All of us have a few goals in our life. It can either be short-term goals or long-term goals. And to achieve that goal, we keep on doing things that take us nearer to the goal.
Now, there are two types of people. First, one who plans everything well in advance in order to keep moving towards the goal, and follows the plan. Second, one who goes with the flow. In the second case, there are chances that the person might drift away and end up not achieving the desired goal at all. Chances of failure are there in both cases but in the second case, chances are significantly higher than the first one.
Oh, wait! This wasn’t a life lesson. Just replace the word ‘life’ with ‘business’, and ‘people’ with ‘entrepreneur’.
The first kind of entrepreneur, one who plans everything, is the one who believes in strategic planning for his business.
And the second entrepreneur is just gambling with the money he has put into his business.
Cutting to the chase, if you’re someone responsible for making major business decisions, or responsible for driving business growth, you wouldn’t want to gamble, right?
This is the reason why strategic planning is important for a business.
What is strategic planning for business?
Strategic planning is the managerial process of deciding on clear long-term and short-term business goals, and preparing a strategy to achieve the same. It is crucial for your business’ long-term success. It not only provides a sense of direction and outlines objectives, but is also useful when making day-to-day business decisions.
So, to ease out the process, there are certain strategy planning tools and methods that are commonly used by businesses. Strategic planning models provide a framework upon which strategy can be developed. And the tools act as a backbone to help you fill required inputs in the model.
Now, let’s delve deeper to know more about these strategic planning tools and models.
Tools that make strategic planning easier for your business
Strategic planning isn’t a tough puzzle that can’t be solved. When done with the right approach, it’s very smooth and easy.
These tools help you align your thoughts in a proper direction, and make sense out of data you’ve collected so far.
1. SWOT Analysis
The term SWOT is an acronym for ‘Strengths’, ‘Weaknesses’, ‘Opportunities’ and ‘Threats’. Strengths and weaknesses are considered internal factors, and opportunities and threats are considered external factors.
SWOT analysis is done in the form of a matrix. The matrix contains the strengths and weaknesses that your organization has. And opportunities and threats in the form of competition, policies or any other factor related to your industry.
2. Porter’s Five Forces
Porter’s five forces model is a strategic planning tool that helps you understand your business competition and attractiveness of the industry you’re operating in.
Porter’s five forces model includes these five aspects to be evaluated upon:
→ Competition in the industry
→ Potential of new entrants into the industry
→ Power of suppliers
→ Power of customers
→ Threat of substitute products
3. PESTLE analysis
PESTLE analysis is a strategic planning framework that you can use to analyze and monitor the macro-environmental factors that may have a profound impact on an organization’s performance. This tool is especially useful when you’re expanding your business to a foreign market.
Overall, it’s a complete detailed analysis of the external business environment.
4. VRIO framework
This tool comes into play after the creation of the vision statement of the company. It helps you unveil the real value of your product, its USPs and the factors that can lead to long term competitive advantage.
VRIO is an acronym for:
V: Valuable – Does your product/service adds value to your customer?
R: Rare – Do you own/control a scarce resource or capability that’s in demand?
I: Inimitable – Is it expensive to copy your organization’s resources? Or is there any easy substitute available?
O: Organized – Does your company have organized management systems, processes, structures, and culture to capitalize on resources and capabilities?
If you identify all the four components of the VRIO framework in your product, it means you’ve achieved sustained competitive advantage.
Now, once you’re aware of all aspects of your business, be it internal factors, external factors or products, you’re ready to create your strategic planning models.
Strategic planning models, you must know about
Google the term ‘Strategic planning models’ and you’ll find a plethora of options right on your face. You’ll be happy that you’ve got a lot of options to choose from but you’ll end up being even more confused and indecisive.
Here are five strategic planning business models specially picked to meet the needs of all kinds of businesses.
1.Basic Strategic Planning Model:
As the name says, it’s a ‘basic’ model, and does not contain any pre-specified template. It’s mostly preferred by new organizations that have minimal experience with strategic planning. It can also be beneficial for businesses that do not have enough time and resources to be put on strategic planning.
There are certain steps that are followed while creating a basic strategic planning model.
i) Define your mission statement. Describe why your business exists.
ii) Choose the intermediate goals of your business. See what needs to be achieved first.
iii) Create strategies to reach your goals.
iv) Create an action plan that properly implements your strategy.
v) Implement the strategy and monitor your progress.
2.The Balanced Scorecard (BSC) model:
Balanced Scorecard (BSC) model of strategic planning takes into account your objectives, measures, targets, and initiatives.
