Strategic planning
Monday, February 8, 2010
Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ), PEST analysis (Political, Economic, Social, and Technological), STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors), and EPISTEL (Environment, Political, Informatic, Social, Technological, Economic and Legal).
Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions:
1. "What do we do?"
2. "For whom do we do it?"
3. "How do we excel?"
In business strategic planning, the third question is better phrased "How can we beat or avoid competition?". (Bradford and Duncan, page 1).
In many organizations, this is viewed as a process for determining where an organization is going over the next year or more -typically 3 to 5 years, although some extend their vision to 20 years.
In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the "strategic plan."
It is also true that strategic planning may be a tool for effectively plotting the direction of a company; however, strategic planning itself cannot foretell exactly how the market will evolve and what issues will surface in the coming days in order to plan your organizational strategy. Therefore, strategic innovation and tinkering with the 'strategic plan' have to be a cornerstone strategy for an organization to survive the turbulent business climate.
Mission, vision and values
Mission: Defines the fundamental purpose of an organization or an enterprise, basically describing why it exists and what it does to achieve its Vision. Mission may be long term as well as for short term for any organisation. A corporate mission can last for many years, or for the life of the organization or may change as per the demand of the organisation mission varies. It is an objective with a timeline, but rather the overall goal that is accomplished over the years as objectives are achieved that are aligned with the corporate mission.
What one intends to do or achieve; aim.
Vision: Defines the desired or intended future state of an organization or enterprise in terms of its fundamental objective and/or strategic direction. Vision is a long term view, sometimes describing how the organization would like the world in which it operates to be. For example a charity working with the poor might have a vision statement which read "A world without poverty"
It is sometimes called a picture of your company in the future. Your vision statement is your inspiration, the framework for all your strategic planning. "Where do we want to go?"
Values: Beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities.
Strategy: Strategy narrowly defined, means "the art of the general" (from Greek stratcgos). A combination of the ends (goals) for which the firm is striving and the means (policies)by which it is seeking to get there.
Mission statements and vision statements
Organizations sometimes summarize goals and objectives into a mission statement and/or a vision statement Others begin with a vision and mission and use them to formulate goals and objectives.
While the existence of a shared mission is extremely useful, many strategy specialists question the requirement for a written mission statement. However, there are many models of strategic planning that start with mission statements, so it is useful to examine them here.
* A Mission statement tells you the fundamental purpose of the organization. It defines the customer and the critical processes. It informs you of the desired level of performance.
* A Vision statement outlines what the organization wants to be, or how it wants the world in which it operates to be. It concentrates on the future. It is a source of inspiration. It provides clear decision-making criteria.
An advantage of having a statement is that it creates value for those who get exposed to the statement, and those prospects are managers, employees and sometimes even customers. Statements create a sense of direction and opportunity. They both are an essential part of the strategy-making process.
Many people mistake vision statement for mission statement, and sometimes one is simply used as a longer term version of the other. The Vision should describe why it is important to achieve the Mission. A Vision statement defines the purpose or broader goal for being in existence or in the business and can remain the same for decades if crafted well. A Mission statement is more specific to what the enterprise can achieve itself. Vision should describe what will be achieved in the wider sphere if the organization and others are successful in achieving their individual missions.
A mission statement can resemble a vision statement in a few companies, but that can be a grave mistake. It can confuse people. The mission statement can galvanize the people to achieve defined objectives, even if they are stretch objectives, provided it can be elucidated in SMART (Specific, Measurable, Achievable, Relevant and Time-bound) terms. A mission statement provides a path to realize the vision in line with its values. These statements have a direct bearing on the bottom line and success of the organization.
Which comes first? The mission statement or the vision statement? That depends. If you have a new start up business, new program or plan to re engineer your current services, then the vision will guide the mission statement and the rest of the strategic plan. If you have an established business where the mission is established, then many times, the mission guides the vision statement and the rest of the strategic plan. Either way, you need to know your fundamental purpose - the mission, your current situation in terms of internal resources and capabilities (strengths and/or weaknesses) and external conditions (opportunities and/or threats), and where you want to go - the vision for the future. It's important that you keep the end or desired result in sight from the start.[citation needed] .
Features of an effective vision statement include:
* Clarity and lack of ambiguity
* Vivid and clear picture
* Description of a bright future
* Memorable and engaging wording
* Realistic aspirations
* Alignment with organizational values and culture
To become really effective, an organizational vision statement must (the theory states) become assimilated into the organization's culture. Leaders have the responsibility of communicating the vision regularly, creating narratives that illustrate the vision, acting as role-models by embodying the vision, creating short-term objectives compatible with the vision, and encouraging others to craft their own personal vision compatible with the organization's overall vision. In addition, mission statements need to be subjected to an internal assessment and an external assessment. The internal assessment should focus on how members inside the organization interpret their mission statement. The external assessment — which includes all of the businesses stakeholders — is valuable since it offers a different perspective. These discrepancies between these two assessments can give insight on the organization's mission statement effectiveness.
