Chapter 1
3
Introduction to Applied
Strategic Planning
IN THE FIFTEEN YEARS since we published our initial version of Applied
Strategic Planning: How to Develop a Plan that Really Works (Goodstein,
AL
Nolan, & Pfeiffer, 1993) and the accompanying Consultant’s Kit (Nolan,
Goodstein, & Pfeiffer, 1992), much has happened that has changed our
RI
world. The growth and importance of the Internet, the globalization
of trade, the consolidation of many industries, the growing importance of
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the environmental movement, and concerns about the limitations of nat-
ural resources, especially oil, are but a few of the changes that quickly
MA
come to mind. For example, seven of the ten companies with the largest
growth in share value over the past decade did not exist twenty years ago
(McKinsey & Co., 2006). Each of these changes potentially has important
ED
consequences for all organizations. Tracking those changes that have the
greatest potential to impact an organization and developing a plan to
HT
respond to change is an imperative requirement for organizations.
But over the years our experiences as consultants to organizations
IG
have convinced us that most planning processes are poorly conceptual-
ized and even more poorly executed. Our experience has shown strong
R
resistance to planning in most organizations and that it is rarely creative
PY
when it is done and, moreover, is largely tactical rather than strategic in
nature.
CO
Most planning processes, in fact, result in long-range rather than strate-
gic plans. These long-range plans are based on the assumption that we can
extrapolate the future from the present. If we simply assume a 7 percent
growth rate compounded over the next ten years, we will have doubled
our revenues and no one should complain about that. But the idea that
no significant changes will occur in our particular environment over the
next five years does not meet a test of reasonableness. A genuine strategic
plan should involve an effort to consider a variety of futures and develop
options for meeting each of these futures.
Strategic planning is critical to the success of any organization.
However, McKinsey & Co. (2006) reports that less than half of the almost
eight hundred business executives who responded to its online survey
1
2 Applied Strategic Planning: An Introduction
were satisfied with the manner in which their organizations conducted
strategic planning. And, although three-quarters of these executives indi-
cated that their organizations engaged in strategic planning, less than a
quarter of these executives reported that their organizations used the
results of the planning process in making important organizational deci-
sions. The two major suggestions that these executives made for improv-
ing their organizations’ strategic planning process were, first, to improve
the company’s alignment with the strategic plan and, second, to develop
methods for monitoring the company’s progress in implementing the
strategic plan. Only slightly more than half of these respondents regarded
their strategic plans as fact-based, that is, focused on the most important
strategic issues facing the company or built on a shared understanding of
the dynamics of their particular market. Finally, these executives raised
significant concerns about the ways in which their organizations com-
municated their strategies to those not involved in the process, how they
executed the strategy, aligned the organization to the plan, and measured
performance against this strategy.
These findings from one of the world’s premier consulting organiza-
tions strongly suggest that the template used by most organizations for
developing a strategic plan is grossly defective and gives rise to the popu-
lar notion that strategic planning is a useless activity mandated by manage-
ment for its own amusement. Our approach to planning—Applied Strategic
Planning—represents our continued effort to address these issues.
We define Applied Strategic Planning as the process by which the guid-
ing members of an organization envision its future and develop the necessary
procedures and operations to achieve that future (Goodstein, Nolan, & Pfeiffer,
1993.) Both our experience over time and the reports of others who have
adopted our approach clearly support our contention that our model pro-
vides an organization with both a clarity of direction in which to move
and the psychological energy to initiate that movement. Using our model
requires that the organization simultaneously develop a strategic plan
and a strategic management process—one that will ensure that the plan will
be successfully implemented.
It is important to note that beginning a plan with a vision of a desired
future for an organization leads to a very different outcome than that
obtained from any long-range planning process—an extrapolation of cur-
rent business trends. Beginning with the present and planning a future very
much like the present is a far cry from envisioning a desired future and plan-
ning how such a future can be achieved. Envisioning involves the conviction
that our present actions can influence our future—we can help create our
Introduction to Applied Strategic Planning 3
own future rather than passively accept whatever comes to pass. A power-
ful well-thought-out vision can become a magnet pulling an organization
toward its ideal future. As Peter Drucker said, “If you want to know what
the future is, be a part of its development” (Haas, 2006, p. 72).
Before we outline the framework of our model, it is important to rec-
ognize that this approach to planning often raises difficult issues for the
client system, issues that may have been unaddressed for years. As a
result, we have found that Applied Strategic Planning works best when
it is facilitated by a skilled consultant external to the client system. The
consultant-facilitator works to keep the process moving along and ensures
that the important issues are addressed—and, when necessary, that the
skeletons in the closet are brought into the light of day.
