Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources, including its capital and people, to pursue this strategy. In view of its significance in the achievement of TQM, this chapter describes in detail several aspects of strategic planning. Its corresponding term in Japan, viz., hoshin-kanri, is explained. A highlight of this chapter is providing several definitions offered in various websites for strategic planning.
Work environment; Business plans; Strategic plans; SWOT analysis; PEST analysis; STEER analysis; EPISTEL; Draw-See-Think-Plan; See-Think-Draw; Hoshin-Kanri; Situational analysis; Nichijo Kanri; Strategic planning elements; Customer positioning; Gap analysis; Strategy development; Strategy deployment; Perspectives of strategic planning; Road map of quality planning; Contingency theory; Leavitt’s diamond; Mission and vision statements
The need for organization to plan for the future is as old as business itself. Peter Drucker in his book, The Practice of Management, noted that managers must determine not only what the business of the organization is but also determine what will be the business in the future. This future planning when done systematically is called strategic planning. Strategic planning assumes significance in view of the changing environment in which there are many forces operating on the organization as illustrated in Fig. 7.1.
Business planning is the formulation of a formal statement of a set of business goals, highlighting why they are considered attainable, and including the background information about the organization, or the team working towards the attainment of these goals.
The business plans can be in two categories, depending upon their importance for the day-to-day operations.
● Operational planning
Strategic planning involves the determination and development of policies used in achieving the goals of the company, while the operational planning is the planning of the day-to-day operations and procedures in conforming to the policies set by strategic planning.
Strategic planning is an organization’s process of defining its strategy or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. The following are some of the business analysis techniques used in strategic planning.
Strategic plans are decision-making tools. They may not have any fixed content for the strategic plan, but the format is determined by the goals and the audience. The goals must have a plan or method with resources for their achievement, and must be based on the statistical conformation and shall not be based purely on assumptions. Strategic planning is also called policy deployment by certain authors. The following are some of the tools for the performing analysis that would be helpful for strategic planning.
● SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)
● PEST analysis (Political, Economic, Social, and Technological analysis)
● STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors)
● EPISTEL analysis (Environment, Political, Informatics, Social, Technological, Economic, and Legal).
As explained above, SWOT analysis forms the best tool for the performance analysis. Its basic methodology is to apply the following steps.
● Vision—define vision and mission statements and set the hierarchy of goals and objectives.
● SWOT—conduct SWOT analysis of the above according to the desired goals.
● Formulate—design the processes and actions to be taken to achieve these goals.
● Implement—implement these processes and actions.
● Control—establish control systems and monitor them based on feedback.
Different authors have proposed other methodologies as below:
(a) Three-step process may be used:
● Situation—evaluate the current situation and how it came about.
● Target—define goals and/or objectives (sometimes called ideal state).
● Path—map a possible route to the goals/objectives.
(b) Draw-see-think-plan is another alternative approach:
● Draw—what is the ideal image or the desired end state?
● See—what is today’s situation? What is the gap from ideal and why?
● Think—what specific actions must be taken to close the gap between today’s situation and the ideal state?
● Plan—what resources are required to execute the activities?
(c) See-think-draw approach:
● See—what is today’s situation?
● Think—define goals/objectives.
● Draw—map a route to achieving the goals/objectives.
When developing strategies, analysis of the organization and its environment as it is at the moment and how it may develop in the future, is important. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the external environment, as well as the strengths and weaknesses of the organizations.
There are several factors to be assessed during the external situation analysis:
2. Competition
3. Technology
4. Supplier markets
5. Labor markets
6. The economy
7. The regulatory environment
Let us now consider the following case study as cited in The World is Flat by Thomas L Freidman.
ASIMCO of US first purchased Federal Mogul Corporation, a camshaft manufacturing company with a high-end customer profile. But when it went under bankruptcy, its associate company started manufacturing the semi-finished camshaft in China, but did the finishing operations in the United States, supplied them to US car companies without losing the goodwill name made by the former company.
How does it rate in business ethics? Is it an unethical practice or a win-win tactic?
The Japanese term for strategic planning is Hoshni Kanri, which can be broken down into four parts, Ho-shin-Kan-ri.
Ho means direction, while shin means a shining needle, as used in compass. So the word Hoshin, means a compass needle equivalent to the word diksuchi in Sanskrit, representing the progress toward a goal.
Kan means control or channeling the progress (akin to the term kan in kanban) while ri translates into reason or logic. So Kanri refers to administration, management, control, charge of, or care for.
Thus taken altogether, Hoshin Kanri means management and control of the organization’s direction, focus, or goal. It can be thought of as the application of Deming’s Plan-Do-Check-Act cycle to the management process.
Or in other words, Hoshni Kanri represents the management planning and control toward the achievement of the goal. It is a method devised to capture and cement strategic goals as well as to provide insight about the future, and develop the means to bring these into reality. It is a systems approach to the management of change in critical business processes using step-by-step planning, implementation, and review process so as to improve the performance of business systems. As Dr. Yoji Akao puts it,
With Hoshni Kanri, the daily crush of events and bottom line pressures do not take precedence over strategic plans, rather, these short-term activities are determined and managed by the plans themselves.
