Each year, it's like déjà vu for the leadership team. The strategic planning process often takes the form of an off-site workshop consisting of a series of focused, intensive meetings. Preparation for these strategic planning sessions is just as strenuous and takes weeks or months–often requiring the help of expensive management consultants. The output is an ambitious multi-year strategy.

Yet, despite all this effort, did you know most corporate strategies fail?

Numerous studies from tier-1 consulting firms have reported approximately 70% of strategies fail due to poor execution. Furthermore, organizations only realize about 60% of their strategies’ value. On top of that, a recent McKinsey survey reported that 70% of board members didn’t even trust the results of the company’s strategy process.

For the majority of organizations, there is a significant gap that exists between a well-formulated strategy and its successful execution. This is known as the "strategy-execution gap."

This article aims to help you and your organization bridge this gap by providing a structured approach to strategic planning, supported by established strategic management frameworks commonly used by strategy consultants and Fortune 500 companies.

But first…

What Is Strategic Planning?

Strategic planning is the process by which organizations define their direction and make decisions on allocating resources, including capital and people, to pursue their goals. It's a disciplined effort that shapes what an organization is, who it serves, what it does, and why it does it, with a focus on the future.

Effective strategic planning defines not only where an organization is going and the actions needed to make progress but also how it will know if it is successful. It is less about predicting the future and more about preparing for multiple futures, allowing organizations to stay agile and adaptable in the face of uncertainty.

Strategic Planning Process: Key Steps

We can divide the strategic planning process into 6 steps:

1. Define Your Vision and Mission

It is important for management to first define its vision and mission. A clear and compelling vision and mission, together, act as a guiding star, reflecting the organization's aspirations and the impact it aims to make.

The mission captures the essence of the organization–who it serves, what it does, its objectives, and its approach to reaching those strategic objectives.

Although everyone feels they grasp the concept of a "vision," oftentimes, organizations describe their vision in vague, unstructured, and descriptive terms. This leads to confusion and ambiguity. Instead, a company’s vision should be well-conceived, structured, and descriptive. More explicitly, a vision consists of 2 core components:

1. Core Ideology: This defines what we stand for and why we exist (our core values and purpose). It is unchanging, even as markets and competitive dynamics change. Our core ideology contains the organization’s core values and core purpose.
2. Envisioned Future: This is what we aspire to become, achieve, and create, often encompassing a 10+ year, long-term goal.

Let's examine a real world example with Tesla, currently the world’s largest EV manufacturer.

Tesla's mission statement is: "to accelerate the world's transition to sustainable energy." This statement is concise and captures the essence of Tesla:

• Who it serves: The world, indicating a global scope.
• What it does: Accelerates the transition to sustainable energy.
• Its objectives: To make sustainable energy solutions more accessible and dominant.
• Its approach: Through innovation in electric vehicles, energy storage, and solar technology.

This mission statement clearly outlines Tesla's strategic objectives and its approach to achieving them. It speaks to the organization's commitment to sustainability and innovation, targeting a global audience and aiming to lead a significant shift in energy consumption patterns.

Tesla's vision statement aims to "create the most compelling car company of the 21st century by driving the world's transition to electric vehicles." This vision integrates both core components of an effective vision:

1. Core Ideology: The commitment to sustainability and innovation, underpinned by the drive to lead the transition to electric vehicles. It reflects Tesla's core values of sustainability, innovation, and excellence.
2. Envisioned Future: Tesla aspires to be the most compelling (not necessarily the biggest) car company of the 21st century, which implies leadership in innovation, design, and sustainability within the automotive industry. It suggests a long-term goal of changing the automotive and energy industries, envisioning a future where electric vehicles and sustainable energy solutions are prevalent.

Tesla's vision and mission are well-aligned, with the mission focusing on the immediate strategic objectives of accelerating the transition to sustainable energy and the vision laying out a long-term aspiration to revolutionize the automotive industry. Together, they provide a clear, compelling guide for the company's direction, strategies, and actions, reflecting both the impact Tesla aims to make and its aspirations for the future.

Once the management team agrees upon a shared vision and mission, we can move forward to setting our strategic goals.

2. Set Short-, Medium-, and Long-term Goals

When setting our strategic goals, there are 2 important frameworks we can use.

