Having an annual strategic planning process is essential, because it forces you to understand your company's core capacities, its strengths and weaknesses and its competitive markets (that is, the behavior of your customers and movements of your rivals). It also demands that you make assumptions about the future and some short-term financial projections. In terms of defining and executing your strategy, this annual learning process may be the most important action you take all year.
However, the business world is changing faster than ever; if you develop the perfect strategy in December, it may be obsolete in six months. Defining a strategy will always be an important, necessary process, but flexibility has never been more important. If your strategy doesn't allow for adaptation when assumptions are no longer valid, then it's bad, no matter how perfect it was initially. You'll still need the deep understanding of your company's core capacities, but you'll also need to be flexible in how you adapt to your market.
How, then, can you gain more strategic flexibility? Here are three ideas:
- Review your strategy at regular intervals. This will allow you to quickly identify when your initial strategic assumptions are moving off track. Have monthly strategy-monitoring meetings with those who created the plan to evaluate whether it's working or not. Collect and share information about your markets, rivals, prices and new technology. Challenge your strategic assumptions and review how the market is trending. If you discover that you need to adapt your strategy because, say, the macroeconomy is going badly or growing much faster than expected, then you might want to structure a quarterly meeting to discuss and make any changes you deem necessary. In summary, set up formal structures to collect, share and discuss information as you execute your strategy, and then allow for strategic tweaks and changes on a regular, planned basis.
- Promote operational and individual flexibility within your company. It's not just your strategy that needs to enable flexibility, but also your corporate structures, systems, processes, budgets and, most importantly, people. As markets get more dynamic and technology evolves at ever-faster rates, you need to make adaptability a core value in all you do. You don't want your company to be like a giant oil tanker that takes two hours to turn and can't even enter some harbors because of its girth. There are many big companies like this tanker. Fortunately, operational and strategic flexibility has been a big advantage for middle market companies over their larger, more bureaucratic rivals. Hire people who are open to and capable of learning, and invest in developing their adaptability. Have IT systems that enable customization, even if it costs you more initially. When new market opportunities arrive, you can quickly take advantage of them because you've structured flexibility into your company's DNA. You'll have a massive return on investment that will be the envy of your slower rivals.
- Develop a dynamic budgeting system. Just as you should review and potentially modify your strategy on a monthly or quarterly basis, you should also do the same with budget allocations. A dynamic budget allows you to make short-term changes based on incoming data so you can increase allocations to growing areas and reduce investment in stagnant places. This rolling budget should work in step with your strategic modifications. It's even better if you can set up triggers and catalysts that will make these flexible budgeting decisions automatic. Dynamic budgeting also helps you avoid a static process that bases crucial business decisions on office politics, influence peddling and interdepartmental rivalries. This politicized approach is outdated and is the antithesis of the flexibility that can help your middle market company effectively adapt to emerging opportunities.
The takeaway: Continue to use an annual strategic planning process, but also set up structures to review your assumptions and execution at regular intervals. The best strategy in December can be the worst strategy in June. You'll want your company to jump off the collapsing horse and onto one that's moving swiftly in the right direction.
How does your company evaluate and revise its strategic goals? How often do you find yourself changing strategies? Tell us by commenting below.
Boston-based Chuck Leddy is an NCMM contributor and a freelance reporter who contributes regularly to The Boston Globe and Harvard Gazette. He also trains Fortune 500 executives in business-communication skills as an instructor for EF Education.