As a contrast, Nichijo means daily routine and kanri means management and control, similar to kanri of hoshin kanri. Thus, nichijo kanri covers all the day-to-day aspects of operations and planning and is complementary to hoshin kanri, which refers to the long-range or strategic planning.
There are several definitions available in the web. Some of them are reproduced below to give an insight into the process.
Strategic planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue its goals.
Strategic planning is a process to determine or reassess the vision, mission, and goals of an organization and then map out objective (measurable) ways to accomplish the identified goals.
Strategic planning in information technology is the first stage of the planning model. It aligns the system’s strategic planning with overall organizational planning by assessing organizational objectives and strategies, setting its mission, assessing the environment, and setting its policies, objectives, and strategies.
Strategic planning is a top-down approach concerned with the long-term mission and objectives of an organization, the resources used in achieving those objectives, and the policies and guidelines that govern the acquisition, use, and disposition of those resources.
Strategic planning is the planning activity through which one confronts the major strategic decisions facing the organization. A decision is not rendered strategic merely by being important.
Strategic planning is the process of answering the questions: “Where are we going? What should we be doing? And how will we do it?”
Strategic planning identifies the medium to long-term goals integral to the institution’s mission; general principles are fairly fixed, but the means for implementation are flexible.
Strategic planning is the process of developing long-range goals and plans for an organization.
Strategic planning is a decision-making process in which decisions are made about establishing organizational purposes/mission, determining objectives, selecting strategies, and setting policies.
www.services.eliteral.com/glossary/decision-support-systems-glossary.php
Strategic planning is the process of thinking of and determining specific goals, objectives, and actions to move from one place to another.
Strategic planning is the determination of the steps required to reach an objective of achieving the optimum fit between the organization and the marketplace.
Strategic planning is developing short and long-term competitive strategies using tools such as SWOT Analysis to assess the current situation, develop missions and goals, and create an implementation plan.
Strategic planning is the process of planning for a set of managerial decisions and actions that determine the long-term performance of an organization.
Strategic planning is the identification and ratification of business directions, visions, goals, directions, and objectives to ensure the business is appropriately positioned given its capabilities, and markets. The strategic plan provides a framework for development of tactical plans to achieve desired intentions.
The strategic plans involve the following, which are further explained in subsequent paragraphs.
● Markets to be served
● Customer needs
● Customer positioning
● Predicting the future
● Product diversification
● Alignment of the plans with the vision, mission, and the concepts of the organization
● Gap analysis—to identify the gaps that exist between the present and future state of the organization.
● Investment in machinery and equipment
● Manpower
● Budgets
● Strategies for improving profits, etc.
Besterfield et al. illustrate the above in the following seven basic steps for strategic planning.
1. Customer needs: The first step is to discover the future needs of the customers. Who they are? What do they want? How should the organization meet and exceed their expectations? This step is further explained in a later chapter on quality function deployment.
2. Customer positioning: To determine which customer market the company should serve, and which types of products or services.
3. Predicting the future: Tools like demographic projections, economic forecasts, technical assessments, etc., shall be used to predict the future.
4. Gap analysis: The strategic planners shall identify and pinpoint the gaps between the current state and future state of the organization by analyzing the core values and concepts.
5. Closing the gap: By establishing more realistic goals and responsibilities, the plans should be developed to close the gaps.
6. Alignment: As the plans are developed, they must be aligned with the mission, vision, and core values of the organization for without these, the plans will have little success.
7. Implementation: Resources must be allocated to collecting the data, designing the changes, and monitoring the progress being made.
The strategic planning should be aimed at achieving the following in two phases:
1. Set strategic directions and determine key planning requirements for long-term well as short-term goals.
2. Integrate customer and marketing expectations with the company’s vision and mission.
(b) Strategy realization:
1. Allocate resources to ensure realization of the plans and goals.
2. Determine key performance measures and indices for tracking progress.
3. Adapt strategies for meeting the competition challenge.
Strategic planning is an essential element of organizational management, but will be significant only if implemented effectively. The biggest failure of strategic planning is not in identifying what is to be done, but in wrongly executing the same. Michael Porter in his article in the Harvard Business Review supplemented this view by noting that strategy and effectiveness are both essential for superior performance.
As Larry Cassidy noted, “When companies fail to deliver their promises, the most frequent explanation given is that the CEO’s strategy was wrong. But in fact, the strategy and its planning may not be the real cause. It is in the ineffective execution that the strategies most often fail and things that are supposed to happen do not happen.”
Edwin Bliss observed that “Success does not mean the absence of failures; it means the attainment of ultimate objectives. It means winning the war, not every battle.” Shiv Khera, too, observed that “most people fail not because of lack of ability and intelligence, but because of lack of desire, direction, dedication, and discipline.”
(b) Customer perspective
(c) Internal perspective
(d) Innovation and learning perspective
This is represented diagrammatically in Fig. 7.2.