The first is around time frames, where we can leverage McKinsey’s 3 Horizons of Growth. As the name suggests, there are 3 time horizons to explore:

1. Short-term horizon (1-year timeframe): The objective here is to challenge the current strategy, evaluate progress, and explore options to accelerate execution. The scope is around products, regions, and functions. As we explore the short-term strategy, it’s important to encourage a culture of creativity and real dialogue. We should seek to avoid a budget-focused process and discussion.
2. Medium-term horizon (3-5 year timeframe): The purpose of the medium-term horizon discussion is to identify the steps necessary to realize the vision. The scope is around the business unit. Our focus in this horizon is to develop clear, actionable business plans that describe the multi-year strategic initiatives to transform vision into value.
3. Long-term horizon (5+ year timeframe): Lastly, the objective over the long-term horizon is to define, validate, or redefine the vision, mission, and direction of the organization.

Each horizon is uniquely considered and has different strategic objectives.

The second framework is around goal-setting. Here, we can use Peter Drucker’s SMART goals framework. SMART is an acronym for Specific, Measurable, Achievable, Relevant, and Time-bound, the 5 criteria for effective goals. These criteria help translate the broad vision into tangible targets that provide direction and motivation.

Here is an example of a "smart" short-term goal: Increase the company's market share in the mid-range smartphone segment by 5% over the next 12 months.

This goal meets the SMART criteria in that it is:

• Specific: We are specifying the metric and market.
• Measurable: An increase in market share is easily measured.
• Achievable: A 5% market share increase seems feasible and not unrealistically ambitious.
• Relevant: Relevancy is self-evident, as this goal ties directly to company profitability.
• Time-bound: We specify a timeframe of the next 12 months.

3. Encourage Productive Strategic Dialogue

Most organizations repeat the same strategic planning process year in and year out. This leads to a situation where the effectiveness of the strategic planning process diminishes, as most analyses become adjustments of last year’s analyses. The same inputs lead to similar conclusions, and creativity is sapped from the sessions.

So, how do we break this cycle? The answer is to encourage productive and stimulating "strategic dialogue" by asking different questions.

Great strategists need to learn the "art of questioning." Here are a few guiding principles around this:

• Questions shouldn’t be too broad (e.g. "How do we disrupt the industry?"). They should be focused enough to provide actionable insights.
• Questions also shouldn’t be too narrow (e.g. "What should the pricing be?"). Narrow questions may overlook broader strategic considerations and limit the scope of analysis, missing out on opportunities for more comprehensive insights.
• The leadership team should engage in a strategic workshop to articulate and prioritize key questions we need to answer in the next 3-5 years.

Examples of solid questions that drive strategic dialogue include:

• How can we differentiate our products/services in a crowded market?
• What adjacencies should we explore to drive future growth?
• How can we leverage emerging technologies to create new value propositions?

Once the right questions are selected, we can have teams address these questions. These teams will design new, relevant analyses, develop strategic recommendations, and repeat the process next year.

4. Engage a Broad Group of Stakeholders

Organizations that engage a broad, decentralized group of both internal and external stakeholders in their strategic planning efforts yield stronger results than organizations that leave strategy in the hands of a small, centralized team. This is the key to effective stakeholder management.

Involving a broad group from different backgrounds, generations, and geographies prevents groupthink and is more likely to surface alternative ideas and perspectives. It is common to also engage participants external to the organization—e.g., customers, suppliers, consultants.

This approach improves our strategic "peripheral vision." In other words, it makes us more adept at spotting both opportunities and risks early. Engaging diverse stakeholders helps uncover blind spots and potential issues that a centralized team might miss.

To effectively engage stakeholders, organizations can:

• Identify key stakeholder groups and representatives from each group.
• Conduct interviews, focus groups, or surveys to gather input and perspectives.
• Invite stakeholders to participate in strategic planning workshops or sessions.
• Leverage online collaboration tools and platforms to facilitate engagement.
• Provide clear communication on the strategic planning process and the role of stakeholders.

It is also important to engage stakeholders early on, as this increases buy-in, which helps with the strategy implementation process later on, thus bridging the strategy-execution gap. Early involvement fosters a sense of ownership and commitment among stakeholders, making them more likely to support and champion the chosen strategy.

5. Identify Frameworks That Help You Execute Your Plan

Frameworks are structured approaches to analyzing and solving common business problems. There are hundreds of strategic management frameworks available for all types of business challenges and situations, particularly in the realm of strategy development and strategic thinking.

