Strategic Planning 101
How do you create a strategic plan for your company that will lead to transformational results? What type of strategic planning is the most impactful? In this short guide, we will cover what strategic planning is, the importance of strategic planning, 8 common strategic planning frameworks, characteristics of successful strategic plans, and the best strategic planning tools. Before we dive into the types of strategic planning, let’s take a moment to look at one of the many strategic planning examples.
Related reading: The 7 Steps of Strategic Planning
What Is an Example of Strategic Planning?
A very common one is the 5-year strategic plan example. A five-year strategic plan is a living document that gives a high-level view of goals for the upcoming years. Notice the emphasis on “living”—this is because strategic plans tend to evolve and change. Strategic plans can be made for any length of time, although the most common time frames are 12 months, three years, and five years. They typically have three major sections:
- A mission statement with a major goal.
- A list of initiatives to meet the goal.
- A financial plan to show how money will be spent and where revenue will be generated.
This isn’t a rigid framework, but rather more of a roadmap that helps you get to the right destination (even if that destination isn’t exactly what you originally envisioned).
Related reading: What is a Strategic Plan Example?
What Are Strategic Planning Frameworks?
When it comes to strategic planning techniques, there is different terminology that is used: models and frameworks. These terms are typically used interchangeably, although some think there are shades of difference. In general, both frameworks and models provide you with a process for how to develop a strategic plan that is unique to your business.
Related reading: 4 Steps to Build and Roll Out Your Strategic Plan
What Are the Types of Strategic Planning?
There are many different types of strategic planning, running the gamut from informal to formal. It’s important to note that many of these frameworks can be used in combination with each other. Let’s take a look at the most common 8 types of strategic planning:
Sometimes referred to as a “SWOT Matrix” or “SWOT Matrix Analysis,” the name is drawn from the four components: Strengths, Weaknesses, Opportunities, and Threats. This comprehensive analysis takes into account internal and external factors in addition to current and future potential.
The main benefits of the SWOT Analysis are that it generates a fresh perspective and actionable data about the company. Additionally, this framework is very cost-effective. In fact, anyone who is familiar with the organization can conduct one. However, the limitations of this framework include inaccurate information, as preconceived notions can influence the data, and SWOT Analysis may not be the right fit for complex, multifaceted planning.
PEST stands for Political, Economic, Social, and Technological. This model is typically used by businesses to study and understand the external market they operate in. The PEST Model is particularly useful when attempting to enter a foreign market. A major limitation is obviously the fact that the model only examines external factors and does not take into consideration any internal variables.
This model is a good candidate for using in combination with other frameworks.
OKRs (Objectives and Key Results)
Objectives and Key Results, informally known as OKRs, is a collaborative goal-setting methodology that is widely used within software companies today. OKRs originated at the computer company Intel and was quickly adopted by other tech companies.
In his book Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs, John Doerr shared why this method was so transformational at Google: “Contributors are most engaged when they can actually see how their work contributes to the company’s success. Quarter to quarter, day to day, they look for tangible measures of their achievement. Extrinsic rewards—the year-end bonus check—merely validate what they already know. OKRs speak to something more powerful, the intrinsic value of the work itself.”
Using this method is simple—choose an objective and three to five key results. The objective should be a significant, ambitious goal that is clearly defined. The key results should be easily measurable in order to determine success.
OKRs are an excellent tool that companies can use to set challenging goals and push themselves further than might have been thought possible. However, if too many OKRs are set and followed, it can lead to a lack of prioritization and objective overload.
Porter’s Five Forces
Businesses who are seeking to increase their competitive advantage often use the Porter's Five Forces framework. By looking at five competitive forces that are present in the marketplace, companies can understand what factors influence their profitability. The five competitive forces are:
- Competition in the industry
- Potential of new market entrants
- The power of suppliers
- The power of customers
- The threat of substitute products
A few of the benefits of Porter’s Five Forces are that you can easily identify opportunities to expand and that the information gathered will help you create the most value with your strategic plan. A significant limitation is the fact that there are more than five forces that impact companies, like technological advancements or changing governmental regulations to name just a few. This framework may not be practical for companies that are operating in several industries.
Value, Rarity, Imitability, and Organization are the four prongs of this framework, helping businesses to understand their competitive potential and plan accordingly. By looking at the four components and asking questions, the VRIO framework allows companies to identify and leverage their specific advantages. Because this method focuses on resources that you actually possess, rather than more general strengths, tangible solutions often surface rather than intangible suggestions. Limitations of the VRIO Framework are that smaller, less established companies may struggle to use it and that it only focuses on internal factors, excluding external variables.
