What Every Business Executive Should Know About Creating a Comprehensive and Executable Strategic Plan – Part 2
Given the opportunity to better leverage the art and science of strategic planning, organizational leadership should endeavor to understand strategic planning and unlock the competitive advantages it can bring them.
Strategic Planning Defined
Strategic planning is the process of devising a plan of both offensive and defensive actions intended to maintain and build competitive advantage over the competition through strategic and organizational innovation.
A well-formed corporate strategy lays out the bumper-pads to keep organizational momentum aimed in the properdirection, accomplished through unambiguously expressed strategic goals (outcomes) and operational actions to achieve those strategic organizational outcomes.
At a minimum, for strategic planning to yield competitive advantage, it must address three key questions:
- “What do we do?”
- “Who are our customers?”
- “How do we do what we do better than our competitors?”
What do we do?
While it may sound almost silly to suggest that organizations should expend effort during strategic planning defining what it is that they do, but it is not as unproductive as it may seem. If an organization cannot succinctly explain what they do, how will their marketplace understand it? Furthermore, this line of analysis during the planning process often uncovers misperceptions on the part of leadership’s understanding of core lines of business and market focus. Strategic planning begins with getting leadership on the same page about the mission of the organization and the core offerings the business provides. Additionally, in strategy development, the question of “what should we do” is a corollary to the “what we do” question. This perspective relates to building competitiveness in your offering and exploring tangential markets that might be exploited, provided that the barriers to entry are not too high and organizational capabilities match the opportunities being evaluated. Truly gauging core competencies is key to this analysis, not just from leadership, but down through the organization.
Who are our customers?
An organization’s strategy cannot overlook the most important stakeholder – the customers served by the company. Data analysis of the organization’s customer base is recommended prior to, or as a part of the strategic planning process in order to firm up suspicions and debunk any incorrect perceptions. Knowing the attribution of the organization’s customer profiles helps drive value-creation, sales growth, product and service innovation and ultimately profits. A thorough understanding of the major customer groupings, segmented by loyalty, profitability and annual spend will help answer questions like:
- Why are our customers still buying from us?
- How stable is that long-term buying relationship?
How do we do what we do better than our competitors?
For an organization to understand its own competitive advantage, it must first examine its core “essence of goodness” and understand the triggers that compel customers to buy products or services from them instead of a competitor. Is it service, product superiority, pricing or something else?
Competition always exists externally from third parties, but it can also come from within current customers. Internal competition occurs when a customer develops a solution that displaces the product or service of the selling organization. Strategy must remain close to the creation of tangible customer value or risk losing market competitiveness.
When we can define and explain our value proposition succinctly, strategic goals related to innovation and value creation can more easily be developed and ultimately implemented.
A Graphical Depiction of the Elements of Strategic Planning
The graphic below shows inputs into a well-formed strategic planning process, in the context of the environmental and structural current state of the organization.
In the articles over the coming weeks, we will walk through various aspects of the graphical model and clarify terminology.