Frameworks are useful because they allow you to not only comprehensively think about a business situation, but to do so efficiently. Strategic management frameworks are typically developed by strategy consulting firms—part of their trade secret. Commonly recognized frameworks include SWOT analysis, Porter's 5 Forces, and the BCG Growth-Share Matrix.

Let’s take a look at the Strategy Framework Canvas (SFC), which is a unifying framework that can guide us in selecting the appropriate corporate strategy for our circumstances and executing it effectively. This model is particularly useful for large organizations facing changes.

SFC identifies 5 distinct archetypal approaches to strategy:

1. Classic
2. Adaptive
3. Visionary
4. Leader
5. Renewal

Classic Strategy

The Classic approach is the most common approach. It is ideal in scenarios where the market dynamics are predictable, competition remains stable, and strategic initiatives can sustain over time. This approach is particularly relevant in environments where companies can forecast with a reasonable degree of accuracy and thus plan their moves with confidence.

In the Classic Strategy approach, organizations strive to carve out a sustainable competitive advantage by strategically positioning themselves within an attractive market landscape. The essence of achieving a competitive advantage lies in understanding and leveraging the known and stable bases of competition. These bases are not readily malleable by any single player's actions due to the market's predictable nature. Therefore, organizations can secure their advantage through 1 of 3 ways:

1. Economies of Scale: Dominating the market or a significant portion of it through sheer scale, allowing for cost leadership or enhanced bargaining power with suppliers and customers.
2. Differentiation: Setting the company apart through unique products, services, or customer experiences. This can also manifest as achieving scale within a narrower market segment, effectively dominating a niche with specialized offerings.
3. Distinctive Capabilities: Excelling in specific operational, technological, or other critical capabilities that competitors cannot easily replicate. This could involve innovations in product development, supply chain efficiency, or customer service excellence.

This strategy requires a deep understanding of the market structure, customer preferences, and competitive dynamics, coupled with effective execution to maintain the strategic positioning over time.

The most well-known Strategy frameworks are typically the Classics, such as:

• GE-McKinsey Matrix
• Value-Disciplines Model
• Porter's Five Forces
• BCG Growth-Share Matrix

Adaptive Strategy

The Adaptive approach is employed when the business landscape is unpredictable and volatile. Unlike the Classic approach focused on a sustainable Competitive Advantage, Adaptive Strategy is founded on the notion of continually creating and capitalizing on temporary advantages. In such dynamic environments, the emphasis shifts from long-term planning to continuous experimentation and real-time adjustments. Since advantages are fleeting, the focus is on the means rather than the ends.

Visionary Strategy

Organizations adopt the Visionary approach when they can reliably create or reshape an environment to a degree of predictability by identifying and relentlessly pursuing an opportunity. Visionary Strategies are often associated with entrepreneurial startups, but large corporations, like Google, also drive them through Corporate Entrepreneurship Programs. These programs enable teams within established organizations to conceive, develop, launch, and manage new businesses distinct from the parent company, while leveraging its abundant resources.

Leader Strategy

The Leader approach is suitable when the environment is unpredictable, yet malleable, allowing an organization to shape or reshape the entire industry. This strategy necessitates collaboration with a diverse ecosystem, distributing risk, accessing complementary capabilities and resources, and rapidly building the market through collective strength.

Renewal Strategy

Finally, the Renewal Strategy approach is adopted when the environment is harsh and inhospitable for the current business model. In such circumstances, the existing way of operating is unsustainable, and the first step is to change course and preserve resources. This strategy aims to restore the organization's vitality and competitiveness. Corporate Transformation Corporate Restructuring, and Corporate Turnaround efforts fall under this category.

Explore the top 100 business frameworks utilized by management consultants here.

6. Continuously Monitor Performance

Now we move from planning to execution. High-performing organizations use real-time performance tracking. They continuously monitor resource deployment patterns and their results against plans, leveraging continuous feedback to reset planning assumptions and reallocate resources accordingly.

This real-time approach allows management to identify and find flaws in the plan, as well as shortfalls and deviations in execution—and to avoid confusing one with the other. By identifying and rectifying issues in strategy implementation expediently, we can further improve our chances of bridging the strategy-execution gap.

To effectively monitor performance, organizations should define and track Key Performance Indicators (KPIs) that are aligned with their strategic objectives. KPIs provide a quantitative way to measure progress, identify areas of concern, and course-correct as needed. They also help ensure accountability and transparency across the organization.