Another approach to defining Vision and Mission is to pose two questions. Firstly, "What aspirations does the organization have for the world in which it operates and has some influence over?", and following on from this, "What can (and /or does) the organization do or contribute to fulfill those aspirations?". The succinct answer to the first question provides the basis of the Vision Statement. The answer to the second question determines the Mission Statement.
Methodologies
There are many approaches to strategic planning but typically a three-step process may be used:
* Situation - evaluate the current situation and how it came about.
* Target - define goals and/or objectives (sometimes called ideal state)
* Path - map a possible route to the goals/objectives
One alternative approach is called Draw-See-Think
* Draw - what is the ideal image or the desired end state?
* See - what is today's situation? What is the gap from ideal and why?
* Think - what specific actions must be taken to close the gap between today's situation and the ideal state?
* Plan - what resources are required to execute the activities?
An alternative to the Draw-See-Think approach is called See-Think-Draw
* See - what is today's situation?
* Think - define goals/objectives
* Draw - map a route to achieving the goals/objectives
In other terms strategic planning can be as follows:
* Vision - Define the vision and set a mission statement with hierarchy of goals and objectives
* SWOT - Analysis conducted according to the desired goals
* Formulate - Formulate actions and processes to be taken to attain these goals
* Implement - Implementation of the agreed upon processes
* Control - Monitor and get feedback from implemented processes to fully control the operation
Situational analysis
When developing strategies, analysis of the organization and its environment as it is at the moment and how it may develop in the future, is important. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the external environment as well as the strengths and weaknesses of the organizations.
There are several factors to assess in the external situation analysis:
1. Markets (customers)
2. Competition
3. Technology
4. Supplier markets
5. Labor markets
6. The economy
7. The regulatory environment
It is rare to find all seven of these factors having critical importance. It is also uncommon to find that the first two - markets and competition - are not of critical importance. (Bradford "External Situation - What to Consider")
Analysis of the external environment normally focuses on the customer. Management should be visionary in formulating customer strategy, and should do so by thinking about market environment shifts, how these could impact customer sets, and whether those customer sets are the ones the company wishes to serve.
Analysis of the competitive environment is also performed, many times based on the framework suggested by Michael Porter.
Goals, objectives and targets
Strategic planning is a very important business activity. It is also important in the public sector areas such as education. It is practiced widely informally and formally. Strategic planning and decision processes should end with objectives and a roadmap of ways to achieve those objectives.
The following terms have been used in strategic planning: desired end states, plans, policies, goals, objectives, strategies, tactics and actions. Definitions vary, overlap and fail to achieve clarity. The most common of these concepts are specific, time bound statements of intended future results and general and continuing statements of intended future results, which most models refer to as either goals or objectives (sometimes interchangeably).
One model of organizing objectives uses hierarchies. The items listed above may be organized in a hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO), Second Rank Objective, Third Rank Objective, etc. From any rank, the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?" The exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. That is how the TRO is defined.
People typically have several goals at the same time. "Goal congruency" refers to how well the goals combine with each other. Does goal A appear compatible with goal B? Do they fit together to form a unified strategy? "Goal hierarchy" consists of the nesting of one or more goals within other goal(s).
One approach recommends having short-term goals, medium-term goals, and long-term goals. In this model, one can expect to attain short-term goals fairly easily: they stand just slightly above one's reach. At the other extreme, long-term goals appear very difficult, almost impossible to attain. Strategic management jargon sometimes refers to "Big Hairy Audacious Goals" (BHAGs) in this context. Using one goal as a stepping-stone to the next involves goal sequencing. A person or group starts by attaining the easy short-term goals, then steps up to the medium-term, then to the long-term goals. Goal sequencing can create a "goal stairway". In an organizational setting, the organization may co-ordinate goals so that they do not conflict with each other. The goals of one part of the organization should mesh compatibly with those of other parts of the organization.
source: http://en.wikipedia.org/wiki/Strategic_planning
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Strategies to improve the performance of the company
Tuesday, December 30, 2008
In this era of increasingly tight competition, every time a company must evaluate its performance, and conducted a series of improvements, so that can still grow and compete. Repairs will be carried out continuously, so that the better performance of the company and can continue to excel in the competition, or at least can still survive. One of the strategies to improve and maximize the performance of the company is restructuring the way. If we hear a word or term restructuring, which we have think, apparently to discuss the company is in decline. This is by definition the restructuring itself, which, among others, as follows:
Restructuring, often referred to as downsizing or delayering, involving a reduction in the company in the field of labor, work units or divisions, or a reduction in the level positions in the structure of organizes company. Reduction of this scale required the company to improve efficiency and effectiveness (David, F, 1997:226) Restructuring strategy used to find a solution for companies that do not grow, or the threat of pain for the organization, or industry door significant changes. The owners generally make changes in the management team, strategy changes, or the insertion of new technology in the company. Often followed by further acquisitions to build a critical part, the part that is not necessary, to reduce the acquisition cost effectively. The result is a strong company, or the transformation of industry. The strategy requires restructuring the management team who have insight to look to the future, when the company is undervalued at the point position in the industry or who cooked for the transformation. The same insight required to turn around the business units, even in a business that is not familiar (Mintzberg & Quinn, 1996:732). Restructuring the company aims to improve company performance and Maximization (Djohanputro, Bramantyo, 2004:2).
