What Is Strategic Planning?

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In my 25 plus years as an independent business consultant specializing in strategic planning I have developed or accumulated more than 25 definitions of “What is Strategic Planning?” The following are the five that have proven to be the most useful, particularly for small and medium sized companies.

1. Strategic planning is the process of focusing a company’s efforts on understanding its current situation, developing goals, and creating goal oriented action plans.

This is a good illustration of the ready, aim, fire approach – systematically gathering the right information then analyzing the information to form goals and the ways and means for achieving them.

2. Strategic planning is concerned with proposed actions which affect the fundamental character of the business; the products it offers, pricing, quality, distribution, and production.

This illustrates a more fundamental approach that zeros in on answering the question “what business are we in?” It takes you back to square one and is useful when management is concerned with the overall direction of the business and its long term viability.

3. Strategic planning pertains to how a business allocates its resources to achieve its goals or objectives.

Sometimes business mis-allocate their resources. Many small companies under-allocate resources to marketing and  new business development and therefore struggle to grow. This approach to strategic planning can put a spotlight on this weakness so that corrective action can be taken.

4. Strategic planning is positioning a business to optimize its performance for the benefit of the owner.

In some small and medium sized businesses the owner ends up working very hard for modest compensation. By taking a step back and doing some planning, owner compensation can be improved. In the end it’s not how much you take in that counts, it’s what you’re able to take out.

5. Strategic planning is  a process for developing realistic goals and selecting tactics to achieve these goals.

This is a straightforward short term approach to strategic planning involving setting goals and pursuing them. For many companies, this is all that is needed to revitalize the business and get it onto a profitable growth path. 

Because not two companies are alike, strategic planning is not a one size fits all proposition. At Beta Consulting we approach each strategic planning assignment with fresh eyes so as to develop the right approach for that client.

 

Growth by Market Penetration

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The easiest way to grow is by doing more of what you are already good at. The easiest way to do that is to sell what you already make or do to qualified prospects that are similar to customers you already have.

Start by picking out your 5-10 best customers. Review what they do and what they are like as an organization. Some of these customers will probably be in similar businesses. It’s likely that they will fall into 3-5 categories.

Next, scan the market to find other companies that are in these same categories. It is likely that you will identify at least 10-15 companies in each category. Then the fun begins.

Contact each company and attempt to qualify them as being realistic potential customers for your products or services. It’s normal to find that about half of these companies are not realistic potential customers.

Then pursue the qualified customers to begin a relationship that eventually opens the door for you to compete for their business.

The advantage of this approach is that you will be promoting your most successful products or services to companies that are like companies where you have already been successful.

At Beta Consulting we have helped many companies implement this strategy.

Market Research, Wants and Needs

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Henry Ford once made the following comment regarding market research: “If I had asked them what they wanted, they would have said faster horses.”

That’s the trouble with most market research. It’s pretty good at getting people to tell you what they want, but not so good at discovering the underlying need that drives what they want. Until you figure out the need, your market research won’t be very helpful in identifying significant opportunities.

The right follow up question would have been “why do you want faster horses? The answer would have been something like, “so I can get where I’m going in less time.” And that would have been the need: “people want to get where they’re going, faster.”

Faster horses might have marginally improved the situation but in no way would they have fully satisfied the underlying need.

So the thing about market research is to get people to tell you what they want and then dig deeper to find out why they want it. Then you have a shot at identifying an unmet or under-served need that could lead to a business opportunity.

 

 

Change Strategy to Grow

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The client is a third generation family business involved in the manufacture of stamped, formed, and machined metal parts, molded plastic parts, and assemblies. The company serves the marine accessories, automotive, and agricultural equipment industries. Products are sold to OEM, end user, and distributor customers. Sales are in the $10-20 million range.

Company sales had reached a plateau. As the industries it served consolidated, a small number of customers accounted for the majority of sales. The plant was operating at about 50% of one shift capacity, but the business remained very profitable. Management decided to diversify by developing new products for markets not presently served.

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