Why All Businesses Need an Effective Strategic Plan
Morton Stories

Why All Businesses Need an Effective Strategic Plan

By Wade Calvert, Wealth Advisor & Partner

Why All Businesses Need an Effective Strategic Plan

Morton Stories

Strategic planning provides a road map to organizational management to align the functions of an organization to achieve the set goals. An organization can achieve planned goals through proper guidance from a strategic plan employed in decision-making and management discussions while determining resources and budget requirements (Cote, 2020).

Impact of strategic planning

Most organizations have initiated the strategic planning process to attain more predictable outcomes. This process prioritizes the efforts, allocates resources efficiently, aligns employees and shareholders for organizational development, and ensures that all plans are backed by sound reasoning. Effective strategic planning can improve the performance of an organization and will also enhance its survival rate. In the research study of George et al. (2019), it has been proven as a successful practice in both private and public organizations. Strategic planning should not only be utilized at the start of the planning process, but it should also continue to be utilized throughout all organizational plans. Positive impacts of having a strategic plan in an organization include:

  • It allows organizations to be proactive rather than reactive.
  • It provides a better sense of employee direction.
  • It enhances the operational effectiveness of an organization.
  • It increases profitability and market share.
  • It provides durability to a business.

If an organization fails to develop and implement a strategic plan, it can lose precious momentum and lead time to combat the hurdles facing many businesses. According to Olsen (2016), failure to develop a strategic plan can negatively impact an organization and its employees by not having an organizational purpose and lacking proper direction. Additionally, organizations without a strategic plan can face several issues with management and employee performance. Some of these issues may include (Ong, 2015):

  • Leadership indifference
  • Complacency of stakeholders
  • Confusion among the employees
  • Deeply entrenched perspectives that may not align with the company’s vision

To implement an effective strategic plan, a specific framework should be utilized to positively impact an organization. There are many different frameworks that can be applied, and this article will focus on three: the Value Discipline Model, the Ansoff Matrix, and the Bowman’s Strategy Clock.

Value Discipline Model

The value discipline framework is a strategic planning model that can be applied at any stage of organizational growth. This model allows organizational management to get laser-focused on the set objectives of a business. Bigger organizations such as Dell, Walmart, and Intel utilize the value discipline model. According to the study of Ordenes (2021), this model entails three competitive areas; however, companies should only choose one specific area to focus on depending on their needs.

1.     Customer intimacy – most common in higher value service organizations. Think of the Four Seasons hotel and being greeted by name.

  • Loyal customers
  • Best customer solution
  • Innovation at customer level
  • Dominant CRM

2.     Product leadership – market leaders like Apple or Tesla come to mind

  • Best product
  • Product innovation
  • Flexible production
  • R&D is dominant

3.    Operational excellence – Walmart’s efficiency

  • Reliable product
  • Lowest cost price
  • Ease of use/convenience
  • Logistics is dominant

The Ansoff Matrix

The Ansoff Matrix is a strategic planning framework employed by organizations that want to move beyond “business as usual.” Companies looking to expand into new markets or seeking to create new products or services will benefit most from utilizing the Ansoff Matrix. It provides four quadrants of growth and highlights which one of these strategic directions can be adopted to successfully grow a business (Wright, 2022). The quadrants help map out the varying levels of risk for each strategy, starting with the most conservative option in the lower left quadrant and moving towards greater risk as you move away from this quadrant.

These four strategies include:

  • Market penetration – Refine marketing to better reach an existing market with current products and services.
  • Market development – Expand market to a new region or different target market, but still provide the same product and services.
  • Product development – Maintain the same market but begin to cross-sell other products or services.
  • Diversification – Highest risk, and potentially higher reward, as new products and services are brought into new markets.

Bowman's Strategy Clock

   This strategic framework is a beneficial model to enable an organization to comprehend how businesses compete in a marketplace. It provides a competitive market position to a business, and by better understanding a company’s market position companies can ensure

better alignment around products, services, and marketing. Bowman’s clock framework provides different strategies that are divided into four quadrants: perceived value to the customer (low to high) and price (low to high).  

To achieve the greatest competitive advantage, an organization should pick one of the first five strategies of Bowman’s Strategy Clock. Companies in the 6-8 range will eventually fail unless they are in a protected industry. The eight strategies are:

  1. Low price and low added value – ex: dollar store
  2. Low price – ex: Walmart
  3. Hybrid (moderate price) – low price with higher perceived value; ex: Toyota
  4. Differentiation – ex: Chick-fil-A or Nike
  5. Focused differentiation – ex: Neiman Marcus
  6. Risky high margins– ex: cable companies
  7. Monopoly pricing –ex: utilities
  8. Loss of market share

Each of the three strategic frameworks can be utilized regardless of the company size or industry. There are other frameworks that can be implemented as well and depending on the goals of the company, it might be worthwhile to explore all options to see what fits best for the specific organization. Ultimately, the strategic framework is like a guardrail on a winding road: the road is the path that the company is heading down and the guardrail is the strategic framework that ensures you stay on the road to reach your destination.

References

Cote, C. (2020). WHY IS STRATEGIC PLANNING IMPORTANT?https://online.hbs.edu/blog/post/why-is-strategic-planning-important

George, B., Walker, R. M., & Monster, J. (2019). Does Strategic Planning Improve Organizational Performance? A Meta-Analysis. Public Administration Review, 79(6), 810–819. https://doi.org/10.1111/PUAR.13104

Olsen, E. (2016). Risks of Having No Strategic Plan.https://www.dummies.com/article/business-careers-money/business/strategic-planning/risks-of-having-no-strategic-plan-178743

Ong, C. (2015). 5 Benefits of Strategic Planning.https://envisio.com/blog/benefits-of-strategic-planning/#:~:text=A strategic plan provides management, objectives — thus increasing operational efficiency.

Ordenes, P. (2021). Value Disciplines Model & Your Competitive Advantage. https://www.cascade.app/blog/value-disciplines

Taiwo, A. S., & Idunnu, F. O. (2006). Impact of Strategic Planning on Organizational Performance and Survival. Research Journal of Business Management, 1(1), 62–71.https://doi.org/10.3923/RJBM.2007.62.71

Wright, T. (2022). The Ansoff Matrix Helps Organizations To Grow.https://www.cascade.app/blog/the-ansoff-matrix-helps-organizations-grow?hsLang=en-us