But every time a company doing repairs, either on a small scale or large scale, the aim is to improve performance. Of course, companies need not wait for a decline made new improvement, as can be delayed, so that improvements need to be carried out continuously. In general, the term used when a company restructuring would like to make overall improvements, and the aim is to improve and maximize the performance of the company.
At this time, if you read in the newspapers, many companies are doing corporate action, the aim is to strengthen, improve and maximize the performance of the company. To understand what and how is the restructuring that can maximize the value of the company, below the line I try to make a big snippets problems, which I take, among others, from the book-length pack Bram (former lecturer I) as follows:
a. Corporate Restructuring goal.
Restructuring the company aims to improve company performance and Maximization. For companies that go public have been, Maximization value the company characterized by high stock prices the company, and the price can sit on the top level. stock prices is not playing the market or the fried fry stocks, but really is a mirror expectations investors will be the future of the company. In line with the companies that already go public, the selling price also reflects investors' expectations on the future performance of the company. While not go for the public, the company Maximization value reflected in the selling price of the company.
b. Mapping portfolio and Strategic Business Unit (SBU) Company
First is the mapping of the portfolio, the ability to know how each asset in providing added value for the company. Is there idle assets, or assets that are less productive, and not because it did not need to be in line with company strategy? Assets that are not productive and not in line with the company's strategy should be for sale.
Then do the mapping SBU, each SBU votes based on some characters, such as: a) life cycle, b) the market, c) growth and cash flow. Then each SBU evaluated, is still in line with company strategy. SBU is appropriate, can be associated with increased value, or give Economic Value Added (EVA) to the company as a whole.
c. Rating SBU
There are several ways SBU assessment. One way that is commonly used measure of current cash flow is expected to be generated by the SBU. Value Net Present Value (NPV) of the cash flow is a value from the SBU. (Catt: I have 10 SBU assessment phase, there will be segregated on the article).
d. Correction portfolio and SBU.
After the assessment, the SBU assets and the only remaining fully in line with company strategy. However, the quality of assets and SBU should be evaluated, in order to operate optimally. After knowing the various potential problems of assets, management needs to develop a variety of alternative actions against these assets, with the goal of improving the productivity of the assets concerned.
e. Maximization SBU value.
SBU a value based on cash flow to its health, especially the pattern predicted cash flow. Maximization value means that the SBU management efforts so that the projected cash flow SBU since the restructuring will be healthier and improved from time to time.
Things that need to be in the value Maximization SBU:
1. Make sure there is no potential assets stored. Assets that often do not realize is intangible assets, such as: a) Name of the company, which can be lost if you do not used.b) research and development capability, which is a potential for the company. c) The impact of marketing, eg the incentive campaign, which can be positioned in the product SBU marrow consumers.
2. Make sure that the funding company's health. Financial structure that gave both participate in the share of value Maximization SBU.
3. Make sure the organization supports all the strategies in the Maximization SBU.
f. The Leadership
The factor of leadership is one key to the success of the process of restructuring the company. Without a good leader, the restructuring will stop in the middle of the road. Terms of the first primary and a leader in the process of restructuring is a visionary. The leaders also need to be a restructuring agent of change. The process of restructuring, never a good idea will always get resistance from some employees.
Leaders also need to have the ability to used (Empowerment) employees. Identification of assets and SBU with both the starting point is the restructuring of the good. Identification result in fatal error, because the subordinate is able to make the tasks that can not ignore the weight of the board.
Source reading:
David, Fred R. Strategic Management. Prentice-Hall International, Inc. New Jersey, 1997.
Porter, Michael E. How Competitive Forces Shape Strategy. In any posts Mintzberg, H. & Quinn, James, B.1996: The Strategy Process: Concepts, Contexts, Cases. Prentice-Hall International, Inc. New Jerswy, 1997.
Djohanpuro, Bramantyo, MBA, PhD. Value-Based Corporate Restructuring. Towards Excellence strategy Compete. Jakarta: PPM Publisher, 2004
Many of the participants as the author of the restructuring process of the company.
Source : http://edratna.wordpress.com
Label: performance, strategy
