Best Practices to Take Strategic Planning Off to a Great Start

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Annual strategic planning is a necessary process that results in driving initiatives and a new budget. The process is expensive and time-consuming, and many participants find it unproductive. In their view, the major issues are a formal mechanistic approach and a lack of impact on the company and its strategic direction. A few best practices can change that and bring significant improvements.


Best Practices

It is worth noting that the unit manager owns the strategy formulation and implementation plans. Ultimately, the manager controls the unit’s performance, is the foremost expert on its competitive position, and is best positioned to develop strategic plans within the larger context of the corporate strategy. With that in mind, a few best practices can help the manager make a positive difference and get strategic planning off to a great start.

  1. Understand the corporate direction. Direction setting is critical in aligning planning unit strategies and performance to corporate expectations. Upfront alignment allows planning units to attempt to develop strategic plans consistent with the corporate strategy. How does the business fit in the corporate portfolio? What are the cash flow expectations? Does corporate management expect growth, maintaining position, harvesting, or disposal? What is the explicit direction?
  2. Use standard metrics. It’s essential to measure corporate and units’ performance with uniform metrics to avoid confusion or inadvertent bias across units. What are the standard metrics used across the units?
  3. Adopt a business-driver model. A business-driver model provides a simple and direct approach that the unit can use to assess and communicate the financial impact of the main factors that drive performance and its strategies. The causal relationships between these factors and unit performance must be made explicit.
  4. Identify the correct critical success factors. Critical success factors (CSFs) are the factors or activities necessary for the business to be successful.  They define the key areas of performance that are crucial for an organization to achieve its goals. What are the CSFs required to serve customers? How do we satisfy these requirements?
  5. Formulate a robust strategy. Strategy requires a clear assessment of the unit’s market position and competitive position, development of insights, choice of competitive strategy, and formulation of strategic options. Refer to guidelines and strategy templates provided by corporate management for market segmentation, cost analysis, and competitive analysis.
  6. Focus on multiple horizons. The unit must confront three horizons to maintain its viability, including the long term (next five years), the medium term (next three years), and the short term (next 15 months). The business plan must address each of these.
  7. Identify material initiatives. The culmination of strategy is the identification of initiatives: What are the initiatives required to fulfill the strategies? What are the expected costs and benefits of each initiative? What is the cumulative impact on the existing performance? These initiatives must be specific, measurable, achievable, results-oriented, time-framed, estimated-resourced, and responsible-party allocated for maximum effectiveness.
  8. Develop the implementation plan. For each initiative, the plan must identify the objectives, level of importance, responsible party, affected market(s), required resources, duration, start and end date, ease of implementation, dependencies on other units if any.
  9. Perform stand-alone valuation of the business. A business unit must conduct its valuation as a stand-alone entity. The primary reason is that business value is the most critical performance parameter, which the business unit manager must own, empower, and maximize.
  10. Articulate the business case. The unit’s strategic plan and presentation aim to articulate a clear market-based strategy and actionable plan. Some key questions include: (1) What market segments are you targeting and why? (2) What does it take to be successful in these segments? (3) What is your current competitive position? (4) What differentiates your unit from the competition? (5) What is your vision for the next 3 to 5 years? (6) Is market leadership attainable? If so, how?
  11. Quantify the business case financial plan. The plan must identify each initiative, the number of FTEs required to complete the project, expenses, capital investments, incremental cost savings, incremental revenue, and impact on the stand-alone value of the business.



Strategic planning is a complex exercise in strategy analytics, planning, presentation, handling of challenges and objections, and the approval by multiple constituencies, all within a narrow time window – a tall order. Many things can go wrong.

The good news is that embedding best practices in strategic planning delivers significant benefits and eliminates an otherwise bureaucratic exercise of minor to no value.

Clarity: it removes the ambiguity of corporate expectations as directions get communicated upfront.

Alignment: it aligns objectives, metrics, and frameworks and establishes a common terminology, reducing confusion.

Transparency: it raises the level analytical rigor, clarification of assumptions, and data-driven views.

Robustness: it places the business in a position of strength and advances the business agenda championed by the manager.

Readiness: it improves the quality of discussion during the challenge and review sessions

A conscious effort to improve strategic planning with a pragmatic approach that embeds best practices goes a long way and steadily works over time.