As a business owner and investor, I read a lot of strategic plans in the last 10 years. Every now and then I got asked what a good strategic plan should look like. My answer:
A good strategic plan contains the actual long-term strategy, broken down into the objectives that have to be met to be successful. It outlines threats and opportunities that might occur and specific actions to address these. Usually, it also shows the expected financial development.
In this article, I am going to take a look at the „blueprint“ of a good strategic plan and the elements that make it successful.
The difference between strategy and a strategic plan
Many people regularly assume that a strategy and a strategic plan are essentially the same. I beg to differ.
A strategy is a set of action oriented rules for an organisation, combined with specific actions to overcome challenges in the marketplace. A strategic plan on the other side is a document that outlines an analysis and the logical steps to arrive at the strategy and its actions, including a time frame on when to execute these.
Keeping this concept in mind, there are really two dimensions to a good strategic plan.
- The quality of the written document or, stated differently: „Can the reader follow the argument?“
- The quality of the strategic assessment itself, i.e. „Is this a good strategy?“
My gut tells me, that most readers are probably more interested in the second dimension. Therefore, I focus my efforts on the slightly different question: „What do I have to think of and include in my strategic plan to get a good strategy?“
The core of a good strategic plan
So, by looking at what makes a strategy good and effective, we automatically get an idea of what to include in our strategic plan.
Every strategy has a certain core of why it will be effective. The logic behind this core I learned in the works of Michael Porter, Richard Rumelt and Jim Collins. (Three authors who seem not to be able to write crappy books 😉 – I highly recommend their work.)
The core logic is built as follows
- Analysis of the business landscape (from customer to competition to everybody else).
- Finding a „worthwhile“ combination of
- catering to a specific need of a target group
- advantages the company has or can build up
- competitive intensity
- economic reason
- motivation
- Designing a way through the challenges to reach a strong strategic position
Especially, number 2 can create enormous headaches, if done properly. I hope you see, that creating a strategy for anything bigger than a local market or a tiny online niche is time-consuming and really hard to get right. On the upside, it is the table of content for the strategic plan.
What should a good strategic plan include?
Many search results that I found focus on the „chapter headings“ of a business plan. In my head, there is a distinction between a business plan (= document to please bankers and investors) and a strategic plan (= document to follow a strategy).
In the following table you can see the classic content points of a business plan and next to it the link to the core concept that is vital in order to arrive at an effective strategy.
| Point in business plan | Related concept in strategy |
|---|---|
| Executive summary | logic of path from analysis to actions concisely |
| Vision statement | not needed in strategy core |
| Mission statement | not needed in strategy core |
| Business goals | the strategic objectives/position that is derived from „worthwhile“ combination |
| Market analysis | necessary for finding a strategic position |
| Internal analysis | necessary for considering advantages to be used in strategy |
| Marketing plan | part of specific actions to build position |
| Operations plan | part of specific actions to build position |
| Financial projections | somewhat useful as part of other indicators for assessment |
When you are at this point, it can be a daunting exercise to plan all the nitty-gritty stuff for the next three years. Before you start, I suggest, that you read Harvard‘s (well written) article on how strategy isn‘t a planning exercise.
Key factors to successful strategic planning
Some articles I read focus on implementation of a strategic plan name factors like Engagement, Communication & Project Management. To arrive at a strong strategic position, a successful implementation is only half the way. If I have the wrong strategy, it doesn‘t matter how well I implement it. So, here are my key factors for a successful planning phase:
- Learn about strategy first. (it is more than a slogan)
- Research your market. (minimum 5 competitors)
- Develop more than one strategy. (as it will give you more inside)
- Build in experiments. (to verify strategic assumptions)
- Find measurable indicators. (so you can see progress)
- Set revision dates. (at least once a year)
- Plan processes and systems. (or else your strategy stays on paper)
- Define how you earn money. (stuff for free doesn‘t pay salaries)
- Check for logical errors. (ideally through an outsider)
These factors ensure a certain discipline in your strategic thinking. However, they can just lift the chance of success, they can‘t promise anything.
Another point, so far not really mentioned, is experience. I don‘t mean experience in a skill set or topic, though that obviously helps. I mean life experience. Some things you just can‘t imagine happening because you haven‘t lived through it. I do not want to discourage the young crowds. Quite the opposite, I want to encourage learning strategy by saying: To a certain degree you „automatically“ get better through age…
The issue with experience I took a step further. In my article „How do you become a good strategist?“ I outlined a plan on how to generate experience with focus on strategy, so you can become a good business strategist.
How many strategic goals should a company have?
This question plays into the discussion, of what a good strategic plan is, in two ways. First, we have to think about, if there are too many or too little strategic goals. Second, we have to define what we actually mean by strategic goal.
As a general rule, a company needs to have as few goals as possible, ideally just one. This focuses resources and prevents it from spreading too thin. Since most goals complement each other, there is usually a different time for each, which allows a company to only pursue one at any moment.
So, theoretically, a business can have lots of strategic goals. As long as they are tackled one after another, resources don‘t get spread out. It is the pursuit of many, sometimes even contradicting, goals at the same time, that is the reason for organisations to not accomplish any of them.
To set an artificial maximum or minimum doesn‘t make sense, as the numbers of goals depend on the current strategic position of a company, the aimed for strategic position, the time planned to reach it, the degree of detail of the plan and many more factors.
But what is actually meant by strategic goal? Let‘s say my company wants to focus within the construction market on building pools for a well-off customer segment. Now, I break down this goal into sub-goals for each section of my company. HR gets HR related sub-goals, production gets sub-goals tailored to them, and so on. I could end up with 5 to 500 sub-goals, depending on the size of the company. But are these really 500 strategic goals or just one, broken into pieces? I, personally, see them as one…
What does good strategy look like?
From a practical point of view, I would say that every good strategy has a skeleton or backbone to it, that is just necessary for it to be effective.
A good strategy describes an inner logic of what actions should and should not be taken. It contains guidance on how decisions have to made to achieve the strategic position aimed for. And it is based on an analysis of the company‘s current situation.
I know, it is not exactly a recipe. However, it marks the elements that have to be there. The most often violations that I have seen in my career, are
- ignoring that there has to be an inner logic to all the actions planned for
- not doing a thorough analysis, but judging at a glance.
In my article „What are the 6 steps of strategy formulation?“ I detailed a roadmap of designing a strategy. The post is a little bit longer than usual, but it provides you with a step-by-step-plan that you can follow and that has an inner logic that is actually reasonable. By this I mean that most people start with a strategic goal, which doesn‘t make sense in business life.
How do you know if a strategy is successful?
Keeping the questions of all question to the end, I can only answer it from experience.
A strategy is successful, if it moves a company to a stronger strategic position in the market without draining too many resources, so that gaining the position compromises the health of the business. The way to evaluate the degree of success is by controlling critical performance indicators.
Obviously, no one can ever tell with certainty, if a strategy is successful before it is executed. I just wanted to point that out, because many people (mostly new to the game of business) still look for that.
An executed strategy that doesn’t reach the originally intended position, isn‘t necessarily unsuccessful. Because it is possible to end up in another stronger position than before, even though it wasn’t the one aimed for. Additionally, please don’t see a strategic plan as something static. It has to be reviewed and adapted regularly, because market conditions change and not all assumptions are proven correct.
So, the only thing left to do, is analysing these indicators that give you a feel for the health of your company.