Definition of Strategic Planning

Clear definition of strategic planning avoids the common confusion with business planning, budgeting, and marketing strategies.

What is Strategic Planning?

Every organisation or major part of a complex organisation occasionally has to make some momentous decisions- the sort of decisions that affect the entire destiny of the organisation for years into the future. These decisions are designed to address the really biggest and most important issues facing an organisation – issues so significant we might call them 'strategic elephants'. So our definition of strategic planning must have something about big decisions.

Such decisions are not simply about small adjustments to activity levels, but are the kind of decisions that may lead to a substantially different organisational structure, or major changes in the relationships among key stakeholders, competitive position, or strategic partners of the organization.

Sometimes the outside world forces such decisions on the organisation. Such forces may include major shifts in the market, big changes in government policy, and radical moves by competing organisations.

Sometimes, it is something inside the organisation that demands a major reappraisal. Technological change driving new methods of carrying out its work, or weakening of its financial structure, or a change in the senior management of the organisation requiring a large re-organisation are examples of such internal forces.

Organisations have always faced such pressures to make huge decisions. In recent years, the pressure has risen to the point where a systematic yet flexible process of dealing with such decisions is called for.

Such a process is variously and sometimes confusingly described as: corporate planning, strategic planning, business planning, and variations such as corporate strategic planning, or strategic business planning. Other labels make the subject more industry specific such as military strategic planning, hospital strategic planning, and in some jurisdictions what others know as urban and regional planning is sometimes called strategic planning.

As its name implies simply-strategic-planning.com will focus primarily on ‘strategic planning’. By this we have in mind any plan which looks forward several years and

which is concerned with massive factors only. The focus of the decisions in the plan are the organisation as a whole in its environment as a whole.

Strategic Planning is Different from Business Planning

A definition of strategic planning must be based on understanding that a strategic plan differs from a Business Plan in three ways;

it looks much further ahead; it consists largely of words with just a few figures to indicate the scale of the

planners’ intentions. A Business Plan, on the other hand, consists largely of figures. Because these are often unreliable beyond a few months, managers are reluctant to look ahead as far as they may need to. Strategic plans can look further ahead because so few figures are employed, and also

what few figures they do contain are tested by risk analysis techniques.

Definition of Strategic Planning

A systematic, formally documented process for deciding what is the handful of key decisions that an organisation, viewed as a corporate whole must get right in order to thrive over the next few years. The process results in the production of a corporate strategic plan.

Strategic Plan

A set of statements describing the purpose and ethical conduct for an organisation together with the specific strategies designed to achieve the targets set for each of these.

So there we have it - strategic planning, and strategic plan defined.

This is not the end of the story about a definition of strategic planning. As you work with a strategic planning process you may want to understand more about other aspects of strategic planning.

There is much more to know about strategic planning!

The following outlines other aspects of a comprehensive definition of strategic planning.

It helps in gaining support for and understanding of corporate strategic planning to make clear the benefits of strategic planning.

The question What is strategic planning? will be answered in many ways by different people. Here at Simply Strategic Planning we see strategic planning as a systematic way to anticipate and respond to the challenge of change.

The importance of strategic planning is in the small number and the long term impact of the decisions embodied in the strategic plan. These decisions are those required in facing up to the most important challenges facing an organization. It helps in coming up with a clear definition of strategic planning to understand the purpose of strategic planning. These strategic planning issues are characterized by the size of their possible impact on organizational performance and the time span of the impact.

The geographic scope and impact may also set issues apart as strategic. Many more organizations of all types and sizes are having to consider this matter in an international context. Global strategic planning is a process adopted by organizations that operate internationally in order to formulate an effective global strategy.

An effective strategic choice process positions an organization for making sustainable strategic decisions. Learn about the five simple components of strategic planning that reduce risk and dramatically improve long-term performance of your organisation.

Use strategic planning principles to keep your corporate strategic planning process on track. Formal strategic planning as a group decision making process benefits greatly from formalizing of the procedures involved.

Strategic planning and business planning are separate and related, and the idea of merging them under the umbrella strategic business planning is not useful.It is important to be clear about different forms of planning, and in particular the differences between operational and strategic planning.

A persistent problem for some organizations is the difficulty of getting strategic plans implemented. Applied strategic planning blends strategy formulation with the means of managing strategy implementation.

Useful strategic planning models include clear procedures for objective setting, option generation, results monitoring, issue clarification, and participant engagement.

Corporate level strategy covers the strategic scope of the organization as a whole, and for most organizations is the only strategic plan required.

We have explained in detail what strategic planning is, and that leaves us to clarify what we mean by strategy and strategic. A top manager approved decision that has

substantial long term effects, and is accompanied by an integral risk analysis is strategic.

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Benefits of Strategic Planning apply to the organization as a whole

The benefits of strategic planning at the corporate level include consensus on key issues and strategies to address them, commitment to, and capacity for implementing the strategies, clearer communication of priorities, improved cooperation among groups responsible for achieving strategic objectives, and more effective management control of strategic initiatives. All of these benefits of planning can contribute to enhancement of corporate performance over the long term.

The Argenti Strategic Planning Proc ess can improve the Performance of Your Organization by helping you to find Strategic Elephants!

Before elaborating on these benefits of strategic planning, I want to clarify some terms involved.

Does strategic planning improve corporate performance?

The ultimate benefit of strategic planning would be that it contributes in some measurable way to improving overall organizational performance.

However, there is little agreement on the extent of any such contribution. Some research looks at the relationship between strategic planning and organizational performance. Measurement and conceptual difficulties make this a challenging endeavor. For example, varying approaches to selecting indicators of corporate performance make comparison over time and across enterprises and industries difficult. Such problems obstruct replication of work which might  improve our understanding of any possible relationship between organizational performance and strategic planning and management. 

In addition to difficulties over defining and measuring corporate performance, the studies do not even agree on what ‘strategic planning’ means. Strategic planning may variously be confused with operational planning, business planning and budgeting. Some people define strategic planning on the time span of the decisions.

For example, they may define a plan with more than a one-year planning horizon as strategic, while any plan of less than one year they see as ‘operational’.

A definition of corporate strategic planning

Here I define strategic planning, consistent as a systematic, formally documented process for deciding the handful of key decisions that an organization, viewed as a corporate whole, must get right in order to thrive over the next few years.

Decisions that we can call strategic decisions are those likely to affect organizational performance for some years. So trying to find a link between strategic planning and performance over periods of say less than three to five years is unlikely to be helpful.

The contribution of strategic planning to organizational performance

A few early studies suggested a direct positive relationship between formal corporate strategic planning and improved organizational outcomes. Some others were inconclusive, and a few seemed to suggest a negative relationship.

On balance however, it appears that at least the formal planning process surfaces relevant issues and options that would not otherwise be considered, and this may be one of the benefits of corporate strategic planning. Making sure that top managers are paying attention to the right things is a valuable outcome of the process.

A few meta-analyses address the apparent inconsistency in the research results. These confirm the difficulties associated with varied approaches to defining strategic planning and the lack of agreement on performance indicators.

A useful meta-analysis or review of research on the link between strategic planning and corporate performance is J. Scott Armstrong (1982), The Value of Formal Planning for Strategic Decisions: Review of Empirical Research, Strategic Management Journal, 3, 197 - 211.

Armstrong examined the details of the strategic planning process, the setting of firm level objectives, and strategy implementation. He concluded that, despite difficulties in making the comparisons, corporate strategic planning does benefit businesses in terms of increasing the probability of improved performance. The chances of improvement, even with partially carried out planning processes seem to run at about 80%, which is significantly higher than for many other management tools. Studies in some other sectors and for smaller businesses confirm these findings.

The benefits of strategic planning- magic bullet or waste of time?

Still a few see strategic planning as an empty or symbolic ritual that makes little or no contribution to corporate performance. Others see strategic planning as a magic bullet that almost guarantees improved performance. Obviously improved performance is a desirable result. However, employing formal strategic planning does not guarantee improved results. The reality seems to be that even employing just a few of the essential procedures of strategic planning there is at least an 80% chance of improved corporate performance.

This may make us more confident to recommend corporate strategic planning as an aid to improving organizational performance; however, we must accept that the situation is so inherently complex that we cannot guarantee that strategic planning always improves performance.

I simply assert that one of the potential benefits of corporate planning is improved performance of the organization. It contributes to improved performance by enabling and enhancing a range of other things in the organization that contribute to performance improvements.

There are a few benefits of strategic planning

From my own experience, I strongly believe that a formal logical systematic corporate strategic planning process like the Argenti process, that is designed with the realities of organizational life in mind can contribute those things that will positively affect corporate performance. Therefore, we look to the multiple benefits of strategic planning that can make this contribution.

What the Argenti Strategic Planning Process guarantees is that the process will achieve what it is designed to do. The design and deployment of the Argenti process provides the benefits of strategic planning that together improve the probability of improved corporate performance. If even partially implemented formal processes have an 80% chance of improved corporate performance, then we can expect

significantly higher rates of achievement with a process that is specifically designed to yield the benefits of strategic planning that I call the ‘Seven C’s’.

The benefits of strategic planning and the Seven C’s

The benefits of strategic planning at the corporate level include-

consensus on key issues and strategies to address them, commitment to implementing the strategies, capability building, communication of priorities, cooperation among groups responsible for achieving strategic objectives, and control of strategic initiatives. And all of this can contribute to corporate performance improvement.

