Strategic planning is a concept that many businesses embrace only with a sense of wariness. This is because the process is often rooted in “feel good” language and visionary aspirations. The typical CFO prefers a little more meat on the bone.
So how do we put the “plan” back in strategic planning? This is done by focusing on the customer and adding the concept of profitably to the process.
Starting with the customer is important. If you do not define your customer well, then you won’t know what resources to employ, how to go to market, or what business to accept or reject. If you try to be all things to all people, then you make no one happy in the end.
Defining your customers and their needs helps you position your products and services. Keep in mind that what you identify as a customer need may not necessarily align with your customer’s buying criteria. For example, many customers will evaluate you not so much on how you meet their needs, but by how you compare to the competition. If you offer something that is too much better than the next guy, you could price yourself out of the market. The point, of course, isn’t to settle for mediocrity. Rather, when positioning your products and services, simply spend some time thinking about what your customers need and what they think they need.
Once you have your customers down, it’s time to focus on profitable growth. Start with long term objectives – perhaps five years out but maybe shorter. Next, define what you need to do in the short term to realize these objectives. Both long term objectives and short term activities need to be realistic, easy to communicate, and measurable. For example, let’s say your long term objective is to double your sales in five years. This may be ambitious, but it’s doable, clear, and easy to evaluate. Your short term objective in such a scenario might be to expand your sales force by 10% in the first quarter. Equally doable, clear, and easy to evaluate.
Of course, a 10% increase in your sales force over several quarters doesn’t automatically translate into a doubling of sales. And even if it did, you have to consider the impact of the cost of the sales force on profit margin. Which brings us to the importance of reporting.
To realize your goals, you need to put a solid reporting/feedback mechanism in place. By defining your activities well, you can better understand their costs and judge whether or not they’re realistic. If they’re not, then reset your sights. Good reporting highlights both your opportunities and vulnerabilities. It also tells you where to put your resources and when to re-evaluate your strategy.
The purpose to this approach is to put quantifiers and measurements on an otherwise highly visionary and therefore qualitative exercise. If you remain realistic and set at least some of the measurements for your objectives in P&L terms, then you can put yourself on better footing for profitable growth.