Strategic Planning … Why Waste Your Time?

I was reading a study several years ago from The Balanced Scorecard Collaborative where they reported that 80% of companies do not have a strategic plan, and of the 20% that do have a plan, less than 10% of those companies ever execute on their plans. If you do the math, fewer than 2% of all companies have, or execute on, a strategic plan of any kind.

Can the 98% of all companies be wrong? Is strategic planning a big waste of time?

In working with many small companies, from start-ups to companies with well over 200 employees, they all have one thing in common.  They all have very small market shares, and none had a strategic plan.  Smaller company management teams are under the impression that the strategic plan is a 3” thick document that takes months to write, and ultimately ends up in a desk drawer, never seeing the light of day again.

Chart 1 below highlights the prime reasons why companies do not execute of their strategic plans. Do these barriers exist in your business? How often do you ever step away from the day-to-day details of the business and talk about strategy?

A strategic plan for most companies can be presented in just a few pages. A company with less than 1% market share can certainly consider the real possibility of doubling in size and still fly well under the radar of competition.

There are three key elements a small company should think about as the foundation for their strategic plan.  They include:

1)    Market Share: As stated above, most companies have well below 1%-2% market share making market penetration a most viable strategic option. You do not need to perform market research to validate this fact. For companies with a very small market share, thinking about doubling or tripling sales is not a flight of fancy.

Within the context of market share it is important to clarify the region where your product or service will be sold.  For example, if you are a dentist, most of your target customers might be within a 5-10 mile radius of your office.  For a plumbing company you region might be set at customers within a 40 mile drive from your office.  If you are a manufacturer of “widgets” you could eventually be selling this product in the US, or beyond.

2)    Target Markets and Customers: You have a small market share and you want to double/triple sales.  This begs the question – Who are you going to target to sell you product or services too?  The challenge of most small companies is in the focusing their sales efforts.  They attempt to be all things to all people. This lack of focus often results in a marketing message that is so general is lacks appeal.

One great exercise is to make a list of all your customers and then characterize each of them in terms that have some meaning to your business. This might look similar to the chart below.

Characterizing your current customers in this manner will help you to better organize your outreach program, and it will also be valuable in framing the message to that segment in the language they can relate to. For example, Healthcare might relate to your product/service differently than Education.

Once these market segments are determined, in today’s age of rapid access to vast amounts of information it is very straightforward to identify target accounts within any target market segment. If your company is a small regional company, target accounts can be identified within a specific service radius from the company by using postal zip codes. This information is very cost effective to acquire.

1)    Value Proposition: This is the most important part of any plan.  The value proposition addresses the seminal question that every target account will ask … Why should I buy a product or service from your company?  You must give them a real reason to believe!

This is where almost every company drops the ball. Companies focus on the product (the “widget”), or the service (plumbing, or the design and installation of security systems), they established their business around as the basis for defining and differentiating their value proposition.

Think about this for a second, it is very hard to make a case to a target customer to buy from you based on the features and benefits of your “product” alone. Companies rarely define their value proposition in the more global terms that include the soft differentiators listed in Chart 3 below.

If you want your value proposition to have real punch the elements in Chart 2 much be an integral part of your company culture.

I believe it was the Cheshire Cat in Alice in Wonderland that said .. “If you don’t know where you are going, any road will take you there.”  Taking an objective look at the way you are currently doing business, and good planning will provide you with the foundation for the growth and profits you are seeking.

The key elements of the strategic plan outlined above are a great starting point as companies prepare for recovery from this past recession.  Just think of one point … if 98% of companies are not executing on a strategic plan of any kind, and you are, this presents a very powerful competitive advantage.

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