Strategic Planning: Definition, Process, Steps

We plan our daily activities, vacations, and retirements, hoping that thinking ahead will help us be more efficient and productive. But when you own a business, planning isn’t just about you. How you envision your future affects stakeholders as well. Therefore, you need much more than a simple plan; you need strategic planning that considers every aspect of your business, from goals to growth. Here is how to master strategic planning in just a few steps.

What Is a Strategic Planning Process?

Strategic planning refers to envisioning the future of your business in a very practical manner. The process includes clarifying objectives and goals, analyzing methods to reach them, and developing a strategy for growth. At the end of the process, you will have examined your business's current reality and planned its future steps.

Strategic planning is an organizational management activity that sets priorities, focuses energy and resources, strengthens operations, ensures that employees and other stakeholders are working toward common goals, establishes agreement around intended outcomes/results, and assesses and adjusts the organization's direction in response to a changing environment.

The strategic planning process is recurrent. Businesses tend to do it every 3 to 5 years. However, more dynamic environments require a higher frequency, such as annually. The process involves stakeholders and is based on a thorough analysis of resources, market opportunities, business strengths and weaknesses, and predicted trends.

Although strategic planning refers to the future, it is a practical process. It has clear and achievable objectives and applicable methods to reach them, achievable and incremental milestones, and key indicators and metrics to monitor progress.

What Is a Strategic Plan?

A strategic plan is a document resulting from the strategic planning process. It’s the document you share with stakeholders and used as a guideline for the following period. Often, a strategic plan includes:

  • An executive summary
  • The mission, vision, and values statement
  • The company’s goals for the next period
  • A SWOT analysis to provide an accurate perspective of the company’s current situation
  • The 12-month action plan to reach your objectives and goals
  • Metrics and key performance indicators

Some companies choose to update their mission and vision statements periodically, and the strategic planning process is an excellent time to do so. You gather stakeholders, analyze data, and develop a strategic plan for the future. What better time to reconsider your values and principles?

Strategic Planning Benefits

Like any other type of planning, strategic planning for your business helps you organize your goals and actions. It acts as a guideline for the following period, which you can go back to any time you need directions. However, strategic planning for business does much more than that because it influences many people, from employees and managers to every other stakeholder. How you plan your future will affect investors, suppliers, vendors, distributors, and customers. Most of all, it will influence your revenue, market share, and company culture. Here are the main benefits of strategic planning:

  • Organize people toward a common objective
  • Provide guidelines and a pragmatic action plan to reach the business goals
  • Keep stakeholders informed about your business’ growth and direction
  • Promote long-term vision and mission statements
  • Build a strong company culture
  • Reassess your business periodically and make informed decisions.

Strategic Planning Process Steps

The strategic planning process needs to be well-organized, methodic, and based on accurate data to avoid chaos and confusion. There are only a few steps from a great idea to a successful implementation. Shortcutting the strategic planning process will result in drawbacks both in the short term and in the long term. Therefore, get your team together, gather relevant information, and write a straightforward and cohesive strategic plan. Check out six steps for an efficient strategic planning process.

Step 1: Gather Data and Assess Your Current Business Situation

As the strategic planning process is recurrent, you need to establish your company's current situation before starting to plan for the following period. For this, gather accurate data from stakeholders, such as 

  • internal feedback from employees, 
  • resource inventories, 
  • market research, 
  • customer insights, plus feedback and
  • competition analysis. 

A SWOT analysis can identify strengths, weaknesses, opportunities, and threats. Often, businesses utilize a balanced scorecard (BSC) as a performance indicator to pinpoint and enhance internal operations and the external results that follow as part of their strategic planning.

SWOT Analysis Template

Internal Factors
External Factors
Positive FactorsStrengths
Internal attributes and resources that support a successful outcome.
External factors the project or business can capitalize on or use to its advantage.
Negative FactorsWeaknesses
Internal attributes and resources that work against a successful outcome.
External factors that could potentially harm the project or business.

You may also need customer satisfaction ratings, financial reports, growth indicators, etc. Even small things, such as your employees’ working schedules and overtime reports, can hint at what’s possible in the next period.

