Strategic Planning That Computes

Article excerpt

If it were an equation, it would read: STRATEGIC PLANNING = PLANNING + MARKETING. In other words, without marketing, the strategic planning equation doesn't add up.

Most banks claim that they engage in "strategic planning." When you question them closely, however, you discover that this isn't what many are doing. They are engaging in numbers-driven annual budgeting--masquerading as strategic planning.

Strategic planning cannot be confined to a single annual event. It is a continuous process. Also, strategic planning focuses on the customer and the market--that is, on how superior performance will be achieved--not on the numbers themselves.

Strategic planning has to include a strong marketing component. It's possible to "plan" without marketing, but if you do, you end up with a document that is not "strategic."

Let's review why strategic planning is important. Two factors drive the need for strategic planning: external change and competition. We know that the dynamics of external change are continuously altering the rules that determine success or failure for any business. The seven dynamics of external change include:

* Technology.

* The legal and regulatory environment.

* Demographics.

* Macro-economics.

* Geopolitical shifts.

* Competition.

* Environmental and biological trends.

Therefore, enlightened leaders attempt to monitor continuously the implications of these changes on their industries and companies. Then, they plan proactively the internal changes that are needed to adapt to the new realities. Simply put, we must plan because the reality in which we operate is constantly changing.

Competitive advantage

The need to make planning strategic is driven by competition. The word "strategic," in fact, means "to create an advantage," thus implying the existence of adversaries, enemies or competitors. According to Kenichi Ohmae in "The Mind of the Strategist":

"What business strategy is all about--what distinguishes it from all other kinds of business planning--is, in a word, competitive advantage. Without competitors there would be no need for strategy, for the sole purpose of strategic planning is to enable the company to gain, as efficiently as possible, a sustainable edge over its competitors."

A thorough understanding of the concept of competitive advantage is the foundation upon which strategic planning--and marketing strategy--must be based. Michael Porter, in "Competitive Advantage," provides additional insight: "Competitive advantage grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it."

Marketing, of course, is everything a company does to attract, enhance and retain profitable customer relationships. The key to fulfilling this marketing mission is to develop, modify as necessary, and communicate and reinforce effectively, superior value propositions to targeted customer segments. Competitive advantage (or disadvantage) can therefore be defined as "the perceived worth of your value proposition less the perceived worth of your direct competitor's value proposition in the mind of the targeted customer or prospect"

The value proposition concept is based on the value equation, which states that perceived value (upon which almost all purchase and affiliation decisions are based) equals perceived benefits (intangible as well as tangible) minus perceived cost (nonmonetary as well as monetary).

Strategic planning, therefore, in order to be truly strategic, must produce specific actions that create meaningful advantages over competitors in delivering superior value for existing or prospective customers.

Building the foundation

The best way to design an effective strategic planning process is to use the company's mission statement--with its clearly defined commitments to shareholders, customers and employees--as the foundation. …