Surveys show long term rate of satisfaction with strategic planning among managers. Over the years strategic planning has been in the first or second spot. This may be

an indirect confirmation that that there are significant benefits of strategic planning. See the Bain Management Tools & Trends 2013.

Importance of strategic planning

What determines the importance of strategic planning is the small number and the long term, organisation-wide impact of the decisions in the strategic plan. The corporate strategic planning sits above and informs all other plans in the organization.

The strategic plan is the master of other plans.

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“Failing to plan is planning to fail”. This often-heard quote from Alan Lakein, the popular author on time management, is a reminder that many of the day-to-day operational struggles we face in organizational life had their seeds sown in the past, when we failed to think ahea . . .d.

You cannot predict the future

True, you cannot predict the future. No manager has a crystal ball in his or her brief case. Every day has its own “we couldn’t see it coming”. Nevertheless, many severe day-to-day operating problems have, as their origin, a failure from months or years earlier- a failure in strategic planning. Simply, absence of strategic planning, or poor strategic plans, usually lead to tactical “days you’d rather forget” of operating nightmares, some of which can last months.

The importance of strategic planning in reducing these "days you would rather forget" cannot be overemphasized. My definition of strategic planning is “A systematic, formally documented process for deciding the handful of key decisions that an organisation, viewed as a corporate whole, must get right in order to thrive over the next few years.“

Note that in this definition it speaks of the strategic plan being for the organization ‘viewed as a corporate whole’. The kind of strategic planning we are talking about used to be called ‘corporate planning’. In a sense this makes the importance of strategic planning blindingly obvious. Get it right and the whole organization is impacted, and strengthened towards better long term performance, get it wrong and ... !

Strategic planning gives overall direction

Strategic planning can provide an overall strategic direction to the management of the organization and gives a specific direction to areas like financial strategy, marketing strategy, organizational development strategy and human resources strategy, to achieve success. These other kinds of planning, some of which are confused with strategic planning are intended for parts of the organization, or specific functions or processes within the organization. All of these other types of planning should be guided and informed by the strategic plan.

Strategic planning is planning for the organization as a whole

To repeat strategic planning involves planning for an organization as a whole - as a corporate whole. So corporate strategic planning is not product planning, production planning, cash flow planning, workforce planning or any of the many of other sorts of planning conducted in today's organizations. All these are designed to plan parts or sections or departments of organizations. Most companies, even quite small ones, already employ product development managers, marketing directors, production planners and finance controllers to look after the planning of these various parts, and when you do strategic planning you certainly do not want to do all these again under a fancy new name.

As soon as a strategic plan starts to spell out detailed production plans, workforce plans, finance plans, and so on, it is going to overreach and become a initiative-sapping set of edicts from Head Office. The importance of strategic planning comes not from the degree of control or supervision, and the level of detailed instruction it includes, but for the scale, time horizon, and importance of the decisions it embodies.

Strategic planning is corporate. You can only have a strategic plan for an autonomous or quasi-autonomous organization; you should not have one for any section, part or fragment of an organization unless it is quasi-autonomous, like a profit centre, or a wholly owned subsidiary.

However, an indirect tribute to the importance of strategic planning is made by the common appropriation of the term ‘strategic’ to describe all manner of other partial plans.

Importance of strategic planners

Some planners seem to think that strategic planning means planning the whole organization and so they produce vast schedules showing what is going to happen to

every tiny corner of the organization for years ahead in meticulous detail. It is possible to plan ahead in great detail for short periods of time; it is also possible to plan ahead for very long periods, although only in outline. To try to plan in meticulous detail over long periods, however, is quite misguided.

Some people may become suspicious that the ‘strategic planners’ who do this are only trying to cultivate a greater mystique around the practice of strategic planning. They seem to be saying that you need to be very brilliant to do strategic planning. This is to confuse the importance of strategic planning with the self importance of those who se themselves as 'strategic planners'. Top executives in companies with strategic planning departments get frustrated by 'planners' in their ivory towers, striving for an unattainable perfection in the messy reality of an uncertain world.

The importance of strategic planning is that it is planning for the corporate whole, not for its parts. It is not business planning, although it should inform and shape the business plan, it is not production planning, although it should guide what is produced, it is not workforce or technology planning or any other type of partial planning, and it definitely is not marketing, even though it guides who to market to and where to market. It is not coordinating, forecasting or budgeting. It is a process designed to yield a corporate strategic plan - a statement of strategies designed to affect the long term performance of the organization as a corporate whole.

The small number and the great impact of the decisions gives strategic planning its importance

The purpose of the corporate planning process described elsewhere on this site is to reach an enthusiastic consensus among the top executives in an organization as to the handful of decisions they have to take in order to place their organization in a strong position to face the long-term future.

The purpose of strategic planning

Simply put, the purpose of strategic planning is to set overall goals for your organization and to develop a plan to achieve them. This involves taking time out from the daily grind to reflect on the longer term future of your organization. The reason to carry out strategic planning is to agree on a way to improve the long term performance of the organization.

The Argenti Strategic Planning Proc ess can improve the Performance of Your Organization by helping you to find Strategic Elephants!

In my view, improved performance is a desirable result of using a systematic process of strategic planning. However, employing formal strategic planning does not guarantee improved results. What a well designed systematic process of strategic planning guarantees is that the process will achieve what it is designed to do.

What is corporate strategic planning is supposed to do?

The aim of strategic planning is to obtain a consensus among the top people in an organisation concerning its very destiny.

The primary purpose of strategic planning is to get all those who hold the reins of power facing in the same strategic direction, agreeing what the few long term top issues are and how best to deal with them.

When such a consensus is achieved morale and motivation are impressively enhanced. This agreement, understanding, and alignment are key enablers that contribute to improved organizational performance.

What is corporate strategic planning?

Here I define strategic planning as a systematic, formally documented process for deciding the handful of key decisions that an organization, viewed as a corporate whole, must get right in order to thrive over the next few years.

Strategic planning then is designed to guide and encourage those in the organization who take the major decisions to address the matters most likely to impact the future performance of the enterprise. This is facilitated by adopting a deliberately methodical process. This process is one that is specifically designed to flush out these big strategic issues, called in the Argenti way, strategic elephants. More on the Argenti way is available here.

Most other approaches stop at considering the goal of strategic planning to be setting overall goals for the organization and then developing a very detailed plan to achieve them. Too often the listing of a large number of issues and the forest of details involved in addressing them makes the big picture clouded or crowded with minute concerns. This creates opportunities for particular parts of the organization to get their concerns and views on the agenda, and the requirements of the organization as a corporate whole do not get the consideration they deserve.

The stress in this view of the purpose of strategic planning is about the handful of major performance affecting issues, and the very few corporate strategies needed to address them. It is the size and scope of these issues that makes the plans strategic, not any particular tool, technique, or currently fashionable matrix.

Components of strategic planning

There are five key components of strategic planning that, if carried out effectively, can help reduce risk and dramatically improve long-term performance of your organisation.

Make sure that any system of strategic planning that you use, or strategic planning process that you follow, has formal, clearly documented and communicated, simple steps for these five essential components of strategic planning.

1. Engaging commitment2. Setting long term strategic objectives for improved performance of the

organisation3. Generating strategic options4. Evaluating and deciding on strategies5. Monitoring implementation of the strategies against the long term objectives.

I call these components of strategic planning the engager, aimer, option generator, strategizer, and monitor.

1. Engager

It may seem like a blinding flash of the obvious, but strategic planning is something people do! Yet in many descriptions of the elements of strategic planning processes people don’t get much of a mention. The descriptions and the process flow diagrams seem more like machine wiring diagrams than a process of strategic planning involving interactions among people.

By contrast I believe that engaging commitment from those people who will be affected by the plan is one of the most vitally important components of strategic planning. The first of the key elements of strategic planning should be a means of engaging the right people at the right time in the process of strategic planning.

These people include primarily the Chief Executive Officer and their immediate reporting managers, and the layer of staff or management at one remove from the Chief Executive Officer (CEO). In turn the CEO must engage with the governing body, who in turn engage the beneficiary groups they are there to represent. Other stakeholder groups may possible be affected by the implementation of the strategic plan in the operation of the enterprise. Their interests must be respected. For more detail on who these people are, and how they may be engaged in the process see strategic planning process.

It must be remembered that the processes for engaging people operate in various way in all the other components of the planning process.

2. Aimer

The second of the vital components of strategic planning is a means of setting long term strategic objectives for improved performance of the organisation

Every organization, whether private company or nonprofit organisation (NPO), should set out to benefit one clearly defined group of beneficiaries, and a single, long term,

verifiable, target figure should be set to reflect what it is trying to do for them. If it cannot set such a target, the organization should be reformed until this becomes possible.

The intended beneficiaries must be defined as one homogeneous group; in the case of the business enterprise it is the owners or shareholders.

The benefit offered must also be homogeneous and capable of definition in just a few words. In the business context, the proposed benefit is something like ‘increased wealth’.

The benefit must be capable of being targeted and of empirical verification- essentially then, it must be quantifiable.

It must be of perceived significance to the beneficiaries, e.g. the benefit resulting from the point of view of the shareholders is ‘improved prospects for an acceptable mix of capital gains and dividends within a risk profile that is tolerable’. For more information go on how to set the long term strategic objectives for any organization go to Corporate Objectives.