Objectives are high-level organizational goals.
Measures help you understand if you’re accomplishing your objective strategically.
Targets are the desired level of performance of each measure.
Initiatives are key action programs that help you achieve your objectives.
Balanced scorecard method was created by Dr. Robert Kaplan and Dr. David Norton. They say “Customers’ concerns fall into four categories: time, quality, performance and service, and cost. To put the balanced scorecard to work, companies should articulate goals for time, quality, performance and service and then translate these goals into specific measures.”
Balanced scorecard model gives you an overall view of your strategic planning. It is extensively used by big businesses, government and non-profitable organizations. It can easily be applied to anyone department of your business, like sales, marketing and operations. It is also helpful in bringing the whole team on the same page, in sync with the company’s vision.
3. Scenario strategy planning model:
Scenario strategy planning model is used by businesses to prepare for various scenarios or happenings that could possibly occur in the future. These scenarios can arise due to external forces, policy amendments, changes in government, environmental changes such as demographics, or change in regulations. These scenarios are not in control of any business and it’s better if you’re already prepared even before it arrives.
This model is mostly used along with another strategic planning model. It’s to ensure that the current strategy isn’t hampered because of scenario planning.
You can follow given below steps to implement this model for your business:
→ Identify vulnerabilities that can affect your business in the next 3-5 years.
→ For each vulnerability, discuss several scenarios including the best and worst.
→ Design responses/strategies for each individual scenario (including action plan)
→ Select major common strategies that you can use to respond to changes
→ Apply the strategies if any of the discussed scenarios occur, and measure the impact.
This should be done by businesses that have ample time and resources to work on strategic planning. This can also be applied in case you see any major change that could happen in the next five years.
4. Theory of Change (TOC):
Theory of Change (TOC) is a strategic planning method that makes you define long-term goals and then map backward to identify necessary preconditions to achieve those.
The Theory of Change  model is used when you’re:
→ Setting a goal
→ Building a team
→ Planning an initiative
→ Developing an action plan
Theory of Change  model is generally implemented in 6 stages:
i) Identifying your long-term goals
ii) Map backward and connect the preconditions or requirements necessary to achieve that goal.
iii) Explain why the preconditions are necessary and sufficient to achieve the goal.
iv) Identify your basic assumptions about the context.
v) Figure out the interventions that your initiative will perform to create your desired change.
vi) Develop indicators to measure your outcomes and the performance of your initiative.
vii) Writing a narrative to explain the logic of your initiative.
This is specifically used for planning, participation, and evaluation, that is used in companies, philanthropy, not-for-profit and government sectors to promote social change.
5.Objectives and Key Results (OKR)
OKR is the simplest strategic planning model that any business can follow. While implementing this model, you create/ask to create quarterly sets of ‘OKRs’ which are set and reviewed by every management level in the organization. To evaluate the success of each defined key result, you have to measure it on a scale of 0% to 100%
Here are some of the best practices for setting up a perfect OKR.
1. Set 3-4 objectives at max per level or per person
2. Then, set 3-5 key results per objective.
3. Be clear and simple while writing your goals, so that other people can understand it.
Pro tip: Remember the word OBJECT while jotting down your objectives.
C: Clearly understandable
And the word RESULT when you come up with your key results
L: Limited to numbers
This model is advocated by Google, Intel, Spotify, Twitter, LinkedIn, and many other Silicon Valley successes.
No strategic planning model and tools are good or bad. You just need to pick the right model and perfect tool based on your business size, resources, capability and external factors.
Also, creating a strategic plan using one of these models is just the first step. Following the plan efficiently and monitoring the results are even more important. If you follow all of these together, you’ll definitely accelerate the pace of reaching towards your goal.
The role of strategic planning for your business growth is crucial. It acts as a major decisive factor when it comes to the pace at which your business moves towards the goal. To ease out the process of strategic planning, there are certain models and tools that are commonly used by businesses.
Some of the tools for strategic planning are SWOT analysis, Porter’s Five Forces Model, PESTLE analysis and VRIO framework. These tools help you analyze internal as well as external factors affecting your business.
After analyzing all these factors, you can choose any strategic planning model that suits your business perfectly.
While choosing the strategic planning model, keep in mind your goals, resources, business resources, industry, and size of your business.
Five best business models are Basic Strategic Planning Model, Balanced Scorecard (BSC), Scenario Strategic Planning Model, Theory of Change (TOC) and Objectives and Key Results (OKRs). With these strategic models and tools, you can easily create a strategic plan that is effective, comprehensive and easy to follow.