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…
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.
We can divide the strategic planning process into 6 steps:
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:
Let's examine a real world example with Tesla, currently the world’s largest EV manufacturer.
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:
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.
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:
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:
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:
Examples of solid questions that drive strategic dialogue include:
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.
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:
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.
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:
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:
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:
This 54-slide presentation introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. Topics covered include: Porter's Five Forces, Product Lifecycle, Consumer Adoption Curve, BCG Matrix, SWOT, PEST, Marketing Mix, etc.
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.
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.
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.
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.
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:
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.
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. |
This whitepaper contains 50 in-depth strategic and their results. Each strategic plan delves into the specific challenges and competitive situations faced by a variety of organizations across different industries. It contains both external analyses (e.g. industry analysis, trend analysis) and internal analyses (e.g. SWOT, PESTLE, VRIO).
Leveraging these strategic planning case studies is invaluable for several reasons:
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.
Here are 3 key benefits of strategic planning:
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:
The strategic planning process can be distilled into 5 essential steps:
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.
To write a strategic plan, fill out the following sections:
For more information, check out our free strategic plan template.
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.
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.
The strategic planning process begins with a series of external and internal analyses:
These are all business frameworks commonly used by organizations during strategic planning. Based on the insights gained, the retailer decided to pursue 3 strategic initiatives over a 3-year time horizon:
The company's implementation of these 3 strategic initiatives yielded impressive results, driving considerable growth in online sales, customer retention, and environmentally-conscious consumer acquisition. Specifically, refining the e-commerce platform and enhancing the digital customer journey propelled a 30% surge in online revenues. Simultaneously, seamless integration of online and offline channels, coupled with elevated customer satisfaction, boosted customer loyalty by 20%. Moreover, the launch of an eco-friendly product line resonated with sustainability-minded consumers, expanding the customer base by 20% while fortifying the brand's reputation and market positioning through its core sustainability focus.
While these outcomes are commendable, an over-reliance on digital transformation and e-commerce optimization may have inadvertently overshadowed opportunities to enrich in-store experiences, an area warranting further strategic attention to maintain a balanced, truly omnichannel approach. You can read more about this case here.
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.
This whitepaper contains 50 in-depth strategic and their results. Each strategic plan delves into the specific challenges and competitive situations faced by a variety of organizations across different industries. It contains both external analyses (e.g. industry analysis, trend analysis) and internal analyses (e.g. SWOT, PESTLE, VRIO).
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.
TABLE OF CONTENTS
Introduction Strategic Planning Process: Key Steps 1. Define Your Vision and Mission 2. Set Short-, Medium-, and Long-term Goals 3. Encourage Productive Strategic Dialogue 4. Engage a Broad Group of Stakeholders 5. Identify Frameworks That Help You Execute Your Plan 6. Continuously Monitor Performance Strategic Planning Examples Why Is Strategic Planning Important? FAQs
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Best Practices in Strategic Planning
This framework presents an overview approach to the Strategic Planning process, along with 4 Strategic Planning best practices to ensure effective Business Strategy Planning that leads to successful Strategy Execution. Specific topics covered include the 3 Strategy Time Horizons, Strategic Dialogue, Art of Questioning, Strategic Initiatives, Strategy Dashboard, among others. |
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Strategy Framework Canvas (SFC)
The SFC is a tool to help navigate through the sea of existing strategy frameworks. Since the 1950s, corporate strategy thinking has been evolving--new strategy frameworks are introduced each year. Today, there are literally 100s of strategy frameworks that have been developed by strategists, academics, and consulting firms. The SFC is a unifying choice framework that guides us in selecting the appropriate strategy for the circumstances at hand and execute it effectively. |
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Closing the Strategy-to-Performance Gap
This framework explains the Strategy-to-Performance Gap (also called the Strategy-Execution Gap), its root causes, as well as identifies 7 rules to follow to close this gap. These rules allow an organization to objectively assess any performance shortfall and determine whether it originates from the strategy, the plan, the execution, or its employees’ capabilities. By closing the Strategy-to-Performance Gap, organizations also eventually develop a culture of overperformance. |
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