3. Option generator

Formal planning calls for the generation of alternative strategies. Generating strategic options is one of the central components of strategic planning.

This strategic planning element of generating options relies on having done your homework on the key factors that will shape the feasible options available and in the strategic situation the organization is facing. Only then can the planning team engage in requisite strategic choices. The relevant strategic factors include all those unearthed from the strengths, weaknesses, opportunities, and threats analysis, or SWOTs.

Alternative strategies generated in this component of strategic planning can improve the adaptability of the organization in two ways.

First, by explicitly examining alternatives, it is likely that the organization will find alternatives that are superior to the current approach.

Second, the organization will inevitably encounter environmental changes; if alternative, or contingency plans have been considered for these changes, the organization can respond more quickly and effectively.

For processes of finding all the relevant significant strategic factors go to SWOT analysis, and for generating the alternative strategies see business strategy or strategic planning for non profits.

4. Strategizer

Having engaged the right people, set targets and forecasted to be able to calculate the size of the performance gaps to be closed, and brainstormed an array of relevant strategic options, the next of the components of strategic planning that comes into play is the activity of strategy making. This strategizing component of strategic planning involves evaluating and deciding on the handful of specific strategies most

likely to achieve the long term risk managed performance improvement being sought over the next few years.

It is all too easy to go with the bright ideas that emerge from brainstorming strategic alternatives. After all this fun comes some really challenging hard work in leading to the final decisions around the set of strategies to which the organization will commit itself.

Having planned the work of implementing the strategic plan, you need a system in place for working the plans as they get implemented. The plan should provide for formal reporting at agreed intervals. To allow for corrective action, the monitoring system as the last of the components of strategic planning should be designed to address the same objectives and factors determined as significant throughout the planning process.

All of the components of strategic planning should align well with one another in their focus of the ultimate goal of delivering some clearly defined benefit to the intended beneficiaries of the organization.

Strategic Planning Models for all seasons and different reasons

In the matter of choosing or designing strategic planning models for your organisation, two extremes should be avoided. Some people might claim that there can be only one model of strategic planning for all organisations and at all times. If only life were so simple!

On the other hand some people claim that everything is so fluid and always changing, and every organisation is so unique, that no formal model of strategic planning can be of any help.

I like to avoid extremes. That sometimes puts me off side with everyone!

It may be true that no single formal strategic planning model will suit all organisations in all circumstances, and a few formal procedures can be the basis of a small number of models of strategic planning, to suit a large number of organisations in most circumstances.

There may well be conditions in which no strategic planning framework is currently relevant or useful.

Keep the five strategic planning essentials in mind

Various strategic planning models have evolved over the years to suit the needs and cultures of various types of organisations, management styles, and the state of understanding of the strategic dynamics of the particular organisation in its environment.

The useful models that have survived usually have all or nearly all of five essential procedures.

Any effective strategic planning approach has to have means of-

1. Setting objectives for long term performance of the organisation2. Analyzing the factors internal to the organisation and in the environment of the

organisation that give rise to the most important issues for any strategic plan to address

3. Generating strategic options for addressing the most important issues4. Deciding among the options 5. Monitoring the results of implementing the strategies.

A number of useful strategic planning models or approaches have developed to suit different organizational contexts and management styles.

Factors and variables in choosing strategic planning models

Some of the considerations in selecting and assessing strategic planning models include-

organizational environment organizational health stage of development of the organization organization size structure of the organization organizational purpose attitudes to 'planfulness'.

Organizational environment

The degree of stability or turbulence of the environment may influence the duration and sequence of elements in the strategic planning process. A very stable environment may permit or encourage a more considered, or 'leisurely' approach, with a great deal of time for data analysis, and widespread consultation. a rapidly changing or very turbulent environment may require a more rapid fire approach.

The kind of influence exerted over the governance of the organisation and what is, and who is, included in any strategic planning process may influence the model of strategic planning employed. For example, a government business enterprise (GBE) or public service agency may be required by legislation to follow a particular

approach to strategic planning, or as it is still sometimes called in the public sector ‘corporate planning’.

Organizational health

The state of organizational health may influence the strategic planning approach. An organization in some kind of trouble may be advised not to do strategic planning at all, and a small thriving organisation may be able to manage strategic thinking informally. When a company is going bust, the focus should be on immediate rescue or winding up processes, not long range performance improvement through strategic planning. Any organization run by an autocrat would be wasting everyone's time by engaging on elaborate participative processes. When a brief major upheaval is in prospect, then the quality of attention needed for strategic planning may be in short supply, and should be deferred.

Stage of development of the organization

Where an organizational is in its life cycle may be important in the choice of strategic planning.

The small and very entrepreneurial start-up organisation may be so driven by an almost missionary zeal, by the focus on a particular market, application of a new invention, or similar passion that no special formal effort at strategic planning is required.

As an organisation grows it reaches a threshold where it needs to introduce more professional management practices, and one of these probably should be formal strategic planning. However the model of strategic planning appropriate for the first formal introduction of the process might be a good deal simpler than that required a complex group structure of a multinational business.

Structure of the organization

The structure of managerial accountability, the geographic scope, multiplicity of lines of business, may all require adjustments to the sequencing of tasks, and issues around who should be involved in various decision processes, as well as the sophistication of necessary data gathering for the decision-making.

Organizational purpose

The strategic planning approach used may also be influenced by whether or not an organisation is a for-profit business or a non-profit organisation. Strategic planning

models for nonprofits can become especially complex because of the usual insistence on having multiple objectives, and including scope for a multiplicity of stakeholders or interest groups.

Attitudes to 'planfulness'

Some organizations by tradition or by management style, or the kind of people employed in them have different attitudes to being involved in formal planning processes. Academic institutions have issues over status of the persons involved in planning and decision making that may not correspond to the managerial accountability hierarchy in the administrative area of the organization, and this may set up a need for separate lines of data analysis and decision making, as well a structuring clear opportunities for different groups to be involved in debating the issues to be addressed. Some creative organisations in the arts area for example may reject anything that seems excessively formal, rationalistic, or bureaucratic in nature. Selecting you strategic planning framework needs to take these things into account.

What is strategy?

A common answer to the question ‘What is strategy?’ would be something like this. A strategy is a plan of action designed to achieve a specific goal. Strategy is all about gaining or at least attempting to gain, a position of advantage over adversaries or competitors.

Being forward looking there is always uncertainty and risk associated with deciding strategy. The question ‘what is strategy?’ therefore also implies a set of strategic options from which one chooses a course of action to achieve advantage. Strategy is more about a set of options or "strategic choices" than a fixed plan.

Henry Mintzberg from McGill University has answered the question what is strategy by acknowledging the multiple meanings that may be employed.

Mintzberg answers the what is strategy question with 5Ps

The word "strategy" has a multiplicity of meanings, and in his writing on strategic management theory, Henry Mintzberg, more than most authors explicitly acknowledges this. He identifies five common usages of the term strategy, each beginning with ‘P’.

Plan

Commonly strategy is understood as a plan - some sort of deliberately and consciously chosen course of action. This means strategies are made in advance of

the actions to which they apply, and they are developed consciously and purposefully.

Ploy

A strategy may be a ploy in the sense of a particular manoeuvre designed to mislead or distract a key player such as a business competitor.

Pattern

This takes us to the end result of plans that turn into action, decisions that are having some result or impact. If strategies can be intentions embodied in plans to take action, when the actions are taken, the strategies may be regarded as the realized decisions. The results of decisions in the form of a cascade of actions can take on forms which may or may not be very close to what was intended. There will be a pattern, or a set of patterns in the stream of actions. Mintzberg affirms that a strategy may be consistency in behaviour, whether or not intended. The definitions of strategy as plan and pattern can be quite independent of one another: plans may go unrealised, while patterns may appear without a prior formally documented set of decisions or plan.

What is strategy? Plans are intended strategy, whereas patterns are discernible in realized strategy. From this Mintzberg distinguishes deliberate strategies, where prior conscious intentions that were realized, and emergent strategies where patterns develop in the absence of such prior planning, or despite it.

Position

What is strategy/ Mintzberg suggests that it may be considered as a position. He has in mind the location of an organisation in its environment. This may be a geographic intention like expanding internationally, or the position of a business in a particular industry. By this definition strategy becomes a matching mechanism, mediating the relationship between organisation and its context.

Perspective

Strategy may be a perspective in the sense of a persistent mindset regarding the world in which the organization operates. This mind set or perspective is shared by the most influential members of the organization. It could be likened to an organizational personality. This worldview shows in the intentions and/or the actions of members, as individuals bound by common thinking and behaving.

What is strategy? It is a plan and a position

All five of Mintzberg’s P words seem to be plausible suggestions for how the word strategy is sometimes used in various contexts. However in general management practice, probably plan or position most frequently answer the question; ’what is strategy?

Remember at the start of this section on what is strategy, I said that a strategy is a plan of action designed to achieve a specific goal. Strategy is all about gaining or at least attempting to gain, a position of advantage over adversaries or competitors. In many contexts strategy is seen as both plan and position of advantage.

Lets us look at this business of strategy as position of advantage.

What is strategy? It is a position of advantage

Harvard University’s Professor Michael E Porter addressing the question ‘What is strategy?’ in a classic article by that name in 1992 defined strategy by separating it from operational efficiency and effectiveness, and putting it in terms of market positioning.