Analize your competitive landcape with Porter's Five Forces framework

Other experts recommend reviewing other frameworks such as Porter's Five Forces: Competitive Rivalry, Supplier Power, Buyer Power, Threat of Substitution, and Threat of New Entry. Let’s see in detail what they mean:

1. Competitive Rivalry: This force refers to the intensity of competition among existing companies in a particular industry. Factors such as the number of competitors, market share, and differentiation of products or services can influence the level of competitive rivalry. 

2. Supplier Power: This force refers to the bargaining power of suppliers in an industry. If there are only a few suppliers of critical resources or materials, they may have more power to set prices or dictate terms of supply. 

3. Buyer Power: This force refers to the bargaining power of buyers in an industry. If buyers have many options or if they purchase in large volumes, they may have more power to negotiate prices or demand higher-quality products or services. 

4. Threat of Substitution: This force refers to the presence of alternatives to goods or services that could potentially replace those offered by companies in a particular industry. Companies may face more pressure to keep prices low and maintain quality if many substitutes are available. 

5. Threat of New Entry: This force refers to the ease or difficulty of new companies entering an industry. If entry barriers are high (such as high capital requirements or regulatory hurdles), existing companies may face less competition, while low barriers may lead to increased competition and lower profitability.

Step 2: Analyze market forecasts and trends

Analyzing market forecasts and trends is also a data-gathering step. However, it’s usually done by a different team or an outsourced expert. Forecasts show market and industry dynamics, customer profile changes, and government or global economy predictions. They can predict an increase in costs, a lifestyle change that affects your sales, or the need to adjust your workforce. Sometimes, you may need to develop new products or services or adapt existing ones. 

As you plan for your business's future, it's important to draw inspiration from the organization’s key materials, which might include: 

  • Your mission statement: This can help you understand how to continue working towards your organization's core purpose. 
  • Your vision statement: This can help you clarify how your strategic plan fits into your long-term vision for the business.
  • Your company values: These can guide you toward what matters most to your organization and help you stay true to your identity. 
  • Your competitive advantages: Understanding what sets you apart in the market can help you capitalize on those strengths.
  • Your long-term goals: These can help you track where you want to be in the next five or ten years and ensure that your actions align with your vision. 
  • Your financial forecast and projections: Understanding your expected financials for the next few years can help you make wise investment judgments.

Step 3: List Your Business Objectives for the Following Period

Once you’ve identified your business’s objectives for the following period, write them down and discuss them with your team. Consider your company’s culture, mission, vision, and practical aspects, such as what you can do in the given time. Remember that your strategic plan applies to a limited period of time, such as a year, three years, or five years. Be ambitious with your goals but not overambitious.

"What kind of impact are we looking to have, and over what period of time frame?" is a question strategic planners must ask themselves. They must focus on the goals that will have the biggest influence.

At the same time, identify goals for each aspect of your business. For example, you should know a financial projection and set a revenue goal. However, you may also want to increase sales or customer database, expand your line of products and services, offer better work conditions, hire more employees, or open new business locations.

Use the Balanced Scorecard

When thinking about business objectives, Kaplan and Norton created a balanced scorecard theory focused on four variables – financial, customer, internal, and learning and growth. Kaplan and Norton’s Balanced Scorecard framework is based on four perspectives, which are as follows: 

1. Financial Perspective: This element aims to improve the organization's financial outcomes. It comprises important financial metrics including profitability, cash flow, return on investment, revenue growth, and cost containment. The financial perspective represents the organization's ultimate goal and is critical for its long-term survival. 

2. Customer Perspective: This perspective focuses on customer satisfaction and loyalty. It includes key indicators such as customer retention rate, market share, customer complaints, and customer satisfaction surveys. The customer perspective is crucial for the organization's success as it helps to retain existing customers, attract new customers, and increase market share. 

3. Internal Perspective: This perspective focuses on the organization's internal processes. It includes key indicators such as cycle time, quality control, employee productivity, and efficiency. The internal perspective is important to ensure that the organization's internal processes are effective and efficient, which can lead to improved customer satisfaction and financial outcomes. 

4. Learning and Growth Perspective: This perspective focuses on the organization's ability to learn, adapt, and innovate. It includes key indicators such as employee training and development, employee satisfaction and engagement, and knowledge management. The learning and growth perspective is important to ensure that the organization can continue to improve and innovate, which can lead to long-term success. In summary, the four perspectives of Kaplan and Norton’s Balanced Scorecard framework provide a comprehensive view of the organization's performance and can help organizations achieve their long-term goals.

