Strategy 101: From Planning to Development to Execution
Annually, organizations plan their short-, medium-, and long-term strategies through the Strategic Planning process. A robust Strategic Planning process equips the organization with clearly defined strategic objectives across all time horizons and positions the organization for effective Strategy Development and Execution.
Strategic Planning is a crucial process, but its execution is frequently subpar, resulting in a poor translation from strategy to execution. We hope that by the end of this article, you will not only comprehend the purpose and scope of Strategic Planning, but also have a firm grasp on how to effectively and efficiently execute and manage the entire Strategy process, from Planning to Execution.
This article divides the entire Planning to Execution process into three distinct sections:
1. Strategic Planning
2. Strategy Development
3. Strategy Execution
For each section, we will highlight important core concepts and direct you to relevant resources for further comprehension. You will understand the purpose of each phase and be equipped with useful business frameworks to structure your strategic analyses and approach to implementation.
1. Strategic Planning
Wikipedia defines Strategic Planning as:
Strategic Planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy. Strategic Planning became prominent in corporations during the 1960s and remains an important aspect of strategic management. It is executed by strategic planners or strategists, who involve many parties and research sources in their analysis of the organization and its relationship to the environment in which it competes.
In the majority of organizations, executives are dissatisfied with their Strategic Planning due to its excessive bureaucracy, lack of insight, and inability to accommodate today’s rapidly changing digital markets. To combat these issues, we can employ the following three Strategic Planning steps:
1. Explore Strategy over three time horizons.
2. Encourage a stimulating and productive Strategic Dialogue.
3. Engage a diverse group of decentralized stakeholders.
Let’s delve deeper into each of these three Strategic Planning steps.
The three time horizons we wish to investigate are short term (one year), medium term (three to five years), and long term (five or more years). Each horizon is evaluated individually and has distinct objectives.
Short Term Horizon
The objective of the short-term horizon is to challenge the current strategy, evaluate progress, and explore options to accelerate execution. The scope encompasses products, geographic regions, and functions. As we explore the short-term strategy, it is essential to foster a culture of creativity and open communication. We should strive to avoid a process and discussion centered on the budget.
Medium Term Horizon
The objective of the medium-term horizon discussion is to outline the steps required to achieve the vision. The scope encompasses the business unit. This horizon’s primary objective is to create clear, executable business plans that outline the multi-year strategic initiatives required to transform vision into value.
Long Term Horizon
The final objective for the long term horizon is to define, validate, or redefine the organization’s vision, mission, and direction. This session is the venue for challenging and redefining our market’s boundaries. Our strategic actions aim to shape our future by influencing the industry.
The majority of businesses utilize the same Strategic Planning procedure year after year. As a result, the usefulness of the Strategic Planning process diminishes year after year, as the majority of analyses are adjusted versions of last year’s analyses. There is an effectiveness plateau. The same inputs result in similar outcomes, and the sessions lose their creative edge.
How then can we break this cycle and behavior? The solution is to encourage a fruitful and stimulating Strategic Dialogue by posing diverse questions. Excellent strategists must master “the art of questioning.” Listed below are several guiding principles in this regard:
· Such as, “How can we disrupt the industry?” is too broad a question.
· In addition, questions should not be overly specific (e.g., “What should the pricing be?”).
· The leadership team should conduct a strategic workshop to identify and rank the most important questions we must answer in the next three to five years.
Once the appropriate questions have been chosen, we can have teams address them. These teams will develop novel, pertinent analyses, amass new information, and formulate strategic recommendations. In addition, remember that question-driven strategic dialogue is an iterative process.
Organizations that involve a large, decentralized group of stakeholders (both internal and external) in their strategic development efforts achieve greater success than those that leave strategy to a small, centralized team.
Participation of a large group prevents groupthink. We should include individuals from diverse backgrounds, generations, and locations. This is more likely to reveal alternative perspectives and ideas. It is common to include participants from outside the organization, such as customers, suppliers, and consultants.
This methodology enhances our strategic “peripheral vision.” In other words, it improves our ability to quickly identify both opportunities and threats.
Involving stakeholders early on is also essential, as this increases buy-in, which aids the Strategy Execution process later on.
For more information on Strategic Planning, take a look at these frameworks and tools available on Flevy:
2. Strategy Development
With a productive and robust Planning process in place, we must now ensure that we have the appropriate tools and philosophies to formulate a well-considered Strategy that is appropriate for our competitive and organizational environment.
The good news is that Strategy Development and Strategic Thinking have more research and consultative frameworks than perhaps any other management topic. There are literally hundreds of frameworks for Strategy Development created by strategists, academics, and consultants.
This is additional bad news. Because there are so many available tools, it can be challenging to determine which approach is best for our organization.
To assist in navigating the available tools, let’s examine the Strategy Framework Canvas (SFC). The SFC is a unifying choice framework that guides us in selecting the most suitable strategy for the current circumstances and executing it effectively. This model is especially useful for large organizations that are now stretched across a broader and more rapidly-changing spectrum of business situations.
SFC identifies 5 distinct archetypal approaches to strategy:
1. Classic Strategy
The Classic method is the most prevalent method. In this circumstance, the market is predictable, the competitive environment is stable, and the strategy is viable.
Classic strategy is attained through a sustainable Competitive Advantage by optimally positioning our company in an alluring market. Since the basis of Competitive Advantage in these environments is known and immutable, advantage can be based on superior scale, differentiation (or, alternatively, scale within a narrower market segment), or superior capabilities.
The most well-known Strategy models are the Classics, such as:
2. Adaptive Strategy
When the environment is neither predictable nor modifiable, we employ the Adaptive strategy. The market is continuously undergoing change.