The article is still available at Harvard Business Review.

Porter asserts that operational effectiveness (OE) means performing similar activities better than rivals. Better means more efficient, faster, and cheaper. It is necessary to achieve superior profitability. However, while OE is necessary, it is not sufficient. Operational effectiveness by itself is not a strategy. It is just the price of admission to game so to speak. An enterprise needs to establish a difference that it can sustain.

Strategy is about differentiating your organization from competitor enterprises. What is strategy? It is about being different in the choice of a different mix of activities to provide a product or service. Strategic positions can emerge from three distinct sources which serve as a basis for positioning:

Variety-based positioning: A company can specialize in a subset of an industry’s product (e.g. sell office chairs only, not office furniture in general)

Needs-based positioning: A company can try to serve more needs of a target group than rivals (e.g. not only sell office chairs but other office furniture and perhaps business equipment as well)

Access-based positioning: A company can segment customers who are accessible in different ways (e.g. only sell chairs in central business districts of major cities).

What is strategy? For many a business it may be a sustainable competitive position achieved by making choices that require trade-offs.

Trade-offs required when two activities are incompatible (e.g. you sell low-cost chairs while offering highly customized office design and fit out services. Companies have to make sure that their activities are coherent. This implies refraining from certain activities.

Strategy is about choosing what not to do, as much as it is choosing what things to do..

Another important aspect is how an organization combines activities. By creating a fit among activities, competitors find it harder to imitate the configuration of activities and resources that make up the value delivering business model.

Obviously, the strength of an enterprise can result from a combination of activities. We can think of themes (e.g. low-cost), which span across activities. Strategic fit is fundamental not only to the competitive advantage, but also to the sustainability of that advantage.

The biggest threat to strategy is the desire to grow. Trade-offs set by the strategy seem to limit growth. Trying to compete at numerous levels at once create confusion and undermine organizational motivation and focus. The solution is to grow by deepening the strategic position. This means making the activities even more distinctive, strengthening fit, and communicating the strategy to new customers.

What is strategy when we look at organizations in general?

Helpful as the Porter insights can be in strategic planning discussions and decision-making about a company’s marketing strategy, it may not provide the comprehensive answer to the question what is strategy required for all organizations.

Elsewhere I have defined strategic planning as a systematic, formally documented process for deciding the handful of key decisions that an organisation, viewed as a corporate, whole must get right in order to thrive over the next few years. The process results in the production of a corporate strategic plan.

A set of statements describing the purpose and ethical conduct for an organisation together with the specific strategies designed to achieve the targets set for each of these.

So there we have it - strategic planning, and strategic plan defined.

Note that the definition does not confine itself to the kind of ‘key decisions’. They are not specified as only marketing decisions. So this definition of strategic planning is applicable to non-business organizations, as well as to business enterprises. It also allows for the fact that not all strategic decisions faced by a company necessarily fall into the market strategy basket. ’

So now let me offer an alternative answer to the ‘what is strategy’ question.

What is strategy?

Let us distinguish between 'A strategy' and 'A Strategic Plan'. To do this I see the need for these 5 criteria.

A strategy has 5 essential elements which distinguish it from all other planning types including, of course, operational, budget, business, project....

A strategy is 'a decision which will make a substantial difference to the long term performance of an organization. Inevitably, therefore, it can be determined only by a very senior member of management. Moreover, because it takes effect over a long time horizon, a statement as to its risk to an organization is an essential concomitant.'

In other words, any decision which is approved by a very senior manager, has effects that are substantial and long term and is accompanied by an integral risk analysis is strategic. The absence of any one of these suggests it is not strategic.

Five essential elements of a strategy

A Strategic Plan consists of a very small number of strategic decisions which, taken together, are intended to have a very substantial effect on the long term performance of an organization. Such a plan will contain an integral risk analysis and can only be approved by the organization's CEO, and in some cases the governing body.

You may be bothered by 'very small number'. I suppose it is a judgment thing: a strategic plan containing 20 strategies could be partially strategic but must surely contain a large number of non-strategic decisions. Why? Because, by the above definition, the strategies in a strategic plan, are intended to have 'a substantial effect...' and it is not practically conceivable for a strategic plan to embrace 20 individual strategies all of which have a 'substantial effect' on overall performance.

Strategic Planning Principles

Recognizing, understanding and being guided by a few key strategic planning principles will improve the development and implementation of corporate strategic plans. Below I will outline a few of the planning principles I havefound mosr useful.

Accountability for strategic planning

The first and foremost of the strategic planning principles is that strategic planning is a managerial accountability inherent to top management roles.

Strategic planning is central to top management stewardship of the organization entrusted to them. Responsibility and accountability for strategic planning is not an optional extra. It is a responsibility that top managers may seek support and assistance with. However, it is not a responsibility that can be delegated away to ‘planning departments’, even if they are headed up by someone called a Chief Strategy Officer (CSO), who reports directly to the Chief Executive Officer (CEO).

Nor can the responsibility for strategic planning be given away to a ‘strategy consultant’. No matter how prestigious or how high their fees the strategy consultant cannot be held accountable by the governing body for the strategic plan of the organization. This does not rule out using external assistance for aspects of the strategic planning process. In many situations it is very helpful to have an independent person facilitating the process. But the ownership of the plan content, which means the decisions and commitments to action, belongs to the CEO and other managers.

Corporate strategic planning

The second of the strategic planning principles has to do with the level of he organization that strategic planning relates to. When I refer to strategic planning in this context it means corporate strategic planning. This planning principle asserts that corporate strategic planning is concerned primarily with the performance of the organization as a corporate whole, and not with planning for functions or parts of the organization.

It follows from the first of the principles of strategic planning that, if it is an accountability of the corporate managers, then it is essentially ‘corporate planning’.

In fact at some stages in its history, and still in some contexts, the process we are focused on was, and occasionally still is, called ‘corporate planning’.

However, I believe it is the planning for improving the long run performance of the organization as a whole that is the essence of this second of the strategic planning principles, and not the naming of the process that is our concern.

For a fuller explanation of what we mean by corporate strategic planning go to - What is strategic planning?

Tracking corporate performance

Because strategic planning is planning for the long run risk adjusted performance of the organization as a whole, strategic planning requires performance metrics that track the progress of the organization as a corporate whole.

Another of our key planning principles which follows on from this is the secret to unlocking appropriate overall organizational performance metric. This principle is to define the purpose of the organization in terms of delivering a clearly defined benefit to a level satisfactory to the intended beneficiaries of the organization. This is the way to define the fundamental purpose of the organization.

This is the third of our strategic planning principles. This is part of the larger and crucially important subject of corporate objectives.

Principles of strategic planning relating to strategic decision making

In light of the two previous planning principles regarding corporate performance measurement and clarifying organizational purpose, we can say that corporate strategic planning involves deciding on strategies that have a high probability of achieving satisfactory performance at a very low risk of organizational failure.

So we see risk management as inherent in the strategy making process.

Corporate strategic planning almost always requires that top managers make hard choices from among many apparently desirable options. The desirable opportunities available to many organizations appear almost without limit, and they seem to present themselves very frequently. Therefore, it is vital that the strategic planning results in decisions that are so robust, and solidly committed to by the organization’s leadership, that they are confident to make a range of other choices. These other choices may be the making of hard decisions about what not to do as well as what to

do. We regard this as another of our strategic planning principles. Strategic decisions should make it clear what the organization is rejecting, as well as what it is committing to.

This is not to rule out all opportunities that arise outside the scope of its current strategic plan.

“…chance favors only the prepared mind.”–Louis Pasteur.

Planning is partly about being ready to take advantage of real opportunities. Opportunity, by its nature is something that may be better than our current intentions. However, without sound plans, resulting from a thorough planning process, we would find it hard to recognize, evaluate and judge whether the opportunity should be taken seriously opportunity. This is why a systematic evidence-based SWOT analysis is so important in the strategic planning process.

This suggests another piece of advice to include among our strategic planning principles.

The strategic planning process should be formal enough to enable the tracing of the decisions to information and evidence on which the decisions were based.

This information also provides a reference point against which to monitor the execution of the plan over time.

I would like to say the following is among the principles of strategic planning. Keep it simple. However, I think it would be preferable to say, although less easy to use a strategic planning principle like ‘keep it requisite’. While urging the use of solid evidence to clarify strategic issues, we need also to avoid analysis paralysis. And we need to avoid reducing the analysis to a simple sharing of current fashions in strategy.

A useful rule of thumb, rather than a full member of our set of strategic planning principles, is to limit the strengths, weaknesses, opportunities, and threats in the strategic analysis to no more than six in each, or a maximum total of twenty four. Limiting the number of elephant sized strategic issues to half a dozen each cell of the SWOT analysis chart will reduce the possibility of the corporate strategic planning exercise will becoming an operational planning exercise, in which the team

will attempt to attend to every tiny detail and thus miss the whole purpose of the strategic planning process.

Engagement in the process

The final of this set of strategic planning principles has to do with participation in the process. Although the first of our strategic planning principles indicated that responsibility for strategic planning lay with the top managers of the organization, this does not mean that only they do the planning. For example, the more people involved in these SWOT appraisals the better. The knowledge and experience of the participants contributes a richer picture of the required strategic requirements, and their biases tend to cancel each other out.

