Are We There Yet?
Successful companies review their strategic direction annually, if not quarterly.
We normally suggest that January to June is a good time to review strategic direction, because it fits nicely into the annual board calendar: Q3 is focused on strategy, Q4 is focused on setting the budget for next year, and you need the strategy to set the budget. So how do you review and refocus strategy?
No doubt everyone’s heard of the three simple steps to strategic planning (and review) often summarised as now, where, how. Where are we now? Where do we want to go? How will we make it happen?
Current situation – where are you now?
We advise our clients to start this process with a situational analysis of the external trading environment and internal operating performance.
There is really no right or wrong answer to how this is done. You could brainstorm a SWOT analysis, consider trends in the environment, or run customer and employee surveys to drill down into how people perceive the business.
How might human and financial resources, technology, operational efficiencies and market leadership be perceived as strengths, weaknesses, opportunities or threats?
What strengths could you use to capitalise on your opportunities or mitigate threats? Do you need to address weaknesses to mitigate threats?
The results of an effective SWOT analysis will form the foundation of strategic imperatives to be converted into action plans.
How did the business perform financially over the previous 12 months? Was it better or worse than budget? Why?
Next, review the status of your previous strategic plan. What went well, what has been completed, what is left to do?
What is your purpose or passion? What drove the founders to establish the business, and is it still subconsciously driving the business today? If not, what has changed?
What culture have you created? Is this the culture you need to take you forward and be successful? If not, how would you describe the culture that is needed for the business to succeed? Have a read of our post, How to Build a Great Organizational Culture for some tips.
Are there any obstacles that are holding you back?
Where do you want to go?
Strategic intent is a simple, but precise vision statement that answers the question “where do we want to go?”
Strategic intent captures the essence of winning, is stable over time and provides consistency for short-term action while making sure there is room for team flexibility and innovation.
Even though you are conducting an annual review, and preparing a revised strategic plan for the next year, it is worth thinking about where you want to go in 3-5 years’ time. What are your short, medium and long-term objectives? How have they changed, since the last strategic review?
These statements are most effective when they are grounded in the past and project into the future. They can become more essential and inspiring when they focus less on what you do and more on what you will do for your key customers, why you do what you do, or how the end goal will look or feel.
How do you make it happen?
This is the stage where you decide how to put your strategic plan into effect, culminating in a set of action plans.
The important question is not “how will next year be different from this year?” but “what must we do differently next year to get closer to our strategic intent?”. This provides consistency for short-term action, while leaving room to take advantage of new opportunities.
Identify a small group of core priorities – strategic imperatives – to focus the business’s resources and effort. We advise clients to have no more than six strategic imperatives.
For each strategic imperative, you should identify:
- Purpose – why this strategic imperative is important to the long-term goal, how it helps establish a foundation for success, how it helps move the business forward, or what obstacle it overcomes, for instance.
- Responsibility – who will be responsible for championing this strategic imperative (always make one and only one person responsible). This person should commit to achieving the strategic imperative, so it is important that they frame the purpose, objectives, actions and milestones
- Objective – what does the future state look like
- Actions and milestones will be tracked to ensure progress
- Key Performance Indicators (KPIs) enable you to monitor progress towards achieving your objective
It is critical that KPIs are established in consultation with those responsible for their achievement to ensure there is understanding and commitment to these initiatives by everyone at all levels.
Keep your plans sufficiently flexible to accommodate changes in the business and economic environments – but not so flexible that the plan no longer has meaning.
At the end of your strategic planning review process, the underlying questions affecting your business should be answered, but there is one more question: is this plan sufficient to get us from where we are now to where we want to go?
When viewed as a whole, we often find that the missing ingredient is leadership. To quote Marshall Goldsmith, what got you here won’t get you there, which is so true with strategy. Almost by definition, strategic execution involves leading change, and the leadership team may need an upgrade to successfully implement the strategic plan. Have a read of our leadership insights for tips on being an effective leader.