For many of you, it’s time to wipe the dust off your old strategic plan and begin thinking about developing or updating your business strategy for the next planning cycle. Highlighted below are the top 10 strategic plan derailers that should be avoided to ensure your next plan is worth the paper it is printed on.
1. Treating strategic planning as an event and not a process: Strategic planning is a data-driven, discovery- oriented management process — not a one-off event that centers on creating a PowerPoint deck. The plan is constantly updated and reviewed based on new information.
2. Insular thinking: Strategic planning is an end-to-end process that includes upstream and downstream data input and output. Too often the strategic planning process is not linked chronologically to other related processes, such as human capital planning, budgeting, financial forecasting and management reporting. It’s like a chain with interconnected links that are missing.
3. Making strategic planning the responsibility of the CFO: There is a big difference between strategic planning and financial forecasting. Strategic planning is the purview of the president, the CEO or the person responsible for profit-and-loss management, or the P&L. It should never be delegated to the CFO.
4. Not understanding what you are solving: The most important first step for members of the leadership team is to identify the key questions to answer and decisions to make. Key questions might be about how to identify specific growth engines, which markets it makes sense to enter or leave, what strategy to use in pricing, or how to segment the market.
5. Not understanding your business drivers: For each key business outcome, leadership must have consensus around “cause and effect”— specifically, what variable most directly drives a desired business outcome. If you identify leading measures, you can predict the performance of the business ahead of time or take corrective action when you have a performance shortfall.
6. Spending too much time on peripheral activities: Business planning is more than crafting a catchy mission and vision. I am not aware of any company that has achieved competitive advantage through these documents alone. The vast majority of strategic planning effort needs to be focused on factors such as understanding your markets, customer analysis and positioning, and not on having the best-written vision and mission statements.
7. Focusing excessively on the external view: Most organizations do a satisfactory job of completing an environmental scan to identify external opportunities and threats. The most common shortcoming is that little is done to objectively assess a company’s internal capabilities to ensure a theoretical opportunity can be realized.
8. No consequences: A strategic plan is like a map, and the metrics are like a compass. Success is dependent upon having decisive leadership that differentiates rewards in a meaningful way, aligns culture to drive desired employee values and behaviors, and aggressively addresses performance issues.
9. Weak project execution: To a large extent, strategy execution is a function of good program or project management. The following attributes should be incorporated to ensure successful strategy execution:
• Establishment of a formal project management office (PMO) to manage your strategic initiatives, provide structure and ensure-cross project coordination.
• Common project governance, tools and templates, including the mandatory use of formal charters for each strategic initiative. Make sure you have addressed the full range of PMO functionality, such as project planning, risk management, issue escalation and performance reporting.
• Use decision criteria to prioritize and ultimately select strategic initiatives. Criteria could include financial analysis, such as internal rate of return and net present value, and could also include risk analysis.
10. Failing to cascade the enterprise-wide plan: Organization alignment can occur only when each department or function’s plan is tightly aligned with the plan for the entire enterprise.