In other words, with KPIs, organizations can ensure that their performance aligns with strategic objectives, making it easier to reset planning assumptions and reallocate resources as necessary. The exact selection of KPIs varies depending on the organization and industry. You can leverage the Flevy KPI Library, a vast database of 15,000+ KPIs, to identify the most appropriate KPIs for your organization.

Continual performance monitoring is particularly important in highly volatile industries. In such environments, events outside the organization’s control can render a plan useless. Regular tracking of KPIs allows for agile adjustments to the strategy in response to changing market conditions or unforeseen circumstances.

High-performing organizations exhibit certain attributes that enable successful strategy execution, including:

1. Clear communication of the strategy and its rationale to all stakeholders.
2. Alignment of organizational structure, processes, and resource allocation with strategic priorities.
3. Empowerment of employees and a culture that supports innovation and continuous improvement.
4. Effective use of data and analytics to inform decision-making and monitor progress.
5. Agility and adaptability to pivot the strategy as needed in response to changing conditions.

By continuously monitoring performance through well-defined KPIs, high-performing organizations can identify and address gaps between strategy and execution, ultimately increasing their chances of achieving their desired outcomes.

View our materials on Performance Management here.

Strategic Planning Examples

Beyond leveraging established business frameworks, we can improve our chances of bridging the strategy-execution gap by studying relevant case studies. Below, you can find 5 strategic planning examples to illustrate what we’ve talked about. Follow the links to view the full strategic plans, along with key analyses, strategic initiatives, and outcomes.

Organization	Strategic Challenge
Fitness Apparel Retailer	Facing a 20% decline in in-store sales and a slow online sales growth rate of just 5% year-over-year, the fitness retailer is also combating external pressures such as aggressive pricing strategies from larger competitors and rapidly changing consumer buying behaviors. See the full strategic plan here.
Hobby Store Chain	A leading hobby store chain in North America focusing on a Growth Strategy to improve its online presence. It has experienced a 20% decline in foot traffic over the past two years, made worse by a 30% increase in online hobby store sales industry-wide. See the full strategic plan here.
Healthcare Clinic Network	This regional network of healthcare clinics is experiencing stagnating patient satisfaction scores and increasing operational costs. The organization is seeking to both improve patient care quality and reduce costs. See the full strategic plan here.
Online Education Startup	An emerging online education platform had a promising start, but has since experienced a 25% decline in user engagement and a 20% drop in course completion rates over the past quarter. The organization is confronted with intense competition from established online education providers in Asia. See the full strategic plan here.
Outdoor Adventure Recreation Small Business	This recreation SMB, renowned for its innovative outdoor adventure experiences, has reached a pivotal moment requiring a strategic analysis to navigate the digital landscape effectively. The company is experiencing a 20% decline in customer engagement and a 15% drop in sales due to outdated digital platforms. See the full strategic plan here.

Leveraging these strategic planning case studies is invaluable for several reasons:

• Real-World Application: They offer a glimpse into how theoretical concepts are applied in real-world scenarios, providing tangible examples of strategic planning and strategy implementation in action.
• Learning from Successes and Failures of Others: Analyzing these cases allows leaders to learn from both the successes and missteps of others, offering valuable lessons that can be applied to their own strategic planning efforts. Each strategic plan represents months, if not years, of experience.
• Preparation for Challenges Ahead: Case studies provide insights into organizations and industries at different stages of maturity, showcasing a wide range of strategic challenges and solutions that your organization may not face currently, but will face in the future.
• Inspiration for Innovation: Often, these examples serve as a source of inspiration, sparking innovative thinking and new approaches to strategic planning and strategy development in your own organization.

Case studies are one of the most powerful and practical ways to gain acumen across any strategic management topic. It is also valuable to get a hold of real strategic plans, although those are harder to come by as they are proprietary.

Why Is Strategic Planning Important?

Here are 3 key benefits of strategic planning:

1. First, a unified strategic plan is crucial to align not only the management team, but the entire organization. Given that an organization's resources are finite, it's vital to ensure they are aligned and optimally utilized towards a common goal. Like a ship with a thousand oars, it's critical for everyone to be rowing in the same direction. Otherwise, it’s bound to eventually sink. The strategic plan guides the organization towards this collective goal.
2. Equally important to aligning the organization's efforts is ensuring they are directed towards the correct organizational goals. We don't want our ship moving in reverse! Following a robust strategic planning process leads to a well-formulated strategy. By leveraging strategic planning tools like business frameworks, we can ensure our analyses are comprehensive and grounded in best practices.
3. Lastly, anticipating future challenges is crucial. A ship that spots a storm on the horizon can better brace itself for the upcoming waves. Strategic planning allows organizations to better understand their business environment, foreseeing changes, trends, and potential market challenges, enabling proactive strategic and tactical adjustments to stay competitive. Scenario planning is a particularly effective tool for this purpose.