Where are you going with your business? Where do you want to be? By asking these two questions, you can identify the gap and start addressing it. There are four steps in Gap Planning, also known as Gap Analysis. These steps are:
- Analyze your current state
- Identify your ideal future state
- Find the gap and analyze potential solutions
- Create and implement a plan
Gap analysis can give a comprehensive view of a company and help to prioritize strategies. However, gap planning can be costly and time consuming, as external consultants are often brought in to perform the analysis.
Balanced Scorecard (BSC)
The Balanced Score, or simply BSC, draws from four different perspectives to provide a “balanced” and high-level view of performance. This framework is used to communicate goals, align day-to-day work towards those goals, and measure and monitor progress. Characteristics of the balanced scorecard include a focus on strategy, a defined set of measurements to monitor performance, a mixture of financial and non-financial perspectives, and a portfolio of initiatives.
The four perspectives that BSC examines are:
- Financial stewardship - how the company uses financial resources
- Customer/stakeholder - looking at performance from the perspective of customers and key stakeholders
- Internal process - examines the quality and efficiency in internal workflows
- Organizational capacity - encompasses the resources that impact growth, like human capital, infrastructure, and culture
A balanced scorecard is a great tool for facilitating alignment and connecting each employee to the overall goals. However, this approach requires a lot of data and can quickly get complicated.
Blue Ocean Strategy
Written in 2004 by professors from the international business school INSEAD, Blue Ocean Strategy has influenced many companies to great success. In fact, Nintendo used this framework to develop the Nintendo DS and the Wii, specifically incorporating a touch screen interface and motion controls to reach people who may have never thought to pick up a controller. That’s what Blue Ocean is all about: new markets and uncontested spaces.
In the book, the authors define the terms ‘red ocean’ and ‘blue ocean.’ The red ocean is the known market—the boundaries are clear and everyone is playing by the same competitive rules. Everyone is jostling for the same customers and attempting to corner the market, leading to fierce competition and cutthroat strategies (thus the term ‘red ocean’). However, the blue ocean represents the unknown market—industries that don’t exist yet, where demand must be created rather than fought for. There is no competition because there is no industry! When Nintendo released the Wii, there weren’t any similar products on the market, leading to the creation of an entirely new way of gaming.
The Blue Ocean Strategy provides a step-by-step approach that builds execution into the strategy. The six steps in one part of this strategy are to examine:
- Alternative industries
- Strategic groups within your industry
- Buyer groups
- Complementary product and service offerings
- Functional-emotional orientation of an industry
- Historical trends
The benefits of the Blue Ocean Strategy are clear: having an entirely new market space with no competition gives huge advantages. On the other hand, there are great risks like arriving too early or not identifying the right idea for a new product or service.
What Are 5 Characteristics of an Effective Strategic Plan?
No matter what framework(s) you choose to formulate your strategic plan, the final outcome should reflect these five characteristics:
- A Central Vision - Your strategic plan should communicate to every employee and stakeholder the big picture and the central vision for the business.
- Clear Values - Values impact everything that companies do. Your strategic plan should clearly spell out what the company’s values are to encourage buy-in.
- Long-term Thinking - Strategic plans should prioritize outcomes and objectives for the long-term rather than focusing on the present.
- Accountability - While it may not be spelled out in the strategic plan itself, it is still important to dictate who is responsible for updating and executing the plan.
- Built-in Measurement - Whether you decide to use KPIs or other metrics, measurement and analysis are vital for evaluating the success of the strategic plan.
Interestingly, a 2021 survey by McKinsey found the companies who experienced the most transformational results from their strategic planning were those that:
- Assessed their company’s present situation rigorously.
- Identified the current state of corporate capabilities as well as problems and the underlying mind-sets that must change for the transformation to succeed.
- Broke down the process of the transformation into specific, clearly defined initiatives.
Essentially, this study shows that it doesn’t particularly matter which frameworks you choose as long as you are meeting these characteristics.
What Are the Best Strategic Planning Tools?
The best strategic planning tools are ones that are flexible, integrated, and accessible. They also should include:
- Data integration that ensures your team is not posting to several different places
- Seamless alignment of your company's vision with plan execution
- A flexible space where you can set, prepare, review, and take action on the top priorities
Here at Elate, we have created the leading strategic planning software that covers all of these factors. No matter what framework(s) you use, when it comes time to create, communicate, and quantify your strategic plan, we can help. In fact, we even wrote the playbook on strategic planning!
With 61% of senior executives reporting that their companies often struggle with the day-to-day implementation of strategy, it’s important to have the tools that can help bridge this gap. With Elate, you are empowered and enabled to do just that. You can easily communicate your vision, create alignment, and track performance all in one place. Ready to see Elate in action and experience the difference that the best strategic planning tool can make? Try a free demo or contact us today to take your strategy to the next level.