(602) 633-5353

Thoughts on Strategic Planning

by: Thomas Beyer
on: September 7, 2016
Wordcount: 690

What is meant by the term “Strategy”?

The company’s goals are achieved by the accomplishing a specific strategy.The strategy is often made up of a series of sub-strategies. Sales, Marketing, Finance, Human Resources, Information Technology, Competition, Government Regulations, & Partner Alliances are typical sub-strategies.

The proven framework for a growing company is to set a Strategy which then leads to the creation of a Business Model that is responsible for delivering and supporting the strategy.The Business Model includes important operational issues such as systems, processes, human resources, R&D and capital required to fuel the model. The Business Model is a cohesive set of disciplines designed to maximize the effectiveness of the organization at the optimal cost. The proverbial, well oiled machine. Significant value is created at the time a business model is operational and beginning to achieve milestones within the strategy.

Why is Strategy Important?

Since the late 1970’s technology companies have tended to invent products and services by exploiting various business tactics (highest & best features/benefits). Each time this happens it results in a predictable series of steps whereby the organization grows quickly but then begins to falter eventually reaching a chasm that is only overcome by capital infusion and dilution of existing shareholders.

It’s important to note, that the reason the company is able to grow quickly is because its strategy tends to focus on competitive tactics. Tactics are often the reason a business begins trading. For example, someone invents a way to do something better, faster and cheaper. That is a tactic. The entrepreneur takes the initiative creates the product/service and it sells. The focus on tactics therefore is the reason the company is in business. But, it is management’s insightful decision to develop a cohesive long-term strategy that will create a sustainable enterprise.

Ironically, when venture capital companies began making sizable investments in technology companies,they’re also required to implement a corporate strategy. The VC’s had millions of dollars invested, the company was growing at a rapid pace, everyone was excited and happy. Then came the chasm and management was faced with either going off the edge into oblivion or requesting another capital infusion to make the leap over the chasm. Either way, the existing shareholders experienced loss of their invested capital or dilution.

The strategic planning process is the long-term vision of the company. It prepares the enterprise to thrive when faced with inevitable evolutionary challenges. Companies that can successfully navigate this part of their evolution are often market leaders for generations.

What is the Chasm?

The Chasm is the point in time when the company’s products and services no longer enjoy the tactical competitive advantages experienced at introduction. Signs that the Chasm is approaching are margin compression, customer resistance, increasing competition (directly or substitution), employees leaving to fill voids in the system, cash flow problems, and overall frustration by customers, partners, employees, and shareholders. With the proper strategy and subsequent dynamic business models in place a company can successfully negotiate these inevitable issues. Without a plan in place, the company often does not recognize there is a problem until it’s too late and they are at the edge of the Chasm

Summary

Tactical advantage often places a company in business. Developing competitive tactics is fun and an exciting part of any business. Once the business is operational, management’s desire to grow the company based on a cohesive business strategy and organizational structure will put the company on a sustainable path. The innovation process is arguably more exciting than organizational development (OD). OD means creating policies & procedures that the original vision had hoped to avoid. Many visionaries understandably resist strategic planning for this very reason.

Entrepreneurs who recognize the need and value to prepare and implement corporate strategy are often pleasantly surprised at their decision. They find that while they are not always the architect of the strategy, they still retain their leadership role while maintaining the freedom to continue doing what they do best. Create!

Significant value is created at the moment the business model starts to achieve the company’s strategic milestones.


Strategic Planning