Why is strategic planning important for an organization?

There are two primary reasons why strategic plans are critical to any organization:

A strategy is the glue that binds a management team together. Strategic planning provides a unique opportunity to clarify your organization’s vision. Byproducts of the process are greater teamwork and unity.

While managers view strategic planning as a practical exercise, many also find it inspirational. Participants often report an uncommon level of collaboration, unparalleled in a traditional management setting. By working together in the formation of strategy, senior managers have greater buy-in and are more likely to hold each other accountable to specific outcomes.

Teams that lack vision often also lack focus. Teams with a clear vision are more likely to execute at a high level.

A strategic plan provides a roadmap for competitive advantage. As strategic planning facilitators, we are often asked to help clients identify growth opportunities and magnify points of differentiation.

Strategy formation must be dynamic and not static, changing based on shifting market dynamics. Markets, customers and competitors are fluid, and best-in-class companies pivot in real time. Regardless of whether a company is a market maker or a follower, management teams must recognize disruption, identify customer needs and seize opportunities as they occur.

A foundational element of strategy is market analysis. Within our strategic planning process, we help clients answer fundamental questions:

• What are the distinct markets you wish to address?
• Why are they viable markets?
• Are they cyclical or countercyclical to the markets you are in?
• Are they high-growth markets?
• What is the threat of new entrants or substitute products?
• What is the bargaining power of customers and the pricing power of suppliers?
• What are the barriers to entry?
• What would create disruptive innovation?
• How are markets likely to change?

It is estimated that 90% of a company’s value is derived from answering these questions, yet management teams spend 5% or less of their time on strategic thinking.

Well-run companies create a cycle for strategic planning and evaluating competitive advantage. Such companies have a special energy. They beat their competition to the punch, and in the process, create economic value and better engagement with employees who are aligned with a unifying vision.

For more on how to develop a sustainable competitive advantage, we encourage you to download and read our white papers.