The foundation of the Adaptive approach to strategy is the concept of serial temporary advantage, as opposed to the Classic approach’s notion of sustainable Competitive Advantage. As opposed to long-term analysis and planning, continuous experimentation and real-time adjustment are emphasized in environments that are unpredictable and immutable. Because advantages are transient, we concentrate on means rather than ends.
Adaptive framework examples include:
· Time-based Competition
· Temporary Advantage
· Adaptive Advantage
3. Visionary Strategy
When we can reliably create or re-create an environment with some degree of predictability by recognizing an opportunity and pursuing it with single-mindedness, we employ the Visionary strategy.
Entrepreneurial startups are most frequently associated with visionary approaches. However, large organizations must increasingly adopt this strategy for themselves.
These examples include:
· Value Innovation
4. Leader Strategy
When the environment is both unpredictable and malleable, the Leader Approach is utilized. We are able to shape or reshape the entire industry.
A Leader strategy permits and requires an organization to collaborate with others in a diverse ecosystem that disperses risk, provides complementary capabilities and resources, and builds the market rapidly by leveraging the power of numbers.
These are examples of Leader frameworks:
5. Renewal Strategy
Finally, when the environment is harsh, the Renewal strategy is implemented. This type of strategy aims to restore the organization’s vitality and competitiveness.
Existing conditions prevent the current business model from being sustainable in such a challenging environment. The initial step is to alter course in order to preserve and liberate resources.
Examples include any of the following:
· Business Turnaround Strategies
The next step, after determining the type of Strategy approach to adopt, is to adopt a Strategy Development framework that is most suitable for our organization. Among the most important factors are our Organizational Culture, Organizational Structure, Leadership Style, Competitive Positioning, and Core Competencies.
For more information on Strategy Development, take a look at these frameworks available on Flevy:
The Strategy Chessboard (listed above) is another holistic Strategy framework, similar to the SFC. For even more materials on specific Strategy frameworks, take a look at our Strategy Development Stream (here) and the Flevy Marketplace (here).
3. Strategy Execution
Without execution, strategy is merely theory. Every business has a strategy.
However, were you aware that the majority of strategies fail?
In fact, numerous studies conducted by leading consulting firms (including McKinsey, Bain, and BCG) and Harvard Business Review indicate that approximately 70% of strategies fail due to poor execution.
Moreover, organizations only realize approximately 60% of the value of their strategies. This data is depicted and broken down in further detail on the slide on the next page.
The high failure rate for Strategy execution can often be attributed to scattered and uncoordinated Strategy Management processes. Effective Strategy implementation necessitates synchronized efforts by different executive groups.
This difference between the Strategic Plan and actual performance outcomes is referred to as the Strategy-Execution Gap.
The majority of organizations’ projected performance based on Strategic Planning projections resemble “Venetian blinds.”
In other words, when the projections for each year are compared side-by-side, the resulting diagram resembles a series of diagonal venetian blinds. This pattern indicates a deeper problem with an institution’s practice of setting unrealistic goals, which has negative effects on the culture of the organization.
There are three best practice guiding principles for closing the Strategy-Execution Gap.
First Principle: Keep things simple.
In the majority of organizations, strategy is a highly abstract concept that is frequently used interchangeably with vision or aspiration. It is also something that is difficult to communicate or put into action. As a result, it is impossible to establish a connection between strategy and performance because the strategy itself is insufficiently coherent and concrete.
In contrast, high-performing organizations avoid lengthy descriptions of lofty objectives. They instead use concise, clear language to describe their course of action. By clearly defining what the strategy is and is not, we can keep all employees moving in the same direction.
Second Principle: Use a rigorous framework for Strategy Execution and Deployment.
To be fruitful, the dialogue between corporate and the business unit regarding market assumptions must be conducted within a rigorous structure. Here are some available frameworks on Flevy:
Our Strategic Planning is not predicated on a particular planning framework. It is crucial that the framework establishes a common language for communication between corporate and business units, as well as between the Strategy, Marketing, and Finance teams.
Without such a structure, it is challenging for management to determine whether the financial projections are reasonable and realistic. Thus, management cannot confidently determine whether a performance shortfall is the result of poor execution or a flawed strategy.
Third Principle: Continuously monitor performance.
Organizations with superior performance utilize real-time performance monitoring. Continuously monitoring resource deployment patterns and their outcomes relative to plans, and utilizing continuous feedback to reset planning assumptions and reallocate resources accordingly. This real-time approach permits management to identify and locate flaws in the plan as well as gaps in execution, without conflating the two.
Continuous performance monitoring is particularly important in industries with a high degree of volatility. In such circumstances, events beyond an organization’s control can render a plan ineffective.
“Planning is bringing the future into the present, so that you can do something about it now,” quote Alan Lakein.
Therefore, Strategic Planning is crucial in an organization’s pursuit of its near-, mid-, and long-term Strategic Vision and Strategic Objectives.
To develop Expertise and achieve Excellence in Strategy, we recommend taking a look at our Strategy Development Stream offering. This is the largest collection of best practice Strategy frameworks available anywhere, each a fully editable PowerPoint presentation with a combined today of over 1,800+ slides.
Lastly, a parting gift for getting this far.
Free Strategy Development & Execution Primer
As we’ve just discussed, most organizations develop robust strategies, but struggle with operationalizing their strategies into implementable steps.
Flevy is giving a complimentary 50+ slide presentation that introduces 12 powerful business frameworks spanning both Strategy Development and Strategy Execution. These frameworks teach the best practices used by Fortune 100 organizations and global strategy consulting firms.
Full details here: https://flevy.com/strategy-frameworks