Articles

"STRATEGIC PLANNING": PHILIP HALPIN

This article deals with strategic planning under the following headings:

  1. What is Strategy?
  2. Asking the Future Questions Today.
  3. Strategy as "Fit" or "Stretch" - real time company examples
  4. The Risk of Strategic Drift.
  5. The Strategic Planning Process.
    • Analysing the Environment
    • Analysing the Industry
    • Company Analysis
    • Planning Template
  6. The Strategic Planning Process - An Example
  7. Successful Implementation of Strategy.

The article is designed to provide companies with a practical framework to develop their own strategic plans and also to stimulate discussion and awareness of critical strategic issues prior to embarking on the planning process itself.

1: WHAT IS STRATEGY?

Prior to outlining a process for strategic planning, it is important to answer the question, "What is strategy?"

Michael Porter argues that strategy is not operational effectiveness 1 i.e. "performing similar activities better than rivals"2. Operational effectiveness is necessary to achieve superior performance but not sufficient. Few companies have competed successfully on this basis over a sustained time period3. I believe that techniques designed to achieve operational effectiveness (e.g. benchmarking, outsourcing etc) can be a component of an organisation's overall strategic trust but they are not the strategy itself.

An example will help clarify this issue. A company could have as one of its strategic objectives to be a market leader in efficiency and hence a low cost provider. Benchmarking leading to the adaptation of best practice in a particular process and/or outsourcing may be some of the methods or actions taken to achieve the objective of becoming a low cost provider but they are not the strategy. However, it must always be kept in mind that an unhealthy preoccupation with costs can constrain an organisation's ability to invest in the business for the long-term and ultimately impair performance. The cost game can be only played for so long and then one is found out.

Strategy is thinking about the "big picture" and the time horizon is long-term. It is the capability to develop a world view at some point in the future and to position one's business in it. It requires a focus on the external environment and a capability to anticipate change. It is about seeking out new opportunities, having a strong customer focus and understanding their needs.

A company must establish a clear demonstrable difference in order to achieve sustainable advantage over the competition. A very simple question that all organisations should ask of themselves is "Who needs us and why do they need us". If the answer to this question is not immediately forthcoming the businesses long-term future is in serious doubt.

Strategic decisions are made in a complex and very uncertain environment and require rigorous thinking. It is essential that strategy is linked to the numbers i.e. financial performance.

Strategy should force an organisation to make trade offs. It is not possible to be "all things to all people". Choosing to serve specific market segments that are profitable must result in a decision to say no to either existing or potential customers outside those chosen segments. Failure to do so is costly and ultimately means you go nowhere.

It is not easy to be different if it flies in the face of conventional wisdom and, therefore strong leadership at the top is essential to implement a strategy that is at variance with competitors in the same sector.

1 Michael E. Porter "What Is Strategy", Harvard Business Review, November-December 1996
2 Porter "What Is Strategy", Page 62
3 Porter "What Is Strategy", Page 63