Overview of Strategic Planning Tools
Strategists have developed a large array of tools useful in plan formulation, all of which provide unique insights and advantages.
Outline the wide array of useful tools to improve upon the scope and effectiveness of the planning process within the context of strategic management
- Forecasting, consisting of the basic concept of projecting future outcomes, is the most common tool in the strategic tool belt.
- Scenario planning is where strategists construct various scenarios to test out the potential trajectories of a specific operational plan.
- Contingency planning can be simply described as the back-up plan, while participatory planning is the primary plan. If (or, more likely, when) things do not go according to plan, a contingency plan should be in place.
- Management by objectives (MBO) is the process of defining, disseminating, and implementing the objectives that an organization has identified as strategic.
- The SMART model identifies specific goals, measures inputs and outputs, ensures that the goals are attainable and relevant to the mission of the company, and constructs a timeline.
- Incorporating concepts such as forecasting and benchmarking in conjunction with larger corporate- strategy frameworks such as SMART goals and MBO will equip strategists with a strong short-term and long-term approach.
- forecasting: Estimating how a condition will be in the future.
- benchmark: A standard that allows a manager to compare metrics, such as quality, time, and cost, across an industry and against competitors.
- contingency plan: An alternative to be put into operation if needed, especially in case of an emergency or if a primary plan fails.
Strategists have developed a large array of tools useful in the assessment of strategic planning, all of which provide unique insights into the feasibility and profitability of a given operational project. Identifying these tools, and selecting which are most appropriate for determining the effectiveness or efficiency of a project, is a central responsibility of a strategic-management team.
Listed below are the main tools available for consideration along with a brief description of how each tool is useful.
Forecasting is the the most common strategic tool and it should be considered whenever projects are being designed. Forecasting, simply put, is projecting the future of a project by leveraging all of the available knowledge to generate a likelihood of success. It is useful to construct pro forma financial statements, which illustrate expected costs and revenues.
Scenario planning is an interesting tool with which strategists construct various scenarios to test out the potential trajectories of specific operational plans. One popular scenario application is called the zero-sum game, where the costs and revenues are equated to see at what level of cost or what level of revenue a zero-sum bottom line can be achieved. By benchmarking this situation against reality, strategists can see in which situations value can be captured.
Benchmarking can be done qualitatively or quantitatively, and it is a comparative approach to strategy. Benchmarking usually requires the identification of a close competitor with similar strategic prerogatives so that the strategist can compare and contrast the two companies’ strengths and weaknesses, identifying strategies for improvements or competitive advantages.
Participatory and Contingency Planning
Contingency planning can be simply described as the back-up plan, while participatory planning is the primary plan. An excellent tool for strategists pursuing a particularly risky venture is to develop the primary objectives and strategy while simultaneously constructing a contingency plan that will limit the negative effects of failure. This offsets risk through finding various ways to achieve value regardless of the success of the overall venture. This requires creativity and a degree of adaptability.
Goal setting, similar to MBO and SMART, is a simple method for strategists to establish and enforce specific goals within the organization or strategic business unit (SBU). Goal setting creates incentives for employees by identifying achievable end results, which drives the direction of the company towards commonly established goals. This theory was developed by Edwin A. Locke in the 1960s and is considered an “open” theory, which implies that new thoughts and developments may be layered on top of the original goal-setting framework.
Management by Objectives
MBO is the process of defining, disseminating, and implementing the objectives that an organization has identified as strategic. Objectives provide factual and achievable strategies that align with employee and manager goals in order to ensure that all participants are on the same page. It is also useful to set goals and a timeline to assess progress and ensure that each individual is achieving their segment of the plan.
The SMART model aims to design goals that are specific, measurable, achievable, realistic, and time-targeted (SMART).
The SMART model identifies specific goals, measures inputs and outputs, ensures that the goals are attainable and relevant to the mission of the company, and constructs a timeline.
Though there are many other potential tools for strategists, these seven provide a strong framework for further development of strategic methodologies. Incorporating concepts such as forecasting and benchmarking in conjunction with larger corporate strategy frameworks such as SMART goals and MBO will equip strategists with a strong short-term and long-term approach.