Creating a strategic plan for a midsize business is one of the most important steps one can take to increase the likelihood that the enterprise will be successful in a volatile market. There are many opinions as to how to craft a strategic plan, but fundamentally it’s all about making the best choices for your company’s individual situation.
“Strategy is about choices,” says Aneel Karnani, associate professor and chair of strategy at the University of Michigan’s Ross School of Business. “Companies very often boil strategies down to [words] like quality, low cost, and flexibility. Everybody says that. Strategy is when you do something that another equally smart manager chooses not to do. It’s a deliberate choice between reasonable alternatives.”
Karnani says the choices facing executives include deciding the domain in which their firm will compete, the sources of its competitive advantage, the value proposition it offers its customers, and the organizational design required to execute its strategy.
Smaller firms often must work harder to develop a strategic mindset than resource-rich larger ones, because their leaders have come up through operational roles where strategy wasn’t a priority. Karnani recommends that middle-market executives sharpen their strategic thinking skills through reading, training, and setting time aside to decide, once and for all, what their company is and where they want it to go.
The actual process of creating a strategic plan doesn’t have to be difficult, but it does require structure, discipline, and follow-through, says Denise Harrison, executive vice president and COO of the Center for Simplified Strategic Planning in Ann Arbor, Mich. She says a plan can be built in three meetings:
Meeting I (Situation Analysis) – Develop a thorough understanding of your market, competition, regulatory and supplier issues, the economy, and technology as well as your own strengths, weaknesses and opportunities. Decide what you do know about your business and begin researching what you don’t know. “A process based on this research allows you to make much better decisions because you have fuller knowledge on a broad set of topics,” says Harrison.
Meeting II (Strategy Formulation) – This is where the team develops the “big-picture” strategy based on the research collected between meetings II and III. “At this point, you should also identify external threats that could have the greatest impact on your business – natural disasters, fire, significant changes in regulations or technology, a global recession,” she says, “and decide as a team how to recognize early warning signs, create a contingency plan, and reduce your exposure.” Finally the team will select the 6-10 strategic initiatives that they want to accomplish in the next 12-18 months. Action plans are developed for these strategic initiatives between meetings II and III.
Meeting III (Implementation) – Turning strategy into action. In this meeting you will review the action plans to ensure they will achieve the selected strategic initiatives, including responsibilities, resources required, and funding. From there, begin a monthly monitoring process to keep the plan on track, but be flexible.
Adds Karnani, “A strategy shouldn’t be locked in forever. I’d much rather that a manager think strategically all the time – constantly monitoring the environment, the competition, the trends – and not just every one or two years. It’s a living document.”
A robust strategic plan requires specific division of labor. While the board of directors need not be deeply involved in the process, it can provide value up front by virtue of its broader perspective. The planning team itself should include your best strategic thinkers, but don’t limit it to upper management. “Strategy is not just the job of the top few managers; it involves middle management as well,” says Karnani. “It’s futile to debate whether strategy should be top down or bottom up – it should be both.” Lastly, the process leader should not be part of the team, but should focus solely on making the process work.
Many middle-market companies can benefit from recognizing their individual strategic competencies – the combination of skills, processes, and knowledge that make up their specific intellectual capital. Harrison cautions against getting caught up in the latest strategies promoted by business superstars, and to consider instead the road less traveled. “A strategy is about your company,” she says. Many times businesses see their competitors doing one thing and say, ‘We have to do that, too,’ but often it’s the counter strategy that makes sense.”
“As a midsize company, you have to look at where you have levers and what part of the market you can serve so that you’re not necessarily poking the 800-lb. gorillas in the eye,” Harrison says. “Often there’s a space they don’t want to play in, but you can own the market because it’s relatively small and there may be great opportunities.”