Step 4: Develop a strategic plan of action

With the current situation established and goals listed, it’s time to develop an action plan. Find ways to reach your goals. Make them clear, actionable, and efficient. Moreover, make your actions easy to monitor by dividing them into smaller tasks and assigning priorities.  Don’t forget about associated costs, and plan your budget as well.

You might also build a strategy map based on the balanced scorecard input. A strategy map represents a clear diagram that illustrates the causal relationship between the strategic objectives, which are represented by ovals on the map. It is one of the most effective components of the balanced scorecard approach since it makes it easy to explain how the company creates value.

The action plan is a roadmap. At every moment, stakeholders should be able to look at it and understand where they are and where they need to go. But, like any road, this one should also allow changes and updates. Create a versatile and adaptable strategic plan.

As you develop your strategic plan, you should consider the following elements: 

1. Company vision and mission statement: Clearly define your long-term goals and the purpose of your business. 

2. SWOT analysis: Evaluate your strengths, weaknesses, opportunities, and threats. These aspects are the core elements that will help you identify areas for improvement and growth. 

3. Priorities and objectives: Define your top priorities and objectives for the next three to five years, and set yearly goals to achieve them. 

4. Key results and KPIs: Identify measurable and actionable key results and KPIs that align with your strategic goals and track your progress (we’ll expand on this topic in the next step). 

5. Budget and financial forecast: Determine your budget for the next year or a few years based on your financial forecast and prioritize your most important initiatives. 

6. Project roadmap: Develop a high-level project roadmap outlining your key initiatives' timelines and milestones. 

By considering these parameters, you can create a comprehensive and effective strategic plan that aligns your company's resources and efforts toward achieving your long-term goals.

Step 5: Decide on Metrics and Key Performance Indicators (KPIs)

To monitor your progress efficiently and gather valuable data for the next strategic planning process, decide what metrics and KPIs will benefit you more. Tackle all aspects of your business like you did with goals. You may want to measure income and sales, employee performance, absenteeism, stock flow, and marketing indicators. You might also use SMART goals to help employees understand where the company is going and have more accurate performance review evaluations.

Record the metrics and KPIs regularly throughout the entire period. If you create a five-year strategic plan, it doesn’t mean you compute KPIs every five years. Depending on your business's dynamic, you can opt for a monthly, quarterly, or yearly approach.

Step 6: Share the Strategic Plan with Stakeholders, Revise Accordingly and Execute the Strategic Plan

Once the strategic planning process is over, share the strategic plan with stakeholders and ask for feedback. Ensure they are on board with everything, from objectives to trajectories to actions. Based on their feedback, review and revise the plan. This may take a few iterations until everyone is satisfied with the result.

As you go on with following the plan, changes may be required. Review your action plan accordingly and inform everyone about the changes. The same feedback-update process may repeat every time a change is made.

Remember that a company's strategic plan must be closely linked to employees' activities. So, a good performance evaluation will help to review whether progress has been made toward the selected business objectives. A closely knit strategic plan ensures that the business grows, and at every performance review, you will see whether you’re on track or missing some steps. 

Tip: Discover a concrete example of such strategic planning in HR.


Why do I need a strategic plan?

Your business needs strategic planning to grow and be productive. The strategic plan helps you identify objectives, measure growth, and build a solid company culture. It also enables you to understand the market and your position and adapt to changes that might affect your business. Strategic planning can boost innovation and creativity, devise new strategies, and become an industry leader.

What is the difference between a strategic plan vs. a business plan?

A business plan is usually created when starting a business. It defines your mission and vision statement and shows investors and customers what to expect from you. Once your business is established, a strategic plan is created regularly. It uses existing data and the original business plan to advance your company and establish a new long-term strategy.

Who performs strategic planning?

The strategic planning process involves all stakeholders, from owners and investors to executives and key employees. It may also include experts and facilitators who don’t work for the company. Each party manages a particular aspect. For example, investors may focus more on the financial aspect, while employees may focus more on productivity. Experts may tackle marketing and economic forecasts. Strategic planning is a transparent process.

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