Strategic planning or corporate planning is an activity undertaken by an organization through which it seeks to define its future direction and makes decisions such as resource allocation aimed at achieving its intended goals. "Strategy" has many definitions, but it generally involves setting major goals, determining actions to achieve these goals, setting a timeline, and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources) in a given span of time. Often, strategic planning is long term and organizational action steps are established from two to five years in the future. Strategy can be planned ("intended") or can be observed as a pattern of activity ("emergent") as the organization adapts to its environment or competes in the market. The senior leadership of an organization is generally tasked with determining strategy. It is executed by strategic planners or strategists, who involve many parties and research sources in their analysis of the organization and its relationship to the environment in which it competes. Strategy includes processes of formulation and implementation; strategic planning helps coordinate both. However, strategic planning is analytical in nature (i.e., it involves "finding the dots"); strategy formation itself involves synthesis (i.e., "connecting the dots") via strategic thinking. As such, strategic planning occurs around the strategy formation activity.
History Strategic planning became prominent in corporations during the 1960s and remains an important aspect of strategic management. McKinsey & Company developed a capability maturity model in the 1970s to describe the sophistication of planning processes, with strategic management ranked the highest. The four stages include:
Financial planning, which is primarily about annual budgets and a functional focus, with limited regard for the environment; Forecast-based planning, which includes multi-year financial plans and more robust capital allocation across business units; Externally oriented planning, where a thorough situation analysis and competitive assessment is performed; Strategic management, where widespread strategic thinking occurs and a well-defined strategic framework is used. Stages 3 and 4 are strategic planning, while the first two stages are non-strategic, essentially financially-based. Each stage builds on the previous stages; that is, a stage 4 organization completes activities in all four categories. In 1993, President Bill Clinton signed into law the Government Performance and Results Act, which required US federal agencies to develop strategic plans for how they would deliver high quality products and services to the American people. In the business sector, McKinsey research undertaken and published in 2006 found that, although many companies had a formal strategic-planning process, the process was not being used for their "most important decisions". For Michael C. Sekora, Project Socrates founder in the Reagan White House, during the Cold War the economically challenged Soviet Union was able to keep on western military capabilities by using technology-based planning while the U.S. was slowed by finance-based planning, until the Reagan administration launched the Socrates Project, which should be revived to keep up with China as an emerging superpower.
Process
Overview Strategic planning is a process and thus has inputs, activities, outputs, and outcomes. This process, like all processes, has constraints. It may be formal or informal and is typically iterative, with feedback loops throughout the process. Some elements of the process may be continuous, and others may be executed as discrete projects with a definitive start and end during a period. Strategic planning provides inputs for strategic thinking; these are best seen as distinct but complementary activities. Strategic thinking guides the actual strategy formation. Typical strategic planning efforts include the evaluation of the organization's mission and strategic issues to strengthen current practices and determine the need for new programming. The end result is the organization's strategy, including a diagnosis of the environment and competitive situation, a guiding policy on what the organization intends to accomplish, and key initiatives or action plans for achieving the guiding policy. Michael Porter wrote in 1980 that formulation of competitive strategy includes consideration of four key elements:
Company strengths and weaknesses; Personal values of the key implementers (i.e., management and the board); Industry opportunities and threats; Broader societal expectations. The first two elements relate to factors internal to the company (i.e., the internal environment), while the latter two relate to factors external to the company (i.e., the external environment). These elements are considered throughout the strategic planning process.
Inputs
Data is gathered from various sources, such as interviews with key executives, review of publicly available documents on the competition or market, primary research (e.g., visiting or observing competitor places of business or comparing prices), industry studies, reports of the organization's performance, etc. This may be part of a competitive intelligence program. Inputs are gathered to help establish a baseline, support an understanding of the competitive environment and its opportunities and risks. Other inputs include an understanding of the values of key stakeholders, such as the board, shareholders, and senior management. These values may be captured in an organization's vision and mission statements.
Activities
Strategic planning activities include meetings and other communication among the organization's leaders and personnel to develop a common understanding regarding the competitive environment and what the organization's response to that environment should be. A variety of strategic planning tools may be completed as part of strategic planning activities. The organization's leaders may have a series of questions they want to be answered in formulating the strategy and gathering inputs.
… excerpt ends here. Continue reading the full article.