Bridging the Strategy-Execution Gap

Former CEO of Intel, Andy Grove, was known for his relentless focus on strategic planning and execution. He once said, "Only the paranoid survive." Through this paranoia, he propelled Intel to become one of the most successful companies of all time.

This article derives insights from Intel and other leading organizations that have successfully crossed the strategy-execution gap:

• First, it’s important to follow a structured process. The strategic process laid out in this article mirrors the same process followed by Fortune 500 companies.
• As you develop your strategic plan, leverage business frameworks. Use the Strategy Framework Canvas to help with framework selection that is most suitable for the conditions of your organization. Be aware that as an organization matures, it’s always important to adapt your frameworks and analysis tools accordingly. To understand this concept more, you can leverage business maturity models.
• To further improve the rigor of your strategic planning, be sure to study the successes and failures of others by analyzing strategic management case studies.

FAQs

What are the 5 steps in strategic planning?

The strategic planning process can be distilled into 5 essential steps:

1. Define your vision and mission. An organization's vision and mission provide direction and purpose, encapsulating its aspirations and the meaningful difference it seeks to make. It's important for our vision to be clear and well defined and should consist of 2 parts: (1) core ideology and (2) envisioned future.
2. Set short-, medium-, and long-term goals. In setting strategic goals, there are 3 time horizons we want to explore—short-term (1-year timeframe), medium-term (3-5 years time frame), and long-term (5+ years). Each horizon is uniquely considered and has different strategic objectives.
3. Encourage productive strategic dialogue. To break the destructive cycle of strategic planning stagnation, we need to engage in "strategic dialogue." Pioneered by BCG, strategic dialogue allows us to change our set of strategic questions that govern the direction of our strategy.
4. Engage a broad group of stakeholders. Organizations that engage a broad, decentralized group of stakeholders in their strategic planning efforts yield stronger results than organizations that leave strategy in the hands of a small, centralized team.
5. Identify frameworks that help you execute your plan. Frameworks guide and structure our strategic analysis, enabling us to evaluate a situation comprehensively and efficiently. In the ecosystem of strategy frameworks, there are 5 archetypes:
   • Classic
   • Adaptive
   • Visionary
   • Leader
   • Renewal

For an in-depth exploration of each step, refer to the earlier section of this article, which provides a comprehensive breakdown and detailed insights into the strategic planning process, which also includes a sixth step on Performance Management.

How to write a strategic plan?

To write a strategic plan, fill out the following sections:

• Executive Summary
• Mission Statement
• Vision Statement
• Core Values
• Industry Analysis
• Competitive Analysis
• Internal Assessment (includes SWOT Analysis, PEST(EL)/STEEPLE Analysis, McKinsey 7-S, and/or Value Chain Analysis)
• Strategic Initiatives
• Sources of Value Creation

For more information, check out our free strategic plan template.

How is SWOT used in strategic planning?

SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) is a fundamental strategic planning tool used to gain a comprehensive understanding of an organization's internal capabilities and external environment. By identifying internal strengths and weaknesses, leaders can leverage their competitive advantages and address areas of improvement.

Simultaneously, recognizing external opportunities and threats enables organizations to anticipate market trends, adapt to environmental changes, and make informed decisions. This holistic analysis informs the strategic decision-making process, helping to align the organization's resources and capabilities with its external context.

What is an example of a strategic plan?

Earlier in this article, we provided 5 examples of organizations undergoing strategic planning. Let’s dig deeper in the first example, a Fitness Apparel Retailer. For its strategic planning efforts, this company conducted a number of external industry and internal analyses, revealing the following insights.

To understand the depth and application of strategic plans in various contexts—varying organization types, industry verticals, and strategic goals—refer to our 5 in-depth case studies linked to above here. Each case study details a distinct strategic plan and documents the analysis, strategic initiatives, and results of their implementation.

To dive deeper in many of the concepts discussed in this article, take a look at these Strategic Planning and Strategy Development best practices showcased below.