The 8 Basic Components of a Strategic Plan
How to Create a Strategic Plan
I was recently having dinner with a business colleague, and he asked me, “Have you ever heard of EOS®, the Entrepreneurial Operating System®?” I told him I had. He then said, “What’s your take on it?”
I get this question often, not just about EOS®, but also about strategic planning process in general. As systems like EOS and StratOp (my preferred strategic planning process) gain popularity, it seems more and more business leaders want to make sure they know how to create a strategic plan, and that they have the right components of a strategic plan.
At a high level, my response to questions like the one from my colleague is simple. A solid plan will:
- Define where you currently stand
- Create a picture for where you are going
- Lay out details on how to get there
- Identify the next short-term tactics
- Be reviewed once a quarter
How do you make a strategic plan that accomplishes the list above? In my experience, no matter what framework you choose, it takes about eight basic components to make a solid strategic plan.
Basic Components of a Strategic Plan
Perhaps nothing helps to provide the needed insight for a strategic plan more than gaining the proper perspective.
Perspective answers the question, “Where do we currently stand?” It’s important to know where you are before you start determining where you want to go.
Take this example. We all have smartphones with Google Maps. When you want to get directions to a particular location, what is the first question your phone “asks” you? If you said, “Where do you want to go?”, you’d be wrong. The first question the phone is asking (without really asking) is, “Where are you right now?”
A GPS system can’t give directions until they first know where you are coming from. In much the same way, proper planning can’t happen unless an accurate, honest assessment of the current state occurs. Once that happens, the rest of strategic plan comes into focus.
There are several tools that can helps teams determine this perspective. The first is the traditional SWOT Analysis where we determine the company’s strengths, weaknesses, opportunities, and threats. I offer a unique approach to a SWOT by asking teams where there is breakthrough, battle, frustration and failure.
Another tool to gain proper perspective is called the Four Helpful Lists. In this approach, we ask, “What’s right? What’s wrong? What’s confused? What’s missing?” After asking and answering those questions, we can begin to see what core issues are emerging—issues that we can now address in our strategic plan.
2. A Clear Vision
The best strategic planning processes make space for helping teams to paint a clear picture of the future. That’s exactly what a vision is. When people read or hear your vision or vision statement, they should be able to get a mental picture of what the future state looks like.
In the mid-1950s, when Walt Disney was asked during construction and beginning plans about how he would create his vision of a huge castle, near-real animals, and a paddleboat, among other attractions, he already knew what he was going to do. In fact, the park that opened years later was already mapped and planned out in his mind, and he was able to clearly communicate what it looked like. He could describe Main Street USA, Adventureland, Frontierland, and even Fantasyland. People could see it as he described it.
Being able to have a clear, compelling vision of the future state is a must-have in the strategic planning process.
3. A Defined Mission
Where vision defines the future, mission defines how we’re going to get there. A mission or mission statement should give reason to the existence of the company.
A great example of this is Starbucks. Their vision (future state) is simply be “the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”
What they seek to do every day to get there is their mission: “To inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.”
If your plan doesn’t have direction defined by a mission, chances are your employees don’t, either.
4. Core Values
Core values are the guardrails that we use to manage behavior throughout the organization. They are the “rules” we use to govern how we interact with and treat each other, our clients, and our vendors.
For my money, no one has better articulated what core values are and how they should be developed than Patrick Lencioni of The Table Group. He says, “Values can set a company apart from the competition by clarifying its identity and serving as a rallying point for employees.” He’s right—I’ve seen this firsthand with many of my clients.
Defining core values is one of the imperative components of a strategic plan. Check out Lencioni’s guide on how to do so.
5. Goals & Objectives
This next component takes the “macro” and brings it down to micro. Whereas your vision is big and long term, goals and objectives are smaller and shorter term. Defining goals and objectives as part of your strategic planning process allows you measure the success of your plan.
Examples of goals and objectives would be things like revenue, run rate, number of contracts signed, gross or net profit, etc. Remember to keep these goals SMART: specific, measurable, attainable, relevant, and time-based.
6. Performance Drivers & Risks
Performance drivers are strategic and/or operational elements that are necessary to reach the goals and objectives. Peter Drucker said that every business has its own set of “productivities” that help them reach ultimate performance. Alfred Sloan, who turned GM around and made it the largest company in the world for many years, called them “success factors.” Examples of performance drivers are order cycle lead times, product development cycles, work-in-progress inventory, organizational stability, cost of quality, customer support, cost-value proposition, and total customer satisfaction.
Risks are exposures to loss or injury. They represent peril or jeopardy. They are often beyond the control of anyone at the organization. However, it’s important to identify them so plans can be made to reduce the potential impact a realized risk can have. The effects of the global pandemic, chip shortages, and shifting attitudes on staffing are all examples of risks to identify as part of the strategic planning process.
7. Action Plan
I’ve said it before, and I’ll say it again: It doesn’t matter what you know. It only matters what you do with what you know. That’s where an action plan comes in.
An effective strategic planning process has to have defined next steps. In StratOp, we call these Action Initiative Plans (AIPs). Each AIP has a name, a stated objective, a leader, a team, defined deliverables, and due dates. This level of detail sets us up for the last of the components of a strategic plan: the quarterly review.
8. Quarterly Review
Nothing ensures that things will get done like accountability. Bringing the team together regularly, asking AIP leaders to report on the status of their plan, and reviewing overall progress keeps a plan from being a binder on a shelf. Instead, it becomes a playbook that helps the team move the ball down the field. I can tell you from experience, the teams I’ve worked with that have seen tremendous results are the ones who don’t just develop a strategic plan but make regular review a part of their strategic planning process.
Let’s Start Planning
I’d be more than happy to help you get started on the strategic planning process. If you’d like to have a no-obligation conversation, feel free to contact me to set up a time to chat.