The Applied Strategic Planning Model
Although our approach to strategic planning and our model share many
characteristics with other models that are built on best practices in organi-
zational change, we differ in a number of important ways. First and fun-
damental to our approach to Applied Strategic Planning is that it is “the
process by which the guiding members of an organization” actually work
together to create the plan themselves. We have more to say about the
importance of this approach and its implications in the next chapter on
the role of the consultant. One of those implications, which we see as a
second difference, is the importance of learning how to think strategically.
Strategic thinking will be essential for the members of the planning group
if their work is to be successful.
Since most managers spend most of their time and energy putting out
brush fires—operating tactically or short-term—they often have little train-
ing or experience in thinking or acting strategically. Their working lives
consists of constantly solving a myriad of crises—human resources prob-
lems, customer complaints, equipment failures, inventory shortages—with
little time to consider the future direction of the business or how to plan
for that future. Thus, we have learned that some reorientation and train-
ing about thinking strategically—the critical skill that underlies and serves
as the foundation of strategic planning—is required.
In addition to these two key differences in approach are a third differ-
ence in approach and two noteworthy elements of the model itself that
warrant special attention. The third difference in approach is our contin-
ual emphasis on the immediate application of any findings that emerge
4 Applied Strategic Planning: An Introduction
from the planning process to the organization’s operations, rather than
waiting for a final plan to be adopted. Two differences from typical plan-
ning processes are so important that we have built them into our model.
One is the emphasis we place on identifying and clarifying the personal
and organizational values and the resultant organizational culture as the
basis for all organizational decision making. A second is the importance
of creative envisioning of the desired future state.
It is important to recognize that the Applied Strategic Planning proc-
ess is one of moving in specific steps from the vague and abstract to the
specific and concrete. The process takes the planning group from an
inchoate statement of a desired future to a series of specific actions with
targeted outcomes and specific milestones through a process of successive
approximations.
The Applied Strategic Planning model shown in Figure 1.1 consists of
nine sequential steps and two continuous ones—environmental monitor-
ing (input, or managing information from outside the organization) and
application considerations (output, or acting promptly on that input). This
brief overview will serve to orient you to the model. Each of the sequen-
tial steps will be covered in detail in one of the subsequent chapters, but
we will discuss each step briefly here as well as provide clarification on
the two continuous ones.
Environmental Monitoring/Inputs
The monitoring of the environment—managing input from inside and
outside the organization—conducted by most organizations is woefully
inadequate. Most have no forum enabling individual members who have
uncovered relevant environmental information to surface that information
so that it can be analyzed, researched, and followed up. Our observation
is that a great deal of data is floating around in most organizations, but
far too little information and knowledge—data understood in an organ-
ized fashion.
Application Considerations/Outputs
Implementing corrective actions—output, that is, acting promptly to
respond to a possible threat or opportunity—based on what has been
learned through the environment monitoring process is an integral part
of the Applied Strategic Planning model and comprises the second con-
tinuous process—application considerations. For example, if the organi-
zation has never organized a “bag lunch” to discuss the latest information
Introduction to Applied Strategic Planning 5
FIGURE 1.1
The Applied Strategic Planning Model
Planning
to Plan
Values and
Culture
Environmental Application
Monitoring/Inputs Considerations/Outputs
Mission
Formulation
Strategic
Business
Modeling
Performance Gap Analysis
Audit and Closure
Integrating
Action Plans
Contingency
Planning
Implementing
Your Plan
gleaned from the trade journals, one should begin as soon as possible and
the information developed in such meetings should feed the planning
process. An application consideration describes the organization’s prompt
responses to important information, rather than waiting for the comple-
tion of the planning process.
6 Applied Strategic Planning: An Introduction
Planning to Plan
Before any planning is initiated, a number of important questions must
be answered, including the readiness of the organization to engage in
such a process, whether the culture of the organization generally sup-
ports a planning process, how committed the organization is to a time-
and energy-consuming process, who should be involved in the planning
group, how and when the process should be initiated, how others in the
organization who are not directly involved in the planning process will be
informed about the process, and the time frames for the process.
One of the most important aspects of this stage of the process is choos-
ing the planning group, those who actually will be involved directly in
the planning process. Typically consisting of seven to eleven persons
broadly representing the management level of the various organizational
functions, this group will be expected to commit themselves to a time-
consuming and demanding process, usually while fulfilling their regular
responsibilities.
Values and Culture
All organizational and personal decisions are based to a greater-or-lesser
degree on the values of the decision makers. One of the unique aspects
of Applied Strategic Planning is the attention paid to surfacing and mak-
ing public the values held by organizational decision makers and the role
that these values have played in creating and sustaining the organiza-
tional culture. Clarifying values is often the most contentious part of the
Applied Strategic Planning process and requires the frequent intervention
of a highly skilled facilitator.