In the context of TQM, quality planning can be equated to operational planning as described above. For quality planning, customer satisfaction should be the goal. The important elements in quality planning are similar to that indicated under the strategic planning:
● Identify the customers
● Discover customers’ needs
● Develop product features
● Develop process features
● Establish process control and transforming operations
Road map of quality planning: The following worksheet (Fig. 7.3), listing the several initiating activities and the linking activities based on their outputs, would help in the preparation of a comprehensive checklist for the operational planning.
We know from books on productivity the following 8 Ms of resource inputs for any manufacturing activity.
2 Management
3 Men
4 Machinery and equipment
5 Money
6 Market
7 MIS systems
8 Monitoring and control
Armond Feigenbaum adds Motivation as the 9th M factor effecting quality.
Some of the quality planning and control activities during the production cycle apart from PP&C:
● Engineering of quality products
● Planning of quality processes
● Establishing quality standards
● Conducting quality research, safety studies, etc.
B. Incoming material control
● Establishing purchase parameters and standards
● Conducting vendor surveys and vendor development
● Controlling receipt of materials and parts
● Controlling materials and parts processed by other plants (outsourcing) or in the same plant (work in progress).
John Beckford, in his book Quality, puts forth a new theory called contingency theory, in which the organizational effectiveness is the product of the adequate managerial response to five key factors in the organization: technology, people, goal, size, and environment. This theory considers the organization as an interacting network of functional elements bound together in pursuit of common goals, and each element is essential for the success of the organization. There should be an appropriate balance between these elements and, at the same time, this balance should be dynamic, because the environment and the elements are continuously changing.
Strategic Planning is the means of keeping actions and innovations throughout all levels of employees aligned with the organization’s strategic mission. Fig. 7.4 illustrates the coordinated responsibilities of all levels of management for effective strategic planning.
In 1965, Dr. Harold Leavitt of Stanford University proposed that every organizational system is made up of four main components: People, Task, Structure, and Technology, as illustrated in Fig. 7.5. Any change in any one of these elements will have a direct effect on all the other elements. The way in which each of these main components interacts with the others can help determine the success or downfall of an organization.
The inter-relationship between these four elements can be explained by Table 7.1 below:
Table 7.1
The Inter-Relationship Between Leavitt’s Elements
How Effect on | How Changes in | |||
People | Tasks | Structure | Technology | |
People | — | Educating and training people for new methods. | People need help to learn about their new job duties and responsibilities. | People need extensive training to handle the new technology efficiently. May even require hiring new employees. |
Tasks | Need to modify the tasks or goals to rectify and make optimum use of their skills and knowledge | — | Merging two departments into one or splitting one into two, you cannot continue with the same tasks or goals. | Shifting to a newer technology would require making changes to the way things are done. |
Structure | For hiring more people, you need more supervisors which requires revamping of the organizational structure | When business processes are reengineered, the organizational structure has to be different | — | Computerization or automation needs a different organizational structure. Interdepartmental communication, too, needs to change |
Technology | If you’re hiring computer- literate employees, you cannot ask them to work on typewriters. | If the material planning is to be done by the purchasing department, different software would be required. | If you want to cut down staff, you will have to automate some processes, to maintain the same level of production. | — |
The vision statement defines how you want your business to be seen by the outside world, including the investors, clients, suppliers, the market, and even competitors. It would answer the question “What do we want become in the future?” and provide inspiration for setting future goals. It should be as short as possible, preferably in one sentence. It describes what the company believes are the ideal conditions for the community.
http://ctb.ku.edu/, the website community tool box emphasizes the following characteristics of vision statements:
● Understood and shared by members of the community
● Broad enough to include a diverse variety of local perspectives
● Inspiring and uplifting to everyone involved in your effort
● Easy to communicate
The mission statement is an extension of the vision statement, which would establish the objectives and help in formulating the strategies. It emphasizes what the company is going to do and why it’s doing it. It concentrates on how you would like to achieve your vision and defines the customers, processes, and the desired levels of performance. It should be concise, outcome-oriented, and indicate the company’s key goals.
Features of an effective vision statement include:
● Clarity and lack of ambiguity
● Vivid and clear picture
● Description of a bright future
● Memorable and engaging wording
● Realistic aspirations
● Alignment with organizational values and culture
1. While it can be appreciated that the managers have to spend considerable time for strategizing, they must be cautioned not to spend too much time in the name of strategic planning, but schedule their overall attention for strategic planning, as well as their routine activities, so as to minimize the negative impact of the former on the latter.
2. The formulators of strategic planning must be intimately involved in the implementation, so as to accept the responsibility for input to the decision process and subsequent actions. In other words, strategic planning must limit its action plan in a way that can be delivered by the decision-makers and their subordinates.
3. The strategic planners must anticipate, minimize, or proactively respond when their team members get frustrated over expectations that are not met.
As cited in the definitions, strategic planning is an organization’s process of defining its strategy or direction, and making decisions on allocating its resources to pursue the company’s vision and mission. It is a top-down approach concerned with the:
● long-term mission and objectives of an organization,
● the resources used in achieving those objectives,
● the policies and guidelines that govern the acquisition,
● usage and disposition of those resources.
Hence, it forms the very foundation for the success of an organization.
We can finally conclude with Sir Brian Pitman’s observation that, “there is always a better strategy than the one you have. You just haven’t thought of it yet.”
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