Go to Strategic Planning Process for more information on how the strategic planning process is conducted and who should be involved.

Operational and strategic planning

We need to keep operational and strategic planning clearly distinct in our thinking and discussion of planning in organizations.

Operational and strategic planning are linked decision processes, which should be designed to inform and support one another for effective management of strategies to improve overall performance of the organization, whether business or non profit.

The Argenti Strategic Planning Proc ess can improve the Performance of Your Organization by helping you to find Strategic Elephants!

At Simply Strategic Planning strategic planning refers to a systematic, formally documented process for deciding the handful of key decisions that an organization, viewed as a corporate whole, must get right in order to thrive over the next few years.

In contrast, operational planning or tactical planning is a short-term, highly detailed plan formulated by management to achieve tactical objectives. Operational or tactical planning involves a systematic determination and scheduling of the immediate or short-term activities required in achieving the objectives of strategic planning.

Clearly the time horizon of the decisions involved is a key difference between operational and strategic planning. However, the difference between operational and strategic planning is more than a matter of short or long term planning horizon.

Operational and strategic planning differ according to the decisions involved

In my view the number, scope and time span of the decisions involved are at the heart of the definition of strategic planning. Operational and strategic planning are distinguished primarily by the number, kind and time span of the decisions involved, as summarized in this table.

If you see something that purports to be a strategic plan, and it has a list of 40 objectives for only one year with no overall corporate performance indicator to guide evaluation of the overall implementation of the plan you are not looking at a corporate strategic plan, and it is probably some kind of operational plan.

You can think of a strategic plan as a written long-range plan, which is founded on an enduring corporate purpose, and including a small set of corporate strategic objectives. A corporate strategic plan includes brief statements of a handful of strategies indicating how to achieve the corporate strategic priorities. Strategic planning also provides the indicators for assessing and controlling performance of the organization as a corporate whole.

We define operational planning, on the other hand, as the setting of short-term objectives for specific functional areas such as finance, marketing, and human resources. Performance is monitored and controlled using management performance indicators (MPI) or Key Performance Indicators (KPI) rather than Corporate Performance Indicators (CPI) or Beneficiary Performance Indicators (BPI). This latter is a tool unique in the Argenti Strategic Planning Process.

Strategic plans tend to be more general, and have longer time horizons than do operational plans. Strategic plans normally cover a three-to-five-year and longer planning horizons, while most operational plans usually cover periods of something less than a year. Operational and tactical plans are more concrete and expressed in practical day-to-day terms. Operational plans might include written manufacturing capacity plans, inventory, and sales forecasts; and financial, human resource, and advertising budgets, for monthly or quarterly periods.

Operational and strategic planning are linked

Despite the clear distinctions we are making it is also important to understand that operational and strategic planning are interrelated and complementary decision processes, which must link to each other, inform and support one another for effective management of strategies.

Operational planning is the day-by-day, week-by-week, and month-by-month planning for a myriad of local and functional activities; strategic planning sets the overall direction of your organisation as a whole, its destiny if you will. The decisions that constitute the strategic plan include what the enterprise is not currently doing, but should be doing. The choices of what to do imply other things that the organization deliberately chooses not do. The strategic plan embodies very big decisions with major consequences for the overall performance.

Strategic and tactical planning are different in kind. The two forms of planning must be linked, and integrated, and must not be confused.

Avoid confusion between operational and strategic planning

Summarizing - strategic planning is not a lot of things it is often confused with:

It is not marketing, product planning, market research, marketing strategy, business model designing, IT strategy, or planning for any other particular part or function.

It is not long-range planning, business planning or budgeting. It is not forecasting. It is not finance planning, cash flow planning, human resources planning,

production planning, project planning It is neither co-coordinating nor operational planning. It is neither sophisticated nor advanced. It is essentially simple. However, that

does not mean is it easy!

Regrettably, I believe that much of the usual commentary on operational and strategic planning falls into one or more of these unhelpful answers to the question ‘what is strategic planning?’ They are misconceptions, and they sometimes arise from a deliberate tactic by academics, writers and consultants in this field — people

like me, in other words! Our problem is that, correctly defined and properly practiced, corporate strategic planning is an embarrassingly small subject area. In practice, a strategic plan, crucially important though it is, is a modest document of just a few pages. It is easy to see why academics and consultants need to expand the definition of corporate strategic planning in their books and assignments. They need to throw in anything remotely relevant, such as business planning, marketing and product development, strategic management, portfolio analysis, research into new markets, financial planning and raising capital, acquisitions and mergers planning, action plans, restructuring the management, managing the research function.

Many of these may need to come at the end of the corporate strategic planning process. This is how the strategic plan gets translated into action. Operational planning and strategic planning link in this practical fashion; to include them both into a definition of strategic planning is quite misleading.

Operational and strategic planning are linked as a guide to action which flows from a way of thinking. The key elements of the strategic plan should govern the behavior of everybody responsible for operational planning. It enables organisations to think through and document what they are doing, for whom they are doing it, and why.

Operational and strategic planning contrasted

A corporate strategic plan, then, consists of a very few but momentous statements about the long-term future of the organization as a whole.

'We will merge with a competitor' is a message of the utmost simplicity but of huge importance for any business - if they do merge life will never be the same again. Notice the stark simplicity of this statement; contrast its half-dozen words with, say, a hundred-page report on a new product.

Contrast it, too, with the alternative: 'We will not merge.' Surprisingly often the issue in corporate planning seems to boil down to deciding between diametrically opposite strategic directions. A parting of the ways; the company at a crossroads; the horns of a dilemma; reassessment of its roots; diversify or, on the contrary, trim back to the

core; cut manufacturing costs or, on the contrary, increase them to add value; gain share in the home market or, on the contrary, go for exports; go public or stay private.

You may be surprised how bluntly these choices can be presented to managements when they really get down to fundamentals. Issues that executives used to fight over, sometimes for years, problems that have been examined by committee after committee, pale into insignificance when the real strategic problems - the truly elephant sized corporate issues - are finally identified, simply and starkly. The focus of the top managers' thinking switches abruptly into the true area of concern.

Every company of every size and type occasionally has to make a big decision, the sort of decision that affects its entire destiny for years or even decades into the future, decisions which change not just parts or departments or sections of the company but which alter its whole structure and the very nature of the company itself. They are the sort of decisions that the company and its employees will look back on in years to come and say, 'that was the year when …’

By contrast, operational planning may involve many detailed calculations. Working out the capacity needed to produce a new line of products using materials different to ones previously employed, with the associated transport, storage and other logistics implications can be a very large complex and taxing effort.

However, we hope that the decision to go with this new line of products has been taken at the right level where its organization wide implications could be assessed. That is the job of the strategic planning process.

To find out more about the unique features of strategic planning look at the Argenti Process.

 

Strategic choice is central to strategy making

An effective strategic choice process positions an organization for making sustainable strategic decisions.

At the heart of effective strategic planning lies the ability to surface the truly important issues and to make good choices, in the process of deciding how to address these issues.

I define strategic planning as a systematic, formally documented process for deciding the handful of key decisions that an organisation, viewed as a corporate whole, must get right in order to thrive over the next few years. The process involves choosing strategically and results in the production of a corporate strategic plan.

Strategic decision making is a manager’s responsibility

In general management strategic choice refers to the view that, because of the power relationships in various organizational contexts, people in roles with managerial accountability are not simply restricted by obvious contextual factors such as technology available or environmental factors such as market demand, but they exercise sometimes considerable discretion.

Suggesting that organizational executives have a considerable degree of choice is in contrast to some extreme versions of a contingency interpretation of managerial work. It is sometimes suggested that managerial behavior within organizational structures is ‘contingent’ on these various contextual factors, like size, technology, and environment trends.

I take the view that managers are in fact to become aware of what choices they can exercise, even where the context seems to constrain them to a great degree. Strategic planning is a key process or tool to enable them to do this.

The thorough exploration of any possible strategic options can also prepare managers for the inevitable departures from plan that life will throw up. Strategic decisions and contingency planning for these circumstances go together.

The process of strategic planning creates a corporate strategy for the organization. The process involves exploring a variety of strategic options on the road to isolating the hand full of major strategic decisions that become the essence of the corporate strategy.

These choices may be about such things as a business choosing when and where to compete, or how to win against the competition in the industry segments it has chosen.

For a nonprofit like a school it may involve choices about the student groups to be educated.

What kinds of choices might we face in a strategic planning process?

Those responsible for the planning process are engaged in a process of surfacing the really important strategic issues. Then, in the face of a range of uncertainties, they need to explore the shape of the issues, the relationships among them, comparing their relative potential effects on organizational performance, With the strategic issues understood arrayed before the planning team, they can explore the strategies in the 'choice space' open to them to address the issues or strategic elephants.

The full process of strategic planning will be dealt with elsewhere. However before setting out what is special about a choosing strategically, I will illustrate them with a few examples.

The ultimate strategic choice

Right at the beginning of the process there is a need to agree and state, or reaffirm, the fundamental purpose of the organization. This is often set down in some founding charter of some kind. It should include a clear definition of who are the intended beneficiaries of the organization, and explain unambiguously the kind of benefit they are entitled to expect from the organization. To guide the management of the organization in pursuing this purpose, they and the governors of the enterprise will need some measure of performance. These selections of intended beneficiaries, nature of benefit, and indicator of delivering benefit to the beneficiaries, each represent a most significant choice. The governing body and top management of the organization in question need to be in clear agreement about each choice made in defining the fundamental purpose of the organization.

