In my last blog post, I wrote about how to improve your strategic thinking skills. While this is a necessary leadership capability, as a leader you will also engage others to determine the future direction of your department or organization. One of the biggest responsibilities you will have is to make sure that your team is doing strategic planning and not other types of planning. The difference is that the end result of strategic planning is setting a new direction.
To better illustrate this, two activities frequently confused with strategic planning are succession planning and budgeting. Both activities start with a known entity. For example, 20% of our executive team will be retiring within five years, or we have $50M for our operations next fiscal year. Planning addresses the known entity – how to fill the empty positions, or how to allocate the annual budget within the department. While this planning ends up defining new activities to respond to the known entity, the planning has not taken the department or organization in a new direction, beyond what was already known. Therefore, it is not strategic planning. When this type of planning is complex or looks ahead several years, it is even more likely to be confused with strategic planning.
If that’s what strategic planning isn’t, this is what strategic planning entails:
- Conduct an internal evaluation of your department or organization, both what is working well and what can be improved. Sometimes the bounds of “internal” are fuzzy. So consider “internal” to be anything that is within your control. Think broadly to include things like resources (both human and other), processes, and capabilities.
- Identify and evaluate the impact of external patterns, trends, and developments, today and in the future. Consider not just your immediate industry and competitors but also legal, economic, technology, and cultural changes. For example, how did the pandemic change your company or your industry? How do artificial intelligence, data science, and cloud computing affect your organization and your work?
- Look for themes and issues from your review and distill them down into a SWOT analysis – Strengths, Weaknesses, Opportunities, and Threats. Strengths and Weakness are internal, Opportunities and Threats are external. Discussion within or outside of your team can help determine which are the most important points to include in these categories. Good examples of SWOT analyses for large, well-known companies can be found here.
- Leverage your SWOT analysis to come up with priorities for your department or organization – Key Issues (KIs) and Critical Success Factors (CSFs) that must be addressed. The scope of strategic plans is typically five years into the future. However, this may be shorter or longer, like three years or 10 years. Strategic plans should be updated annually.
KIs & CSFs should:
- Be consistent with your organizational mission and values. If your organization does not have a mission statement and values, then developing these should be the first step in the strategic planning process.
- Leverage Strengths and Opportunities and minimize Weaknesses and Threats.
- State “what” as well as “how.” For example, a soft drinks company might “Diversify product portfolio [what] by developing a bottled water line [how].”
- Not be so generic that anyone in any industry could say it, e.g., “Increase profits within three years.”
- Be no more than five items. If your list is longer than this, your group did not focus enough on identifying bigger themes or priorities.
Give your organization the best chance of success in a dynamic environment by anticipating change, not just reacting to it. Many leaders misunderstand strategic planning; make sure you are not one of them.