Strategic Planning + Agility = Success in Achieving Financial Goals
Strategic Planning + Agility = Success in Achieving Financial Goals
Many times, an organization will put together a strategic plan, followed by a financial plan or budget, and then not take the time during the year to go through it and fine-tune as needed. The plan is meant to provide a roadmap and provide organizational alignment. When you are faced with changes in the marketplace, you need to examine what's in the plan, and course correct as necessary. When your team faces the challenges, more often than not, there will be a part of the organization that heads one way, and another part that thinks something else is more important to address. The result is that you are missing opportunities and being hit between the eyes with threats that have now become real. This is especially realized in those companies that let budget drive strategy instead of the strategy driving the budget.
In putting together your strategic plan, it's important that you have done enough study and preparation ahead of time to be agile enough to respond to changes when they pop up around you. At the very beginning of the planning cycle, it pays huge dividends to complete an industry assessment. This is where you gather data that will help you understand the industry's long term growth opportunities. Take a look at the volume growth rate, competitor mix, rate that technology is changing, and customer value adds that will put you over the top. When you are faced with a new opportunity, these items can be a good funnel to help you decide go forward strategy.
Next, do a competitive assessment, and you have to do this regularly not just as the start of the planning cycle study and understand business relationships, product line breadth, customer requirements, and market share data (if you can get it). Make sure you are talking to your customers, and if applicable, your distributors. They will give you insight to what's happening. Listening and learning approaches can be different by product and area, but they will assist you with buying trends, new product and service opportunities, quality levels, and their willingness to recommend your products to others.
The industry assessment and competitive analysis give you two of the critical pieces that go into your plan, and more importantly, provide you with tools that position you to respond quickly to customer needs and market changes. These two items feed the financial plan. For purposes of clarity, the financial plan is the process by which a business documents and communicates its strategic objectives in financial terms. Many organizations call this their budget. It's important to have a thorough financial plan. Not only should it include an income statement, cash flow and balance sheet, it must have your capital and manpower plans, too.
The decisions that you make to address changes in your industry and competition have a financial impact that must be understood. The primary benefit of having a solid strategic plan is that you can better position your organization to reap financial benefits or protect your current financial position. To quantify the financial impact of the response you make to changes in the industry and competition, a reforecast exercise tells you how your new initiatives or actions will improve or hurt financial results. It's not necessary to prepare an entirely new financial plan, as there is often a lack of efficiency in the process and high costs associated with its completion. A few companies do it, but it's a tough one on which to get buy-in.
It's better to complete the reforecast exercise and understand the financial impact of changes that you will make to respond to the marketplace volatility. It will keep your financial results healthy and enable you to move forward with confidence. Another way to say this is that you can determine the financial results of becoming more agile. You've done the work already. You know the industry, the competition, and you've developed resource plans based on this core set of assumptions. Once you see a new opportunity, it won't take much to tweak the numbers, and you will be well positioned for a successful, rapid response.
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