Strategic choice and corporate performance

With these clear there is a need to set target levels of the overall performance in terms of benefit to beneficiaries. Setting these levels in terms of deciding what would

be failure and what would be satisfactory performance each represent a major choice.

Good corporate behavior is a choice

Setting the code of corporate conduct to be adhered to by the organization as it strives to achieve the targets set for it may entail some other important strategic decisions.

This does not mean having some generic and bland but oh so fashionable statements about corporate social responsibility. Most of these statements do not represent real choices, just empty slogans.

It does mean being very clear about what groups have a legitimate interest in the way the organization performs to achieve its performance and how it behaves while doing this. It also means as a minimum choosing to abide by the ‘no harm’ principle. More proactively an organization could make the choice to engage constructively and positively with these interest groups, and have them actively supporting the organization in its pursuit of its purpose.

How to pursue the organizational purpose involves choosing strategically

In deciding a corporate strategy of major actions and projects to achieve the desired levels of corporate performance, the corporate strategic planning team must thoroughly analyze a number of key factors. These will include assessing the most important capabilities of the enterprise, and honestly evaluating the shortcomings of the organization. Additionally a review of the environment of the enterprise is called for. This involves a search for trends likely to impact the organization, whether positively or negatively. This analysis will be summarized in a short listing of the most important strengths, weaknesses, opportunities, and threats for the organization, or SWOT analysis.

The selection of what aspects of the organization and its environment to focus on could involve significant choices.

Going back a few steps to the beginning of the process, the decisions on who to include in or exclude from the strategic planning process could be another important area of choice.

Jumping to nearer the end the strategic planning process, decisions on final strategic plans will involve creating strategic options to address the strategic issues surfaced through the preceding analysis. The task of exploring these choices to find the best

package of decisions is a creative and challenging one. The package of a few big strategic decisions selected from the many possible options, is one that the organization becomes committed to as the way forward for the next few years.

Having indicated some key points of the strategic planning process that could require strategic decisionI will now talk more about the nature of these choices.

Learn the A B C of choosing strategically

Actually that is the A, B, C and D, as you will see below.

I am strongly of the view that many strategic plans suffer from those responsible formulating strategy not having really faced up to the need for making important choices during the planning process.

Sometimes this is because the planning team simply does not know what they are looking for. So let me list the key attributes of a strategic choice to help you spot the choices in the sometime complex and shifting picture faced by those trying to decide the future of an organization.

In the context of planning for the long term future performance of an organization a sound choice is characterized by these four attributes:

Authenticity, Believability, Communicability and Deliverability.

AuthenticitySuch choices must be authentic choices. For a strategic decision situation to be authentic, it should be made from a number of, at least two, options which represent viable alternatives. For these choices to be authentic they must stated so clearly that it is obvious what an organization will do by following the options, and equally important what it will not do.

The entity must choose who it exists to serve in some beneficial way. It must choose what benefit tit will provide. For a business it must be clear which customers it will cater to, and which markets it will not service. Authentic choices may also include choosing the basis on which the business will compete, or how the firm will achieve competitive advantage in the chosen customer segments of the market, and what it will not do to compete.

An inauthentic choice does not plainly spell out what the organization will and won’t do as a result. For example, many companies pride themselves on being committed to a customer focus. Are we to honestly believe that any business would state in its strategic plan that it will not focus on the customer, or even deliberately ignore the customer? No genuine choice here.

I suppose that if the companies in question did find that their competitors were choosing to deliberately follow the road not taken, that is, ignoring the customer, we might reinstate the customer focus as a genuine choice!

If competitors take options rejected by particular organizations then we might say that a strategic choice was authentic, was addressed, and taken.

BelievabilityA believable choice is one that can be traced back to some real basis in terms of the evidence and commitments of the members of the team responsible for the strategic planning.

Believable choices are based on relevant, representative, and trustworthy evidence or are derived from such facts by sound logic. This stress on facts and logic does not preclude some role for the intuition, emotional commitments, or personal beliefs and values of the participants. However, it does acknowledge them, and their possible influence on the strategic choice process.

In a well designed strategic planning process, the logic applied to the data can traced, clearly stated, and be open to assessment.

Strategic choices and decisions flowing into the strategic plan from them will be less believable, or convincing, to those required to implement them, if conditions are not right. For example if strategic choices are perceived to be unduly influenced by the relative political position of key players or their relationship with other participants in the planning process, they will be less believable.

Anything that compromises the open and rigorous testing of strategic choices through the planning process may undermine their believability, and the confidence people have in the overall plan. For example, overuse of particular data to support a prejudicial position may be as concerning as too little data.

Opinions, and apparent hunches, or just gut feelings may be useful inputs to generating or discussing strategic choices. This is because they may be the product of many years of relevant experiences and knowledge in the field under consideration. A few decades of working in an industry subject to seasonal

fluctuations may give a manager a set of mental models of change in an industry that can be a valuable and believable resource in considering a particular strategic choice being considered by a planning team.

However rather than disregarding these ‘gut instincts’, and just like the ‘harder’ data in the more formal accounting models, they need to be assessed for believability by the planning team as a whole.

CommunicabilityA strategic choice may be authentic, and it may be believable, however, if it not in a form that enables it to be effectively and efficiently communicated, it is a waste of time. ‘Message received and not understood’. This is not simply a matter of the way it is expressed or written. It is also about whether or not the choice is compelling.

When communicated through other forms of planning as well as the complex webs of formal and informal communication channels required to get anything done in an organization, any the choice made should be engaging to a variety of audiences. These audiences include people who may have been remote from the formation of the strategic choices. Yet these same people may be expected to implemented the associated decisions, or at least adjust to their impact on them.

The communicability of the strategic choice becomes a kind of test of the management team commitment. Members of the organization remote from the decision making process, and yet with responsibilities for executing the strategic plan will judge the enthusiasm of the management team by the way in which the top managers communicate the strategic choice or choices. They will of course test the logical sense of the strategic choice against their own experiences and, if found wanting, the strategic choice will not have been fully communicated because it may be rejected by the recipients. “Message received, understood, and not accepted’.

In addition to the factual content of the choice, the managers who have taken this position need to also communicate their determination to make a choice to change direction from current strategies. They also need to communicate their seriousness, and willingness to do whatever it takes to help the organization through the transition to this new position arising from the strategic choice made.

This brings us to the last major attribute of good a strategic choice, deliverability.

DeliverabilitySurfacing the really important issues or strategic elephants, exploring choices relevant to addressing these issues is all very well. Narrowing the choices to a small

number that meet the A, B and C already outlined is fine. However, a strategic choice is not much use unless it can be executed.

That means the choice is not only Authentic, Believable and Communicable. It must also be Deliverable, or Doable, or…Executable. Enough with the alphabet block already!

Strategic choices that have been shortlisted for inclusion in a corporate strategy need to be capable of being broken down into a series of doable steps to be taken immediately, and can be further broken down into medium and long-term achievable actions, with clearly stated deliverables.

These larger authentic, believable, communicable corporate strategic choices must also be able to be carried out in the real world. They must be capable of being translated into clear budgets. Projects or action plans, with clearly assigned accountabilities. They must be at least adequately resourced. As importantly they must be planned with associated risk management practices in place to deal with the inevitable obstacles that arise.

Structure of the strategic choice space

There are five main sets of procedures in the approach to strategic planning followed here at simpley-strategic-planning.com. They are-

Engaging commitment Setting long term strategic objectives for improved performance of the

organisation Generating strategic options Evaluating and deciding on strategies Monitoring implementation of the strategies against the long term objectives.

In terms of decision processes within this set of activities there are three key components of the strategic planning process which generate the space in which sound strategic choice may be made. They are-

The strategic intent or objective set to improve the long term performance of the organization

The strategic issues distilled from the analysis of key factors relevant to the overall situation of the organization in its environment, and

The strategic options generated by the planning team.

The strategic choice space is in the area of overlap among these three components, as depicted in this diagram. The shaded background suggests the pervasiveness of contextual influences on the process.

Consideration of the other overlaps between pairs of components may stimulate discussion and possible other thoughts to clarify what are the really important elements in any decision about strategy.

Between intent and issue analysis there may be no feasible options apparent. Before giving up it may be worth looking to see if the alignment between factors raised in the analysis which seem relevant to objectives have been misread, or are alternative forms of issues already aligned in the central strategic choice space.

Between intent and options it may be possible to identify early on that some options are just not feasible.

There will of course be options thrown up that seem feasible, and to fit the issues raised to some extent, and yet do not align well with the objectives. They may be overly risky, or not align with the code of corporate conduct of the organization.

However, it is only in the space created by all three component circles overlapping, that we find any logical candidate strategic choice for inclusion in the final corporate strategy.

Honest and evidence based exploration of this space enables a reasonable and possible set of strategies to emerge as if by magic. The ‘magic’ is that which comes with of systematic hard work, and honesty in facing up to the really big challenges or

strategic elephants facing the organization, in its pursuit of longer term sustainable performance.

When managerial ego becomes involved, or a deep rooted organizational culture is at play, it may be very difficult to follow the logic as presented.

