When leaders at a company sit together periodically to agree on where their company should be headed, the result is often a “strategic plan”. The output of this strategic planning process is often what drives OKRs and in this post we’ll look at what a strategic plan is, and how this translated into OKR. Much of the inspiration for writing this comes from this post from the Harvard Business Review.
The reason strategic planning is such an important topic is that when management talk “strategy” the rest of the organization rarely “get it”. When so much time and effort is dedicated to producing strategic plans, to put them out into the wild without much thought into how they’re to be understood or acted upon constitutes a waste of resources as best, and a huge risk at worst.
There are thousands of opinions and hundreds of consulting firms around the world who all have their own unique definition of what a strategic plan is. To keep things simple we’ll define a strategic plan as this;
“a documented collection of research, decisions, objectives, and actions that enable a company to derive value from and deliver value to key stakeholders”.
The anatomy of a strategic plan
What you’ll find from some basic research is either surprisingly vague or predictably complex and there seems to be no universal consensus on what strategy or a strategic plan is or how to get to one. To keep things straightforward, we’ll borrow a definition from Prof. Roger Martin, regarded as one of the worlds top thinkers on strategy.
A strategy is simply a set of choices that can be distilled down into two;
- Where do we want to play?
- How do we want to win?
There are some common concepts which you’ll find amongst most approaches to strategic planning.
Most strategic plans contain the following 4 elements:
- Strategy Development
- Implementation Plan
In order to figure out where you want your company to go, you need to figure out where you are before you can set a direction, and therefore, research is key to building a picture of your company and its current place in the world.
One of the obvious places to start is with key stakeholders or, the people and organizations your company derives value from, and who your company provides value to. How detailed your understanding of these stakeholder roles is, has a direct effect on how focused the following plan becomes.
The most basic example of Key Stakeholders would be customers, employees, suppliers, and owners. However, this starts to get complicated when these groups occupy multiple roles like employee-shareholders or owner-distributors.
This is an area where we’ve learned a lot internally at Perdoo, especially as this has a big impact on other key stakeholder groups.
McKinsey, for example, doesn’t provide consulting services to small businesses or sole traders, they target large corporations with sizeable business challenges and the budgets needed to address them. This in turn effects affects their choice of employees, and they only hire those with experience and skills dealing with large corporate clients.
A well researched, clearly defined description of your target customers is crucial to a good strategic plan.
Many companies approach the planning process by trying to understand how and where they provide value to their Stakeholders, without first understanding what value they want the company to receive from them.
For example, you might want to build the most incredible workplace culture in the world, but unless you’re crystal clear about what you want from your employees in return, you’ll never understand, or be able to measure what value “workplace culture” adds to the company.
Starting with the value you want to derive, helps you better understand and align what your company can offer in return.
What do stakeholders want from your company? Getting clear here can uncover both problems and opportunities. Consider the fair trade coffee supplier whose customers demand ethical business practices and the institutional shareholder looking for a sound investment, who happens to have oil and mining stocks in their portfolio.
Understanding how they provide value to stakeholders from their point of view will have a big impact on the coffee company’s communication and investment strategy.
Understanding the value your Stakeholders derive from your company comes from interviews, focus groups or even immersing yourself in their experience. The goal is to understand how your company is viewed through their eyes and what’s important to them.
The next part of the strategic planning process is to take your research and decide where to play and how to win.
Factors like product range, brand perception, customer service, and price can all be repositioned to provide both your company and Stakeholders with greater value.
These decisions can be shaped by long-term Objectives you set for your organization, for example:
- Financial goals—“What financial goals do we have that will impact our organization?”
- Customer goals—“What things are important to our customers, which will, in turn, impact our financial standing?”
- Process goals—“What do we need to do well internally, to meet our customer goals, that will impact our financial standing?”
- People (or learning and growth) goals—“What skills, culture, and capabilities do we need to have in our organization to execute on the process that would make our customers happy and ultimately impact our financial standing?”
How will increasing product range increase value you provide your suppliers? How will it increase the value you derive from customers? How will it impact your distributors?
Your decisions on where to play and how to win, as well as the rationale that supports them, should be documented and inform an implementation plan which describes how you’re going to act on them. This is where a framework like OKR can be extremely useful.
A framework like OKR and software like Perdoo can be a valuable tool to help you turn strategic research and development into a solid strategy implementation plan that your whole company understands, and can work towards.
Mission & Vision
Clarifying your purpose and the kind of company you want to become, sets focus, allows you to imagine an ideal future and work backward, creating the long-term strategic Objectives you’ll need to get there. This should already be included in your strategy.
OKR is a useful tool for planning broad strategic, or Company Objectives, that define a point or a position in the future you want your organization to get to, relative to your stakeholders.
We recommend you communicate Company OKRs to your organization once per year. As you work on executing your strategic plan, you can revisit these yearly Company Objectives and adjust them as necessary.
An important part of any good strategic plan and an area many companies struggle with is getting buy-in from and aligning the entire organization behind the plan. The OKR framework promotes a top-down/bottom-up goal setting and with Group OKRs your teams have the opportunity to contribute to your strategic plan.
With your Mission, Vision and Company OKRs in Perdoo, the creation of Group Objectives can begin. It’s important to stress that your teams should be creating OKRs within the scope of your strategic plan. If you “choose to play” in online retail and you “choose to win” through customer service, and your teams are creating Objectives to “open retail stores” and “build a lean supply chain”, you might want to check to make sure they’re aligned with your plan. You can do this by looking at the scope of your company Objectives.
With an implementation plan in place and your company and Group OKRs communicated the process of executing and measuring your strategy can start. It’s important to stress the importance of regular updates to both your Company and Group Key Results. These are the feedback mechanisms that help you judge both the success of your strategy but also how well it’s being implemented.
To gauge the success of the implementation, look at Group OKRs, their Key Results, and the Initiatives the Groups are working on to achieve them. How well are they aligned to your plan, and how far have they progressed?
To gauge the success of your strategy, update your Company Key Results regularly. Your Company OKRs will show you the distance from the strategic positions you decided company needs to reach.
Strategic planning is a topic that all senior executives have to confront, and it’s often a topic of confusion and complexity. It’s a topic we’ll continue to explore here at Perdoo as we investigate the most reliable, easy to implement and successful approaches to building successful companies.
If you’d like to talk to us about any of the things we covered in this post, or how to take a strategic plan to align your entire organization behind it using OKR and Perdoo, drop us an email: email@example.com or sign up for a demo here.