Strategic planning is often viewed by businesses in both the private and public sector as an impractical process.
As a result most companies focus their efforts on addressing short term concerns, as opposed to gaining a long term perspective on the direction of the company, by developing a strategy that can help to ensure a consistent and sustainable level of long-term growth, operating efficiency and profitability.
The need for companies to develop viable business operations in today’s marketplace, which has become increasingly customer-driven, competitive and encompasses multi-dynamic business environments, is now very prevalent.
Establishing a strategic direction involves analysing the opportunities and restrictions in the business’s external environment, designing a plan to address them by leveraging the strengths of the company, and then providing structured implementation of the plan throughout the company. In developing a strategic plan, management needs to recognise that there are challenges involved in pursuing growth initiatives for the company, and as a result identify ways to address these challenges. Ultimately the implementation of strong growth strategies will allow management to mitigate the potential risks of the ventures in which they are involved.
This article is the first of a two-part series that will highlight the benefits that can be derived to small and mid-sized businesses that are characteristic of the markets in the Cayman Islands and to the public sector through an effective strategic planning process.
This article aims to dispel the notions of strategic planning as purely academic or impractical, and highlights strategic planning as a necessary process in the challenge for today’s company to ultimately create and realise value for its stakeholders.
The second part of this article will focus specifically on strategic planning for public sector entities.
Strategic planning is often considered a management tool suitable mainly for large organisations; however the following points highlight that there is a need for all businesses to develop a strategic planning process if there is any vision for future growth, development or potential to add value to the business.
The need for clear objectives
The growth of any business is often accompanied with issues such as the type of target customers upon which efforts should be focused, the type of products or services that should be offered, and in general what action should be taken in order to achieve the vision for the company.
In order to provide results supporting the company’s vision, employees require clear objectives and plans to achieve these objectives from management. The Strategic Plan provides an action plan that can be used to guide the entire organisation throughout the process.
Creating a sustainable competitive advantage
A company can outperform its competitors if it can establish an advantage that it can maintain. The aim of creating a sustainable competitive advantage is to provide greater value to customers, create comparable value at lower cost or deliver both simultaneously. Creating a sustainable competitive advantage requires developing and implementing a strategic plan that enhances competitive advantage.
Ease of translation of strategies into actionable steps
The time-intensive and complex effort involved in the implementation of strategies across a company is another growth challenge faced by businesses.
The rapidly changing pace of today’s business environment calls for strategies that may be 80 per cent correct and 100 per cent implemented as opposed to being 100 per cent correct but is not consistently implemented throughout the company.
Value is derived through the actual implementation and translation of strategies into the daily operations of the business.
Strategic planning is a creative process, which aims to identify the core competencies of a company, coupled with a strategy that drives all the key decisions made in a company.
It is critical to the business in its ability to influence how individuals act in day-to-day issues. The strategic planning process involves assessing the business environment as well as developing and implementing a detailed business strategy that provides protection, leverage, develops the core competencies, and determines how these competencies can be developed into competitive advantages.
During the initial phases of the strategic planning process it is necessary to understand the current and future states of the industry in which the company operates through an analysis of the four key drivers within an industry – markets, competition, technology, and regulation, in order to determine their influence on the current and future states.
The analysis of these drivers is performed by identifying the strengths, weaknesses, opportunities and threats to the business.
The aforementioned drivers are identified by examining the environment that is both internal and external to the business.
The company must obtain an understanding of the external environment by analyzing the opportunities and threats in the industry in which it operates, and the factors that are required to address them. The reasoning behind performing this external assessment is that the opportunities are identified in order to improve the company’s success in these areas, whilst the threats to the success of the company are identified in order to prioritize the action points necessary to deal with the restrictions that are within the company’s control.
Additionally, an assessment of the internal environment is performed in order to identify the strengths and weaknesses of the company relative to its competitors.
The strengths are identified to ensure maximum leverage, whilst the weaknesses are identified to allow prioritization of action plans to address them. This assessment helps to determine whether the company is capable of capitalizing on any opportunities or counteracting any threats that may have been identified.
A company must establish a strategic direction along with the initiatives necessary to support its vision or plan, by utilizing its core competencies to address the opportunities or threats identified. In order to establish a direction each opportunity or threat identified should be developed into a strategic option, where strategic options are what a company can choose to do in order to compete effectively.
An example of which is, the ability to transfer a company’s core competencies may open avenues into new markets. The strategic options should leverage the core competencies of the company or specify how new competencies should be developed in order to create sustainable competitive advantages.
An analysis of the strategic options developed will then determine the levels or risk or reward associated with each. The most viable options will determine the strategic direction and will demonstrate the potential for significant rewards whilst minimizing potential risks. The chosen option will be broken into specific initiatives that will be the basis of the Strategic Plan and will determine how it will be implemented.
In order to gain buy-in from all stakeholders of the business, and also allow for an easier implementation of the Strategic Plan, the strategy that has been developed needs to be communicated to the entire organization, along with the target plans that will help to outline the tasks required of each individual.
This article was prepared by Maria George, a consultant with Deloitte’s Economic & Business Consulting services division, and is an MBA graduate with over five years of professional work experience within the domestic Caribbean region, The United States of America, and Italy. Deloitte Consulting provides a wide range of economic, strategic, human capital and business planning services including detailed business plans, business and marketing strategies, financial analysis and feasibility studies and business valuations.