It will be tempting to argue for a change in strategic intent in order to get in a favored strategic option.

A suggested but infeasible strategic choice which seems very attractive might have influential supporters, so the evidence regarding its feasibility needs to be sound and fully available to the planning team may need to be carefully argued with clear evidence in support. Choosing what not to do, is as important to agree and record as part of the planning process, as the finally agreed strategic choices.

Nonprofit organizations and the Strategic Choice Approach

An alternative view to the approach mostly taken at simply-strategic-planning.com is that of the Strategic Choice Approach (SCA) to planning.

The SCA builds on action research work initiated in the1960s at the Tavistock Institute for Human Relations in London. The early projects focused on policy-making in local governments, employing teams of operational research and social scientists. Their work questioned the then conventional views of how public policy work should be done. Despite how rule ridden these environments are, these pioneers of SCA demonstrated the vital importance of informal networks of constructive cooperation in achieving pr0gress in decision making in very complex, uncertain, and often highly politicized environments.

Much of this centered on practices designed to reduce various forms of uncertainty about the working environment, about values and about other behavior of a range of players external to the immediate decision situation. Unlike many other workers who focus primarily on the disposal and use of power in these situations, the SCA focused on processes for achieving improved understanding across the usual battle lines in building consensus about what is feasible an desirable in the way of decisions that move to getting things done, while not closing off options for future action, leaving some scope for people to change their minds, and rake advantage of new and usually unforeseen opportunities for making improvements.

The progressive expansion of the empirical evidence base of this work led to a set of methods for facilitating decision-making in complex situations.

In the Strategic Choice Approach, planning is seen as a continuous process of adjustment, and involving a fair amount of reflection on the nature of the decision making process itself. It is a process of a process of reflecting on and clarifying the strategic choices available at any given time, and building commitment to moving forward with a small number of feasible solutions in the form of ‘commitment packages’. The use of the term "strategic" refers more to the way in which decisions are developed and communicated for commitment to action rather than being focused at say the corporate level of an enterprise. So it is not strategic planning in the sense used here.

The most useful explanation of this Strategic Choice Approach is that of Planning Under Pressure, by J. Friend, and A. Hickling.

Strategic planning issues are fundamental to understanding corporate strategic planning

Corporate strategic planning should aim to surface strategic planning issues. Strategic issues are fundamental to the process of corporate strategic planning. As explained at this site, strategic planning is a systematic procedure for identifying the top most key issues - the half-dozen that every organization must get right if it is to prosper over the next few years.

A formal definition of this kind of strategic planning would probably include the phrase 'identifying and addressing the Unresolved Key Issues' (UKI). As UKI is so close to YUKI I will not call these really big Strategic Planning Issues UKIs or YUKIs I did do this when I was teaching strategic planning years ago. However I realized that this gave an unbalanced view of strategic issues as being only negative. Some of them are not at all frightening or horrible. Some of the truly strategic issues facing organizations are positive.

Strategic Issues as organizational elephants

What are strategic planning issues?

Let us avoid the following confusion on this point. An organization can have issues or problems with its strategic planning process. Or it can have issues facing the organization that the strategic planning process can help the managers to understand and address. It is this second sense of big challenges facing the organization that I call Strategic Planning Issues or simply strategic issues.

Issues with the planning process itself are dealt with by having a sound process, one which meets the criteria we have stated elsewhere on this site. You could start with Strategic Planning Process.

John Argenti, developer of the Argenti System of Strategic Planning, refers to the process of unearthing strategic issues as an 'elephant hunt'. It is a process of looking for ‘strategic elephants’ in the organization's undergrowth, identifying them, then corralling them in one place so everyone can see all of them together and can note the sum total of the organization's strategic situation. It is very important to see these elephants against a very broad, panoramic, background and then to deal with all of them at once in one major, holistic, strategic review.

Every organization I have ever worked in as an employee, or worked with as consultant, has had one or more of these elephant sized 'strategic planning issues'.

Examples of Strategic Planning Issues

Want to have some illustrations of these strategic elephants? Glad you asked!

Type of organizational situation- the big product elephant

A manufacturing business has two main product lines, one with sales revenue of $6m, and the other with sales of $12m. Both make about 20 per cent contribution to overheads and profit. The larger $12m product is made under a licensing arrangement with an international firm.

Strategic Planning Issues

The plant facilities used to make the larger volume product are designed to make only this product and are not easily reconfigured for other work. The license is renewable on an annual basis following a review by both parties to the arrangement. The firm offering the license is showing an increasing tendency to shift work to lowest cost producers.

Why the issue is a strategic issue

The risk of losing a contribution to profits of about 20% definitely marks out this dependence of a large customer as a strategic planning issue. The difficulty of

redeploying the assets involved simply adds to the significance of this as a strategic elephant.

Type of organizational situation- having to go on a capital diet

A British subsidiary of a US conglomerate has been producing five products for many years. The time has come to upgrade the production plant, and to ensure the company keeps up with the market's increasing demands for quicker service, lower maintenance costs and higher quality, will require the expenditure of £50m over the next five years.

Strategic Planning Issues

This company's parent has told them they may spend only £21m.

Why the issue is a strategic issue

A judgment would need to be made whether the available capital could be used in way that would enable improved production fast enough to keep up with the changes in the market. These risks would make this matter to be kept on the short list of strategic planning issues.

Type of organizational situation- letting go of yesterday to pay for tomorrow

A diversified group of clothing and footwear companies has seven divisions. The largest subsidiary is a maker of work clothes with a long established reputation for quality. It makes a moderate and slowly declining return on capital although nothing like as high as the other six smaller subsidiaries. These are engaged in specialized footwear for people in dangerous occupations, like firefighters, safety gear like harnesses for electrical linesmen, and so on. These smaller companies have steadily expanded in recent years, and have arranged their manufacturing off shore, turning themselves into design and marketing companies.

Strategic Planning Issues

They are emerging as leaders in their respective fields, which are less and less related to the manufacturer of general purpose work clothing, which is facing increasingly fierce competition from cheap imported products. The smaller companies are seeking additional capital for expansion into other markets. A debate is brewing about the need to sell the older traditional manufacturing division of the firm to raise the capital required.

Why the issue is a strategic issue

The planning team would have to look at the relative size of the contribution from the manufacturing business compared with the other areas of the enterprise, and the point at which the decline in the former would be overtaken by growth in the latter. Also given the decline, a judgment on the quantum of capital that might be realized by the sale could be significant in timing the sale. This is a strategic planning issue because of the potential size of the impacts and the time horizon over which this may impact the business.

Type of organizational situation – when the world doesn’t care about the carer any more

A long established nonprofit organization, has for more than 70 years gained a reputation for integrity and caring relationships with its community, donors and relevant government agencies.

Strategic Planning Issues

Despite good relationships with its donor base and other stakeholder groups, because of severe economic recession, donor income is starting to slide. The Chief Finance Officer estimates that the income could decline between 40 and 50% over the next five years, while expenses have begun to drift upwards at about 3% above inflation in recent years. This is bad enough, but this is a warning sign that its original purpose, set 60 years ago, is becoming less relevant in the current situation with other agencies undertaking the work in more cost effective ways.

Why the issue is a strategic issue

While the cost donor income gap is obviously a strategic elephant, perhaps of even more significance is the fact the founding purpose of the organization may no longer be valid. If not addressed the very existence of the organization is called into question. There are profound strategic planning issues to be addressed by this organization.

Type of organizational situation –death and taxes

A large university restructures to support growing thrust in research and industry related consulting and training. The university commercial subsidiary restructured to parallel the parent organization, into four new separate companies and align company staff more effectively with relevant schools of the university.

Strategic Planning Issues

The single company previously enjoyed tax exempt status as a unit within the nonprofit university. After the restructure two out of the four new subsidiary companies lose their tax exempt status and are subject to full corporate taxation. They happen to be the least profitable of the four companies!

Why the issue is a strategic issue

The possibility arises of the collection of businesses going into a net loss position. The taxation issue appears to be a strategic planning issue that was missed in the process leading up to the decision to restructure the businesses. It may also be the case that the previous set up was masking some poor performance that should have been addressed.

What we know about strategic elephants

You will notice that in all of these examples financial numbers associated with the situation are an important input to the strategic planning deliberations, these strategic issues are very much about judgment, anticipating the likely impact on the organization as whole, and the length of time over which the impact will occur.

Having worked on strategic plans for many organizations over more than forty years I think we can say some things about the patterns that emerge with strategic issues of the very large or elephant variety I have been referring to.

Practically every organization has at least one of these elephantine strategic issues lurking in the organization, which has not been dealt with, and needs to be addressed.

In a very few cases there will be only one major strategic elephant. It is more usual for there to be a few, perhaps up to a handful. In only one case we counted six. I have never seen more than six listed.

I have certainly seen long lists of fifty or sixty issues that were judged to be major or key issues for the organization at the commencement of a strategic planning process.

However, when tested against the criteria of likely impact on the overall corporate performance being impacted by 10, 20 or more percent, most of these ‘key issues’ fell off the lists, or were seen to be symptoms of a larger underlying strategic issue we have described as being ‘strategic elephants’.

In some cases the alleged corporate strategic planning issues were clearly of significance to a part of the organization, but not of corporate significance. This may sometimes be a misunderstanding. In other cases it may be a case of ‘empire building’.

