Why Strategic Planning?

Why Do Strategic Planning?

Why Do Strategic Planning?

The simple answer to the question “Why do strategic planning?” is that we plan to get results.  But the real answer is deeper than this.

First of all, we DO plan to get results.  The data is very clear – companies that do strategic planning get better results.  Overall, they grow faster, improve their market shares and get higher profit margins.

Strategic planning helps you be more competitive and have a sustainable, long term recipe for success that works

Why that is true, however, is a more complex issue.  Strategic planning works for three reasons.  First, strategic planning requires thinking about value and distinction – the major components of strategic competency.  Second, strategic planning requires a careful, judicious allocation of resources to generate the best results.   This is better than most businesses do without planning.  Third, strategic planning allows you to buy major strategic advantage with time, rather than money.  This is critical because you can only guarantee a big strategic advantage by spending large amounts of time or money.  Spending more money than your competitors is a much less profitable investment.

By examining each of these, we can see why a specific approach to strategic planning will give better results

First, competency.  Good strategic thinking requires clear-headed, honest evaluation of your strategic competency.  Strategic competency is a combination of skills, processes and knowledge that creates significant value for customers, differentiates you from the competition and is difficult to copy.  Strategic competency is the source of sustainable competitive advantage. It is normally the main source of above average profitability in any industry.  By extension, you should always favor an approach to strategic planning that has a clear focus on strategic competency.  Consequently, the results you get will be far greater and long lasting than other, more temporary advantages.

Second, resource allocation.  Companies that allocate scarce resources by prioritizing strategic initiatives are usually the ones spending the right amount of time and money on the right things, at the right time.  Consequently, there is no substitute for this rational approach to prioritization.  Therefore, you must use a process that forces realistic resource allocation based on strategic priority. Pay close attention to the fact that most strategic planning processes only look at allocating money, without attention to time.  The best strategic planning prioritizes allocation of both resources.  Because time is inevitably harder to replace than money, better strategic planning must do a good job of examining time constraints.

If cost is no object, you can throw money at any strategic issue and resolve it favorably

Third, lowering the cost of gaining advantage.  If cost is no object, you can throw money at any strategic issue and resolve it favorably.  Strategic advantages – like a brand, operational capabilities, or supply chain dominance – are only useful if they are difficult to replicate.  Furthermore, the best difficulties are the cost or the time required.  If a competitor can buy a copy of your advantage cheaply, it will not remain an advantage.  If the cost – or time required – to gain the advantage is too high, intelligent competitors will not seek to compete with that advantage.  Therefore, good strategic planning will get us into such a great position of  strategic advantage that few will challenge us.  The best advantage of planning is that we can take time to build our advantage instead of money.  This places us ahead of competitors, who either grant us the advantage, or spend large amounts of money to overcome.

Why do strategic planning?  Does your strategic planning give you all three of the advantages mentioned?  If you’d like to learn how you can do this, consider attending the Simplified Strategic Planning seminar.

For more about Strategic Competency, click here.

Robert Bradford is President & CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

M. Dana Baldwin is Senior Strategist with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

Co-Author, M. Dana Baldwin

Robert Bradford

Co-Author, Robert Bradford

 

Robert Bradford
 

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