Strategic Planning

A Key to the Growth of American Small Business

by Christopher M. Quigley, B.Sc., M.M.I.I., M.A., WealthBuilder.ie | March 3, 2008

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DESPITE sub-prime, credit and social crises building up in America the reality is that life must go on and fortune will favour those businesses who are progressive and prepared to take advantage. Research has shown that those firms that integrate a formal approach to planning, in particular strategic planning, stand a much better chance of success in the development stakes. Accordingly I think this is an opportune time to briefly introduce this important topic.

Historical Overview

Modern business as we know it mainly started in the 1900's when technological progress proceeded with the social invention of the business firm. The early entrepreneurs were largely
concerned with production problems and planning was mainly related to operational matters. The object initially was to dominate or absorb the opposition rather than to truly compete. Thus modern marketing, as such, was yet to take root. The concept of ubiquitous competition, as we know it today, was not an issue.

From 1930 on, the mass production era took over from the industrial revolution era. The focus was on the production of as many units as possible to decrease unit cost, therefore management emphasised large production cycles to achieve economies of scale. There were many problems to solve but being aware of strategic challenge and opportunity was not one of them. Industries were well separated and the potential for growth existed. Therefore planning concentrated on internal factors affecting the enterprise.

However, from the 1950's accelerating and cumulating events began to change the structure of the business environment. As firms grew, competition increased, and simply producing at lower cost
no longer ensured a company's success. Enterprises were increasingly affected by novel and unexpected challenges. and this meant that successful decisions could no longer be made based on internal issues alone. It eventually became obvious that external factors had to be catered for if the business was to prosper and grow.

Dawn of Strategic Planning

Between 1950-1970 the concept of strategy, within the business context, was first utilized. While this idea had been used for decades in war it was only the 1950's that a strategic process was applied to allocate scarce resources to optimize results. The science of management began to realize that the best method of planning should take into consideration how the operating environment could change and then exploit opportunities and avoid threats, allowing for the internal capabilities and weaknesses of the firm. A new understanding of this strategy/structure
relationship was provided by Chandler in his 1962 classic: "Strategy and Structure". Chandler viewed strategy as: "determining the long term goals and objectives of an organization, of whatever size, and ensuring that resources are organized to fulfil these goals and objectives." However when taking into consideration the increasing rate of change in business, brought about by technology, I consider the following definition by Igor Ansoff more relevant: "defining specific parameters within which the firm can conduct a search for new opportunities, thereby strategy sets decision rules which identifies the most attractive opportunities for the business to exploit." 

Success Through Planning

In today's modern technological environment being unaware is no longer an option. Thus the strategic approach to planning, which used to be so relevant to the larger firms, is now appropriate to even the smallest of concerns i.e. the environment is changing so fast, strategic perspectives are absolutely paramount. Moreover it has been proved that the extent of a firms' success is directly related to the degree to which the planning process is formalized. In addition it is now accepted that it is not the actual plans themselves that bring success, but rather the formal process itself brings about a mindset and culture, which supports and promotes achievement and the will to win.

Ideally the strategic process should involve the following elements:

1. Identify the objectives of the company and formally document them.

2. Within the core context of the firm, identify opportunities and threats.

3. Evaluate the firms' internal strengths and weaknesses.

4. Evaluate the core competition to the firm and formalize their threats, opportunities, strengths and weaknesses.

5. Evaluate the external environment and document change elements that could have particular relevance to the industry and core business.

6. Based on the foregoing review set out the optimum strategic goal of the enterprise and plan the execution of that goal, allocating scarce resources. 

7. Implement the plan based on a set timeline. Responsibility should rest with higher management and should be reviewed on a formal basis. Implementation should use the formula: Goal-Action-Result-Review-Goal

Ad-Hocracy

The group or committee appointed to develop the strategic plan should be an ad-hoc team
comprising the chief executive, appropriate managers and any additional expert input deemed essential. Ideally an ad-hocracy "is any form of organization that cuts across normal bureaucratic lines to capture opportunities, solve problems and get results." As Robert Waterman put is "in an era of accelerating change, organizational and national economies most likely to succeed are those with the ability to adjust and adapt........ this sort of innovation must become a way of life for business organization across the board. What is needed is an environment that fosters the ad-hoc problem solving technique outside the often stifling daily bureaucracy." However once the strategic objective has been met the ad-hoc group should be disbanded lest it become sub-sumed into the enterprise and form an additional layer of management thus making more complicated the job of the chief executive. 

The Future Is The Present Constantly Changing 

Let us be resolute in our analysis of the American future. There will be constant untimely change, there will be challenge but there will be opportunity. The American economy will succeed, it is only a matter of who will own that success. Crises bring the ideal situations for those who want to grow and prosper fast, but preparation and vigilance is the price. There is no better management formula for prescribing success, in change, than the Ansoff STRATEGIC PLANNING PROCESS. The simple reason for its success is that it allows for total and constant change on all levels and trains management to think in terms not simply of goals but OPTIMUM GOALS TAKING ADVANTAGE OF UNIQUE BUSINESS STRENGTHS. The process also does not only think in terms of the firm but also in matters pertaining to the competition and the environment. The corporations of the future will be the firms and business of today, thinking in the STRATEGIC PLANNING MINDSET. The non-strategic corporations of today will be the historical footnotes of tomorrow. 

Copyright © 2008 Christopher M. Quigley
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Christopher M. Quigley, B.Sc., M.M.I.I., M.A. | Dublin, Ireland | Email | Website

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