Strategic planning is analogous to solving a rubrics cube. Every player involved must find a way to solve for all the colors; not just the color each person likes. It is a company-first exercise, with a laser-sharp focus on strategy and operations.
Strategic planning does not have to be a heavy time or resource intensive effort for a small- to mid-sized company. Vast majority of companies can deploy a streamlined approach because:
- The company likely only has one core product with one or two peripheral offerings. They are unlikely to be cannibalizing each other.
- The company only likely has one brand to plan for. If a small- or -mid-sized company has more than one brand, the planning exercise should reassess the value proposition multiple brands offer the market.
- The commercial teams generally carry the full bag (i.e. they sell everything the company offers), which makes resource planning relatively straight forward.
The Starting Point
Like many concepts under my Growth Framework, planning approach is not a one-size-fits-all answer. The most critical aspect to develop a planning approach is to internalize where the company is starting from. A few questions can help a company assess the starting point:
- Has the company performed a structured strategic planning exercise in the recent past (annual budgeting exercises do not count)?
- If so, was the strategy development, initiatives, and operationalization effective? If past efforts were not successful, the company must first assess how well it has adopted various concepts discussed under the Leadership Approach and Objective & Analytical Culture components of the Growth Framework.
- Where on the Objective & Analytical Culture maturity model does the company sit? Being positioned further to the left implies significantly more pre-work in the form of manual data gathering to assess the market and internal operations.
- Does the company have the appropriate resources to staff a strong planning team, especially a strategic planning lead to develop and execute on an approach?
These self-assessment questions will provide a litmus test on prerequisite steps that must be taken prior to heading into a planning exercise. Ideally, these questions are asked and remediation steps are taken well in advance of starting the planning cycle.
A Streamlined Approach
Two baseline conditions are critical to even begin preparing for strategic planning because this exercise is complex, requires discipline, and needs strong and objective leadership to successfully and positively impact the whole organization. These conditions are:
- A skilled strategic planning team is in place, including deployment of a strong planning lead and demonstration of executive sponsor commitment.
- Executive sponsor internalizes where the company truly stands on core organizational concepts under Leadership Approach and Objective & Analytical Culture, and embraces the importance of taking corrective actions around major gaps.
The planning history and the experience-level of available resources are different across companies. So, defining a standardized approach will not work. However, there are three common properties associated with strong planning approaches at small- and mid-sized companies.
1: Planning sequence
Planning has to start with strategy and how that strategy will be accomplished. Financial forecast should be a derived output from key outcomes from early planning phases. Attempting to start with aspirational growth targets and trying to force-fit strategy and operations into such goals is the equivalent of putting the cart before the horse and is unlikely to be effective.
As obvious as this sounds, starting with a financial goal is the most common strategic planning mistake fast-growth companies make. Many companies I have worked with let their internal rally cries – “we will grow by X% next year” – set the tone for strategic planning. Unfortunately, this creates an anchoring effect for the planning team. Predictably, various members of the planning team present initiatives that suspiciously adds up to exactly the same growth figure – the anchor set by the CEO. Needless to say, these plans do not reflect realities of the company’s strategy or operations.
2: Optimal allocation of time
Vast majority of planning efforts focus too much time on the financial plan and team-level budgeting. However, organizations should spend most planning time and effort on the reasons for and specific plans around deployment of finances. Irrespective of planning history and size of planning team, the ratio of Full Time Equivalent resources companies spend on various phases and deliverables should be similar and lean heavily towards strategy development, mapping leading indicators and strategic initiatives, and drafting operational plans. If these foundational deliverables are well-developed, secondary outputs for socialization, such as board-level presentations and financial forecast, will be quick and easy to derive. A planning exercise should:
- dedicate 4 times more effort on corporate strategy assessment than finalization of budget and forecast
- invest 4 times more effort on drafting operational plans that impact every employee in the company compared to a financial forecast that should be easily derivable from a well-developed Initiative-Resource Map and Leading Indicator Map.
3: One company-level strategic plan
Planning efforts at small- and mid-sized companies should focus on developing a comprehensive company-level plan throughout the planning cycle, until operational plans need development at the tail-end. The planning team should take responsibility for development of all deliverables until the financial plan and operational plans are ready to be built. The team should tear down tendencies to work within functional silos and ensure that all deliverables are cross-functional.
As with all concepts advocated throughout my Growth Framework, strategic planning should focus most of the effort on how a company, as one unit, can successfully win the market through its strategic positioning and operational improvements. Development of strong foundational deliverables simplify creation of and quality of derived outcomes such as financial plans and board-level presentations.