Many organizations incorporate only the strategic part of the name, but planning combined with strategic thinking is central to this phase. A Strategic Plan provides the basic directions and rationales for determining where and how an organization will move towards its visionary goals. It is a written set of concepts that form the plan for the future of an organization. Every organization must have its own unique plan which must be customized for its specific history, circumstances and capacity.
The bad news about the Strategic Plan is that such document is a hypothesis only. It can only be assumed that an execution of the plan delivers successful accomplishment of goals. It provides a framework and specifications which must be tested and verified continuously. Each Strategic Plan is an instruction based on data and assumption. This is where the PMS comes into play. It essential that reliable and accurate data are collected from the outset. This information will be analyzed and processed in order to continuously review and revise the framework of the Strategic Plan. A sound and well-thought plan eventually provides the highest probability of success.
A wide spectrum of different factors affects an organization’s business performance.Depending on the nature of business, some factors may have stronger influence than others.
These factors can be categorized into two groups: internal and external factors.The below list is a selection of possible subjects, but actually their number can be virtually unlimited:
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| External Factors |
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Supplier
Availability, reliability, scarcity of supply, quality, transportation of supply.
Industry
Expectations, tendencies, development, scale, distribution channels.
Technology
Standards, research funding, development, innovation, maturity, capacity, potential, transfers.
Demography
Population, workforce, education, languages, culture, religion, medias, birth rate, literacy, life expectancy, gender rolls, life style.
Economy
Economic system, business cycles, buying power, interest rates, inflation, employment rate, supply/demand, exchange rate, skill level of workforce, productivity, consumer sentiments, growth rate, unemployment rate.
Markets
Regional, national or international markets, market segments, market size, target groups, public/private sectors, individual/ business customer, niches.
Competitors
Rivalry, industry concentration, price, competitive advantages, benchmarking.
Environment
Disposal fees, CO2 tax, electric supply, water supply, environmental protection, activist groups, ethical acceptance.
Politics
Political system, events, stability, conflicts, corruption, lobbying, bureaucracy, policies.
Legislation
Trade policies, labor laws, regulation, taxation, incentives, import/export procedures, licensing, patents, trademarks, copyrights, legal systems.
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| Internal Factors |
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Leadership
Culture, internal communication, authority, ethics, social accountability, corporate governance, company structure, responsibility and authority, barriers.
Business Process
Accounting, controlling, marketing, sales, planning, recruitment, training, development, procurement, production, distribution, customer service, safety/security, risk management.
Product
Innovation, structure, design, function, life cycle, branding, packaging, service, quality, economics scale, differentiation .
Technology
Modernization, maintenance, availability, information technology.
Systems
Organizational structure, inputs/outputs, value chain, best practice, cycle time, performance measurement, quality management system, continuous improvements, bureaucracy .
Knowledge
Technical know-how, managerial skills, leadership skills, statistics, methodologies, core competences, creativity.
Resources
Real estate, infrastructure, properties, financial reserves, natural resources or advantages.
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Depending on the nature of a business, not all factors are relevant and need to be assessed in detail.However, it is advisable to check through each factor (including any which are not listed but possibly relevant) to verify whether it has an impact on competitive advantage and future growth.For example, if your products are disposable baby diapers and you want to know more about possible consumer behavior, you may want to check the environmental side for regulation and disposal cost, and you might check the demographic side for the birth rate in the target markets which will give an indication about potential new customers. Both factors may have an influence on the design and marketing of the products.
| Data Collection and Diagnosis |
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| Soft Data |
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The soft data are often empirically appraised. Whereas they are mostly assumptions, a statistical method of examination may help to reinforce their significance. Such data can be derived from experience, trends, or surveys. Those data have a high degree of uncertainty and may vary strongly. Repetitive data assessment may produce different results. Even minor changes of circumstances – directly or indirectly related to the data – can produce completely different outcomes. Examples are consumer surveys, political and economical trends, forecasts, regulations, etc. |
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| Hard Data |
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The hard data are actual facts and figures. The primary characteristic of such data is that the sources can be tracked, verified and reproduced. They are usually highly accurate and errors are marginal. Examples are market capitalization of competitors, population, inflation, taxation, etc. |
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The process of collecting and analyzing data is complex. Since many different aspects must be reviewed, it is essential that the team members working on this task bring together a broad range of knowledge. It is essential that the information created from the data is eventually transformed into business intelligence. It involves forward and parallel thinking, predicting future events and outcome based on past behavior.
Every organization should consider external support to provide data which cannot be acquired with internal resources.
Each collected data set must be examined in relation to possible impacts on the organization’s performance. This phase requires testing the data with simulations and scenario building. The impact on the performance can only be predicted, and often, an educated guess is the best possible conclusion.
Decisions and choices needed to be based on solid and distilled information. Therefore, the large pool of data must be filtered, prioritized and sorted rigorously until the core of the Strategic Plan can be formulated.
There are systematic methods available which prioritize and filter the data through a mesh of requirements and structures. Some prominent methods are as follows:
- SWOT Analysis (Strength – Weakness – Opportunity – Threats)
- PEST Analysis (Political – Economics – Social – Technology)
- Scenario Planning
- Market Segmentation
- Competitor Analysis
- 5 Forces Model
- Portfolio Analysis
- Life Cycle Analysis
The ultimate objective is to formulate the strategic goals and outline the plan according to the information gleaned from the analyses. The goals are the anchors for subsequent elements of the PMS. The plan will also provide a timeframe for execution of the strategy.
As mentioned earlier, this final plan is a hypothesis and the effectiveness must be continuously tested. This fact is one of the key reasons why the PMS is a crucial management tool for successful business operation. Continuously monitoring business performance and scanning environmental factors allows an organization to react swiftly to any possible changes and emerging situations. |
