How Does Strategic Planning Benefit Companies

“Plans are worthless, but planning is everything.”

Dwight D. Eisenhower[1]

In the previous post, I discussed how to start strategic planning. Now it’s time to talk about why you should.

As this quote from the former U.S. general and president suggests, the benefit of planning is not that you’ll know exactly what to do a year from now but rather that you’ll have thought about the potential scenarios and possible responses in advance so that you can take more deliberate, considered, and decisive action when the moment arrives.

Why Should You Do a Strategic Planning Process?

Whether you lead a small team or a giant organization, it makes sense to carve out time to anticipate what’s coming, envision your response, make trade-offs and big bets, and align your team around how to make decisions. Here are a few of the benefits I have seen when my clients work through a robust strategic planning process:

Lengthen Your View

A strategic planning process creates a forum for discussions with a longer time horizon than the every day. Yet, even in the most senior circles of the largest companies, I’m astounded by how much of the airtime is consumed by discussions of issues within the year, quarter, and sometimes even the week. This is like driving a car while looking at the hood—perilous.

Organizations that take strategic planning seriously consider their purpose with at least a 10-year horizon and then consider the external environment with at least a 3-year view. Are those guesses about which way the world will turn accurate? Seldom. But the exercise of anticipating, imagining, and connecting the dots is valuable nonetheless.

The most significant benefit to lengthening your time horizon is having more time to react. As a small, scrappy competitor gets their footing, you can be incubating new approaches so you’re ready to flip the switch when the time is right. If the coming change is monumental, you have time to build new capabilities that will allow you to respond.

Lengthening your view increases your flexibility to respond.

Establish What’s Primary

Some of the magic of strategic planning is figuring out in which order to answer the big questions. I alluded to that concept in the previous post when I suggested that some organizations’ strategies are driven by meeting a customer’s need (purpose-driven strategies) while others prioritize the owners’ needs (shareholder-driven strategies).

If you start by answering the wrong question, you’ll feel the tension and resistance and get a hint that something’s wrong. For example, if you start with your purpose and feel you’re developing something that works for your customers but not for your owners, as happened to colleagues of mine recently, you’ll know that you started with the wrong question. Reframe around the primary need, and you’ll feel things click into place.

Establishing what’s primary orients all other decisions.

Plan in Context

The annals of Harvard Business Review are replete with cases of companies that ignored changes in the market for so long that their businesses couldn’t respond and faded off into the sunset (or Chapter 11). Strategic planning must include a thorough review of what’s happening in the external environment to allow you to see storm clouds on the horizon.

Recognizing a forming storm is especially difficult because disruptors often start as small, unsophisticated, laughable, non-issues. If you’re Hilton, are you really going to be worried about a company that encourages people to sleep on air mattresses on other people’s floors? If you’re Intel, are you going to go to full alert based on a microchip that makes greeting cards play music? If you’re Blockbuster, are you losing sleep over a company that asks people to wait for their DVD rentals in the mail? Um, well… those examples make it clear that you should.

Strategic planning allows you to look at societal, economic, political, and regulatory trends that might be great opportunities or threats to your business. The process asks you to imagine how customers, suppliers, and markets will change. And it forces you to look at how technology will change what’s possible. By considering these changes deeply, your organization is in a better position to assess what to do and when.

Planning in context makes you less vulnerable to external factors.

Force Trade-offs

If leaders are bad at lifting their eyes to the horizon, they’re often worse at making trade-offs based on what they foresee. A good strategic planning process should force you to decide what’s most important and to deprioritize, delay, or outright dump strategies and tactics that aren’t as likely to yield results.

The result of doing so is more effective resource allocation and at least a hope that some of your tactics will be fully implemented. The alternative is trying to do everything, diluting your resources and burning out your people en route to few projects being implemented fully.

It’s a contentious, agonizing, and sometimes antagonistic process to winnow down potential strategies to a set of maybe four or five that will make the biggest difference. With those strategies in hand, it’s even more excruciating to select the seven, eight, or nine big bet tactics that will make the difference. You will find the result miraculously liberating as everyone finally knows what matters most.

Forcing trade-offs allows you to do more with your resources.

Align Actions

Almost all organizations that conduct strategic planning use it to create a set of tactics that have plans and budgets. But there are wide swaths of your workforce that aren’t assigned to one of those strategic projects and therefore feel exempt from worrying about strategy.

A great strategic planning process has a second purpose, which is to provide a single source of the truth and a touchstone that employees can use to make optimal choices in both extraordinary and routine activities. There’s a full case for this second purpose here, but suffice to say that the best strategic planning processes enlist the attention and energy of all employees in bringing the strategy to life.

Aligning actions mobilizing your whole organization to execute your strategy.

Strategies Last Longer Than Plans

I am a big fan of strategic planning, not because the resulting plan is perfect and the world will stand still while you execute it. I’m a big fan of strategic planning because the strategies help you make better decisions as the world changes around you.

[1] Eisenhower seems to have first said these words in 1957, paraphrasing something he said in 1950. He said he had heard the phrase from someone in the army. See more here.