From consumer goods to biotech, I have consulted with large organizations across various industries and each consultation had one thing in common — a strategic plan. Some clients already had one in place while others were struggling to hit business goals because they hadn’t established a strategic plan. Whether the business objective is growth or productivity, a strategic plan needs to formulated and followed. That’s why I developed the 4-step approach with easy to follow frameworks. We’ll get to that in a second.
All companies need a solid strategic plan to move forward, especially startups. Just because your organization is much smaller than a Fortune 500 does not mean you skip key steps needed to mitigate risks. Most startups are focused on growth: adding a new product feature to attract new customers, launching their product in a new market, or entering a new partnership. So, (I can’t stress this enough) whatever the growth objective is, make sure you start out with a strategic plan so you’re not this guy.
What is a strategic plan?
A strategic plan is the big picture and long term focus of a company. For large established companies that means a 3–5 year outlook while for startups, the outlook can be truncated to 2 to 3 years because of the fast-moving nature of the space. The plan is an all-encompassing reflection of your organization. It defines your company, market, competitors, objectives as well as the strategic and tactical approach to achieving those objectives. A strategic plan is particularly important to startups because it charts out how to avoid risks, leverage opportunities and optimize constrained resources (cash, headcount, etc.),
How to develop a strategic plan
The approach I have found to be most effective consists of four steps. 1) Establish a clear and specific goal. 2) Identify programs to pursue. 3) Evaluate your core competencies. 4) Prioritize the potential programs.
1. Establish a clear and specific goal
Most startups are understandably growth-oriented so this first step pushes you towards specific measurable goals, not grand ones. Let’s assume, ETEZ, a fictitious restaurant reservation software startup, is beginning their strategic planning process. Setting a goal to be the best restaurant reservation app is not a sufficient goal. ETEZ’s goal should be specific, measurable, and time-bound. A revised goal is to become the number one restaurant reservation app in 6 of the top 10 largest cities in the United States.
The established goal also needs to be attainable. If ETEZ has no traction in the 10 largest cities, the goal is aggressive and unrealistic. But if ETEZ is already a key player in 2 of the 10 largest cities with the ability to collect enough actionable data on expansion, the goal becomes aggressive but attainable.
2. Identify potential programs to pursue
Once a goal is set and agreed upon, companies need to determine programs they will pursue to achieve their goal. Cross-functional brainstorming sessions are important in developing potential programs because the various functions provide input about which programs are likely to succeed.
Back to ETEZ, whose growth goal depends on entering new markets. The company conducted some brainstorming sessions and came up with the following programs as potential growth drivers:
- Wait time feature for no reservation restaurant
- Loyalty program
- White label software for restaurants
- QR codes in local newspapers
How does ETEZ know which programs will actually help them attain their growth goal? They will have to evaluate their core competencies to answer that question.
3. Evaluate your core competencies
After developing a list of potential programs, it is important to ensure that these programs leverage your startup’s core competencies which are basically your company’s strengths and competitive advantages. I recommend identifying two core competencies. Some examples of core competencies are product quality, customer service, supply chain efficiency and high innovation.
Once you’ve identified your startup’s two competencies, you can plot them on a 2x2 matrix to identify which suggested programs align best with your team’s strengths. Companies should ideally “dominate” any programs that are high on both competencies, “refrain” from programs that are low on both and “consider” programs that are high on either one of the competencies.
Let’s say ETEZ’s two highest competencies are technology and customer service. All programs they undertake need to be high on both or, at the very least, one of their two competencies. The potential programs identified in the previous step can now be evaluated based on the two core competencies.
- Wait time feature for no reservation restaurant (High in technology and customer service)
- Loyalty program (High in customer service)
- White label software for restaurants (High in technology)
- QR codes in local newspapers (Low in technology and customer service)
In this exercise, companies can pinpoint and eliminate any programs that fall into the “refrain” quadrant because those programs will not make a positive impact on the overall goal. For the programs in the “consider” and “dominate” quadrants, companies now need to determine an execution timeline.
4. Prioritize the potential programs
Now it’s time to create a game plan for the programs that made the cut. Most companies have resource constraints so it’s key to determine which programs to implement first. Companies need evaluation filters to assess the programs for prioritization. The evaluation filters should be a set of criteria that is important to the company such as a high return on investment, maintaining high customer service or providing a competitive advantage.
Each potential program has some level of risk and those risks should be identified and assessed during the prioritization phase. Some risk factors can be the program’s cost, customer acceptance and new competitors. Prioritize the potential programs based on the evaluation filters and potential risks. Rank a program high if it passes all the filters and the potential risks can be managed but rank a program low if it doesn’t pass some filters and there is a high risk associated with it.
ETEZ’s evaluation filters are market expansion, high customer service, competitive advantage and return on investment.
Who should be involved in strategic planning?
Strategic planning is a cross-functional effort. Setting the goal, evaluating the core competencies, and identifying programs to pursue all require buy-in from various functions (engineering, marketing, sales, etc.) within the organization. A diverse mix of functions during these phases also helps in identifying any potential risks. The cross-functional team plays a key role in the prioritization phase because they can provide insights into watchouts like headcount constraints or other limitations.
Each of the prioritized programs needs to be assigned a lead who is accountable for managing the program and delivering results. The program leads should establish timelines with key milestones, reporting procedures and metrics to monitor. For these leads to deliver successful results, the company needs to provide them with the appropriate resources (budget, headcount, etc.).
Now, you’re all set to execute your master plan — go forth!