Mission Formulation/Clarification
Once the organization’s values have been clarified, the planning group
can begin to develop a shared future state for the organization, a critical
part of our definition of Applied Strategic Planning. This dream of a bet-
ter future state for the organization then leads to drafting a mission state-
ment. In relatively general terms, the mission statement answers four
critical questions:
• What business are we in? What customer needs are we meeting?
• Who are our customers, both now and in the future?
• How do we intend to go about meeting our customers’ needs and wants?
• Why do we exist? What values and basic societal needs are we
fulfilling?
Introduction to Applied Strategic Planning 7
The mission statement has two primary purposes: one is to develop
clarity within the organization about future direction, and, secondly, to
provide a vehicle for communicating that clarity to other stakeholders,
including rank-and-file employees. Further, the mission statement should
reflect the distinctive competence or competencies of the organization,
that is, what distinguishes it from its competitors.
Since many organizations now have mission statements, the task
becomes not one of drafting a mission statement, but of clarifying the
existing one. In our experience, however, in many cases there is so little
resemblance between the old and new mission statements that the activ-
ity could indeed be regarded as a formulation rather than a clarification.
Strategic Business Modeling
Strategic Business Modeling is the next step in the planning process,
where the planning group develops the specific, detailed plans and pro-
cedures that will lead the organization from the present to the envisioned
future state. Clarifying the mission, or Mission Formulation, was the first
step toward transforming the inchoate statement of the desired future into
a specific action plan.
Strategic Business Modeling defines the vision of the ideal future in
tangible, measurable tools. It specifies what businesses the organization
will be in; how success is to be measured, that is, what the critical success
indicators are; what needs to be done in order to reach such success; the
mileposts that must be met to achieve that success; and how the organiza-
tional structure, staffing, and culture have to change. In other words, the
strategic business model is a detailed plan for how the organization can
and will reach its intended goals—how it will fulfill its mission. Strategic
business modeling is a time of high creativity as the planning group seeks
to describe fully the ideal future for their organization.
Performance Audit
After the planning group has articulated the desired future state and how
that state can be achieved, the group must turn its attention to a detailed
examination of the present state of the organization, that is, it must con-
duct an objective, unbiased Performance Audit. The Performance Audit
must answer the critical question of how well the organization is perform-
ing in conducting its present business plans. Without such an appraisal it
will not be possible to determine the organization’s capacity to realize its
desired future.
8 Applied Strategic Planning: An Introduction
Gap Analysis and Closure
The clear understanding of both the future state desired by the organiza-
tion and its current capacity presents a critical question: How large is the
gap between the organization’s present capacity and its desired future? Gap
Analysis and Closure asks the tough question of whether the desired future
is achievable, given the present condition of the organization and what
it will take to close this gap. Identification of the size of the gap indicates
whether the desired future state represents a stretch goal or mission impossible.
Finalizing Strategic Direction/Integrating Action Plans
Prior to any integration of the various action plans, which are the outcomes
of the planning process, it often is necessary to step back, review these out-
comes, and consider whether these actions are likely to lead to the desired
future state. This review should lead, in turn, to a finalizing of the strategic
direction or a return to some earlier steps in the planning process.
Implementing any strategic plan involves creating and then inte-
grating a number of fairly specific and detailed operational plans. Such
plans include both one for each line of business and plans for product or
services development, human resources, marketing, capital acquisition
and budgeting, acquisition of technical resources, creating an adequate
communications network, and so on. These operational plans have to be
integrated both across the entire organization and within each of the func-
tional operations together with time lines and control processes.
Contingency Planning
Probability and impact are the two important aspects of Contingency
Planning. We assume that the basic strategic plan involves the scenario
with the highest probability of successful implementation. But there
always are other high-impact events that are less likely to occur than
those on which the basic strategic plan is based.
These are the events that need to be considered and for which a con-
tingency plan should be developed. If this cannot be done because of time
or resources constraints, the strategic plan should include methods for
tracking these alternative events so that the organization’s strategic plan
can be re-examined and necessary changes initiated when it is clear that
this is necessary.
Implementing the Plan
The process of strategic planning requires implementation if it is to be of
any use to an organization. The strategic plan should be the template on
Introduction to Applied Strategic Planning 9
which organizational managers base their decisions. The implementation
process should be initiated with one or more action steps that are derived
from the strategic plan. These may involve a restructuring of the organi-
zation, the launching of a new product or service, changes in some senior
management positions, a new training program, and so on. Some fanfare
and a clear statement by the organization that this change is the begin-
ning of the movement toward the desired future state should accompany
the launch.
With this brief overview of the model in mind, we turn our attention
to the role of the consultant in the planning process.
