How to do a strategic plan and why is it so important?
A strategic plan is defined as a set of decisions about a company’s fundamental objectives, the direction of its development, and the resources and methods needed to achieve them. Strategic planning deals with decisions which consequences are long-term and difficult to reverse. How to write a strategic plan?
A strategic plan usually takes the form of a presentation or document that outlines the company’s current situation, identifies plans, growth prospects, and shows how the company can achieve them. It is helpful to begin creating a strategic plan by asking yourself three basic questions:
- What the company wants to achieve.
- How it intends to achieve it.
- What will happen once it has reached it.
These questions are the primary basis for the entire strategic plan.
How to create a strategic plan? Preparing a strategic plan requires a lot of work and time, but it is essential for the company’s further development. With a properly prepared strategic plan, it is easy to reach the right group of stakeholders and help them understand the company’s goals.
When is it worth creating a strategic plan?
It is worth creating a strategic plan if there is any uncertainty about the future of the company. This is the best time to start the strategic planning. How to do a strategic plan? A strategic plan is also worth creating when: you are just starting your business, you are preparing to launch a new product, there has been a shift in markets, in case of changes in laws, regulations, or business practices, because you have to prepare the company for the upcoming changes properly.
How to create a strategic plan?
1) Analysis of the environment should include answers to the questions: what is our market? What is our share of this market? Who do we count as substitute competitors, and who are our potential competitors? Who are our suppliers, and what is their negotiating position? What is the labor market situation? What is the legislation that applies to our business?
An analysis of the environment: includes identifying and analyzing similar organizations working on the issue or in the same geographic region, interviewing experts in your field and related fields, PEST analysis: political, economic, social, technological factors that affect your organization’s mission and approach, SWOT analysis (find out what is SWOT): your organization’s strengths and weaknesses, as well as opportunities and threats.
2) Analysis of the company: providing information on size and production profile, financial system, motivation system, information flow, R&D expenses, owned patents and licenses, employment, marketing policy, and organizational structure of the company.
3) Needs analysis: this is a critical stage in the development of the strategic plan. What are our objectives? What market share do we want to achieve? What should be our sales volume? How do we want to be perceived by customers and business partners? In what direction do we want to develop? What should we invest in?What will our company and its environment look like in 5 years? The needs analysis must contain answers to all these questions.
The result of the analysis should be selecting an appropriate strategy and then – its implementation throughout the company and controlling its effects.
What to keep in mind while preparing a strategy?
1) Creating a coherent vision that is future-oriented
How to do a strategic plan? Strategy is a practical way to achieve your company’s goals, and it applies to every employee regardless of level. A significant benefit of strategic planning is that the entire planning process produces a single, future-focused vision that can unite your company and its stakeholders. By making everyone aware of the company’s goals, how and why they were chosen, and what they can do to help achieve them, you can create a heightened sense of ownership throughout the organization and thus increase the effectiveness of that organization.
Suppose a manager is unsure of the organization’s strategy. In that case, he or she may make the wrong decisions at the team level, which will produce undesirable or unsatisfactory results in the future. With a single vision around which to unite, everyone can act with a broader strategy in mind.
2) Look out for flaws in reasoning and biases
The decisions we make are associated with all sorts of biases. When participating in a strategic planning process, you must explain why you want to make a particular decision. You must justify that decision and support it with data or projections, thus combating the cognitive biases that arise. How to create a strategic plan?
Some examples of cognitive biases are the recency effect (the tendency to choose the option presented most recently because it is fresh in your memory), Occam’s razor bias: (the tendency to assume that the most obvious decision is the best decision), Inertia bias: (the tendency to choose options that allow you to think, feel and act familiarly).
One of the most complex cognitive biases to capture is confirmation bias. This tends to only pay attention to information that supports a point of view when we are trying to confirm it. If you are working on a strategic plan for your organization, you should ask others to help you look for information that confirms or refutes your idea. If you try to verify your decision yourself, you may fall into the trap of confirmation bias. Combating bias in strategic decision-making takes effort and dedication from your entire team and can make your organization’s strategy much more substantial.
3) Tracking progress based on strategic objectives
Having a strategic plan sues to track progress against goals. When every department and team understands its strategy, its progress can directly impact its success, creating an approach to monitoring key performance indicators (KPIs). How to write a strategic plan?
By planning its strategy and defining its goals, KPIs can be defined at an organizational level. Then, these goals can be extended to business units, departments, teams, and individuals. Through this, each level of the organization is aligned and can positively influence KPIs and company performance.
To sum up
Although the strategy must be far-reaching and structured, it is essential to remember that it should also be agile. A company’s strategy must evolve with the challenges and opportunities it faces. Be prepared to change KPIs if the company’s goals change and communicate the reasons for change to your organization.