No shades of grey among these elephants.

These strategic issues or major themes stand out like the proverbial sore thumb once they are acknowledged. These strategic planning issues are those factors, trends, obstacles or other matters that have the potential to affect the shape and performance of the organization for quite a few years.

It may run counter to the intuition of most people, but it is my experience that the issues surfaced during strategic planning do not fit a neat, smooth, or gradual ranking in severity or importance. Generally speaking either an issue is clearly a strategic planning issue or it is clearly not.

How could you miss seeing an elephant?

You will have noted in the example of the university commercial subsidiaries above that the issue of taxation was completely overlooked. Organizational management teams that have completed conventional business planning and budgeting, or revised their ‘marketing strategies’, or carried a review of organizational structure, sometimes believe they have d also ‘done strategic planning’, yet they often miss one or more of these truly strategic planning issues altogether!

None of these exercises is really designed for the purpose of surfacing and addressing the strategic planning issues that are of significance to the long term future of the enterprise as a corporate whole.

Sadly, even organizations with professional corporate or strategic planning departments which engage in exercises called ‘strategic planning’ can also miss these elephant sized strategic planning issues!

Why is this? Because usually the staff in these strategic planning units are insufficiently experienced in management, or too specialized in their expertise to identify these strategic planning issues, let alone be able to address them.

Strategic issues are not all bad news

Before you think it is too difficult to get agreement on these strategic issues or elephants because they are too difficult to acknowledge, you should realize they are not all bad news!

Possibly about one in three of the strategic issues that are surfaced will be good news, e.g., such as the charitable organization that finds its donations rising at a rate 30% faster than they had projected in their budget.

Of course the bad news is the bad news; one third of strategic planning issues being good news leaves about two thirds of all major issues are bad news. The main product line is fast becoming obsolete, the governing board is elderly, but through shareholding has a lock on changes to the board, and so on.

Because these strategic elephants have not been addressed, and left to undermine organizational effectiveness for perhaps years, there will be a chain reaction through the enterprise of myriads of smaller troubles that absorb management attention and other resources in unproductive ways.

Untamed

The metaphorical idiom, ‘elephant in the room’ is commonly used to refer to an obvious, but ‘inconvenient truth’ that is being ignored or goes unaddressed. The expression also applies to an obvious problem or risk no one wants to discuss. Of course the expression embodies the notion that an elephant in a room would be impossible to avoid, so that, people in the room who pretend the elephant is not there have chosen to avoid dealing with the biggest issue.

Some of these strategic issues or strategic elephants will have been present, untamed, in the enterprise for many years. Some of them will be known to nearly everyone in the company but no one will have tackled them, partly because, as explained above, they have no systematic planning system for raising and addressing such major interlocking strategic issues.

Strategic planning and strategic issues

Corporate strategic planning is planning for the corporate whole, not for its parts. It is not business planning, production planning, strategic planning or any other type of partial planning, and it certainly is not marketing. It is not coordinating, forecasting or

budgeting. It is a process designed to yield a corporate plan - a statement of strategies designed to affect the organization as a corporate whole.

The small number and the great impact of the decisions are two of its notable features. Because these are not complex and because they are highly judgmental in character advanced planning techniques are not often helpful and may actually hinder a clear, simple conclusion.

Clear insight into the organization in its environment, and the courage to face the big strategic planning issues are more important than excessively detailed numerical analysis of the organization.

The purpose of the corporate planning process described at this site is to reach an consensus among the top executives in an organization as to the very few really significant strategic planning issues facing the enterprise, and then to commit enthusiastically to the half-dozen actions that they have to take in order to place their organization in a strong position to face the long-term future.

Return from Strategic Planning Issues to Definition of Strategic Planning.

Monday, September 23, 2013

President Kaler's Strategic Planning Update to the Board of Regents

(Remarks as delivered. Slide deck available for download.)

Thank you, Mr. Chair, members of the Board.

We are in a time of tremendous change in higher education and are faced with both extraordinary challenges and opportunities. To help us focus our vision for the next decade and beyond, I have launched a strategic planning process for the Twin Cities campus. I have asked Provost Karen Hanson to chair the Strategic Planning Workgroup.

Why plan? Why now?

I’ve completed two years on this job. I’ve been around the state, around our campuses, in countless meetings with students, faculty, staff, community and business leaders, parents and you. Here’s what I’ve heard, seen and learned.

Citizens are eager for the U to be good…but distrust what we do. They think we’re fat and bloated, that our tuition is too high, and that we

employ too many administrators. We have a large number of PhD programs, but of variable quality. We are improving our undergraduate experience and metrics, but the coming

demographic changes will be dramatic. We need to improve the Medical School. Athletic success matters. We need operational improvements.  We have an opportunity to build a reputation to match our outcomes. We need a better connection with Greater Minnesota. We need to improve educational efficiency, perhaps via e-learning and

MOOCs. We need to figure out the usage of the right space in the right place. We are sometimes burdened by heavy consultation and processes. And we’re not as collaborative as we should be.

Here’s where I want this University to be in 20 years, what I want us to achieve, and how I want us to be known and perceived.

I want a nationally prominent undergraduate program, A leading research institution, A destination for graduate and professional education, A center for recognized faculty excellence. I want us to be known as a nation-leading health care provider, An athletic powerhouse, With deep community engagement, World-class philanthropy, And sustained state support.

I want that all to lead to and add up to affordable excellence. In short, in a word … I want us to be ambitious.

I want us to embrace ambition. Ambition is not just an earnest desire to achieve greatness. It includes the will to aspire, and aspire to greatness. That aspiration must be driven always by hard work and sometimes by tough decisions.

Here are my goals for the strategic planning process.

Overall: to increase this University’s impact and reputation. The plan should be bold, inspirational and aspirational.  We must create a Twin Cities campus plan that intersects those of other

campuses.  It must articulate a 10-year vision and specific action steps for the next 3-5

years.  It must include defined metrics to guide investment decisions and articulate

both what we will and will not do.  We can selectively build on past initiatives, but with a new vision, goals,

priorities.  The campus community must own and advocate for the plan. It can't be my

plan. It must be our plan. The plan must reflect the broad diversity of our institution, our state, and our

students. Process should be consultative and inclusive, but move along.  We must place a high priority on using existing structures/groups to provide

input.  And we’ve got to align this overall Twin Cities plan with current collegiate or

unit strategic plans, our long range financial plan, and current initiatives, such as the Enterprise System Upgrade Program.

There are many potential benefits to doing this work now. This strategic plan can:

Create buy-in and ownership among current leaders, including the Board of Regents.

Give the University community a rallying point, Leverage a shared ambition for greater excellence, Activate a sense of urgency, Create a common purpose, And it will allow us to deliberately choose our priorities, rather than having our

future decided for us by others, Finally, it will help us continue to create a more efficient, effective organization

by aligning resources and agendas

Why now? First, a lot has changed since the University completed its most recent planning process under the previous administration. Key initiatives of that plan have been completed and Transforming the U no longer serves as a meaningful guide for choices today.

As you can see, the external environment for higher ed has dramatically shifted. Meanwhile, policy makers and business leaders regularly express frustration with the pace of change at the U. But, thankfully, there’s a high degree of confidence in our current leadership—that is, all of us around this table and in my leadership team.

We are perceived as change agents. So, let’s deliver.

Here are the strategic plan components as I see them:

They begin with a vision, then our mission – who we are – and include our values and goals.

We develop strategies, action plans and metrics to track our progress. Ultimately, we establish annual priorities and, importantly…critically…we align

our budgets to support those priorities.

This will take a lot of hard work. That’s part of ambition.

There will be a Strategic Planning Workgroup. This group of about two dozen faculty, staff, students and administrators will gain input from the campus community. The group will identify key strategic issues, trends and strengths. They will draft a final report that will come to me, and then to you about a year from right now.

This is the Strategic Planning Workgroup, and it is, frankly, a spectacular, respected, diverse, experienced, highly opinionated, and, of course, very smart group of this University’s top talent, leaders and thinkers.

As I said, Provost Hanson will chair the group, with Vice Presidents Friedman, Herman, Pfutzenreuter and Wheelock, and former Dean Levine, now in the Provost’s office, and Professor Durfee on the executive committee.

Our timeline is quick. We must execute this with focus at a healthy pace. I will keep you informed and engaged throughout the process. You will review the Workgroup’s work again next summer or early fall.

We expect the process to be dynamic and we won’t stand still even as we are planning. If warranted, there may not be a bright line between completing the plan and starting to implement new initiatives. We will start when we’re ready to go!

The Provost and I are committed to robust input and consultation every step along the way. We’ll prepare a multi-pronged engagement plan that reaches people through different channels and in various ways throughout the process.

Members of the Board, I can’t emphasize enough: your involvement is critical, and it will run the spectrum from being informed, to being consulted to being deeply involved. I need you to be fully engaged in this.

So, let me summarize. Our goal is an ambitious, bold plan to chart our course for the future. I expect it will require some tough, unpopular decisions. If it doesn't, it's not strategic enough. It must be and will be driven by strong executive leadership and the faculty. The process will be consultative and inclusive, but timely. I am thrilled with the quality of the Workgroup. I am excited about getting the Twin Cities campus community engaged in this.

It’s time for us to be ambitious in a way we’ve never been before. Let’s begin.

Thank you, and I am open to your questions.