From the Ask Tom mailbag –
When I look at our strategic plan, it is mostly a mathematical increase in revenues over last year and some projects to cure some of our operational problems. If that is all it is, why is there such a focus on strategic planning?
Unfortunately, for most companies, your observation is correct. Most strategic plans are not strategic, they are tactical. Tactical planning is important, but it is rarely strategic.
Your question is why plan. If we were successful in identifying our competitive advantage and effective efforts to operationalize that advantage, why pow wow to come up with a new plan?
We have to periodically pow wow because of this one factor, change. Change requires us to reexamine our assumptions, understand our marketplace, revise our thinking, adapt our internal systems and track our progress in the face of that change.
Most planning is an attempt to resolve operational issues with our internal systems, that is still a noble goal. Strategic planning is an examination of those external systems that have an impact on the way we organize and operationalize our internal systems. Here are five important external systems you might consider –
- Market (external system). This external system includes your best customer, different customer segments, your best competitor, second tier competitors, vendors and suppliers.
- Regulatory (external system). This could be financial regulation, like taxes, environmental regulation, tariff regulation, permit regulation.
- Finance (external system). As companies grow beyond the resources of stockholder investment, reliance on external sources of capital becomes more important. This includes simple revolving lines of credit, institutional term debt, private equity. All come with strings that have an impact on the way you internal organize. Banks call these covenants. Access to capital markets is seeing an extraordinary shift with increased interest rates depending on market risk.
- Labor (external system). We used to look at unionization and unemployment statistics to get a handle on our access to labor. Now we have to include governmental intervention, student loan forgiveness, cultural impact on employment conditions (unlimited vacation, virtual roles) and accountability in those conditions. It’s all part of your business model.
- Technology (external system). Technology has changed the way that we work. Meaning, technology has changed the way we make decisions and solve problems. Every business model is shifting to incorporate technology and make it effective with a constant eye to the next technology which will bring the next change to the way we organize.
It is these external systems that will have the most impact on your change in strategy. This is where I always start. What’s changed?