Why does strategic planning fail?

A sound strategic planning brings together the initiatives that a company considers essential to achieve its long-term goals. To do this, the most important people in an organization invest time, allocate resources, and define priorities in a lengthy exercise where visions (and sometimes egos) are on the line. Still, studies show that 90% of strategic plans never fully materialize. Why? If having a strategic plan is indispensable, how should it be created and what are the pitfalls to avoid?

What is strategic planning?

Strategic planning is the process by which macro goals are transformed into concrete initiatives to be implemented, usually within one to three years. The purpose is to create a plan that serves as a compass that guides people, aligns actions, and clarifies the step-by-step process for achieving those targets.

Generally, strategic plans have three main parts. The first is a vision or mission statement that sets a relatively long-term and ambitious goal. The second is a list of initiatives, such as product launches, geographic expansions, and construction projects, that the organization must undertake to achieve the goals. The third element is the conversion of the initiatives into costs – the annual budget.

But why do we even create strategic plans? After all, it hasn’t always been this way. When people first started talking about the topic in the mid-1960s, it was thought to be the best way to generate innovation and keep companies competitive. This way of thinking was expected to produce new strategies, as well as provide step-by-step instructions for managers to carry them out. And in some cases, it worked: from Toyota to Apple, there are fantastic examples of companies that have every step of strategic planning figured out down to the last detail, like any other process on an assembly line. But for most companies, the reality is quite different.

Just as there are good examples, there are also blatant cases of great companies with experienced managers and long strategic plans failed spectacularly. In 1997, Kodak was the third most valuable company in the world. Fast-forward 15 years and it was filing for bankruptcy. Blockbuster – which had the opportunity to buy Netflix in 2000 and didn’t – followed the same path. The Kodak and Blockbuster case studies are not exactly new and management books have used them to illustrate the shortcomings of strategic planning for decades. More up-to-date statistics, however, reinforce this stark picture: around 90% of plans are never fully implemented. If they fail so badly, what are they good for?

What is strategic planning good for?

Without strategic planning, a company’s activities risk straying away from a clear path towards its end goals. Root values and mission statements are useful, but only up to a point. Over time, these tend to be watered down by reality and companies face an understandable tendency towards what is happening “right down” rather than focus on business development for the long-term.

Strategic planning acts as a counterweight. It allows companies to know which direction to take to stay alive in the market in the long run, by adapting and surviving changes and crises ahead of time. Strategic planning prevents a company from stagnation, making room for growth and innovation.

In addition, strategic planning is the basis for sound management and distribution of the company’s financial, material, and human resources in a more coherent and efficient manner. With greater alignment and vision come significant cost savings and a deeper sense of purpose. At least in theory.

Why does strategic planning fail?

Although many companies implement efforts to define and plan, data shows most companies fail at strategic planning. These are the main reasons.

1. Strategic planning is not realistic

Strategic plans are often aimed at lofty goals that are not rooted, or that fail to generate support from the leadership team. This usually happens when the business or market is not carefully evaluated, or when the real capacity and resources of the company are not considered.

2. The strategic plan is not supported by data

Lack of data is a capital mistake for a strategic plan. Without a data-backed mapping of the current state of the business, there can be no future vision. In other words, managers are often victims of their own bias, seeing what they want to see and not what the data shows. When decisions are made based on intuition, they often prove ineffective. 

3. The team is not involved

Lack of engagement is another key reason so many strategic plans fail. A plan may be well constructed, but the team was not involved in its definition, and feels it as an imposition. This is why plans outsourced to consulting firms have a particularly high failure rate compared to plans developed in-house.

4. The strategic plan in not time-bound

Without a schedule, the strategic plan ends up being postponed or passed over in favor of other actions deemed more urgent. This attitude may solve problems at the time, but in the medium and long term prevents the plan from being realized. However, it is important to set realistic deadlines, otherwise schedules become useless.

5. The strategic plan does not include quantifiable goals

You can only determine the success of a strategic plan if progress is somehow measurable. Without metrics, there is no way to know whether the results obtained so far are positive or negative. Thus, it is critical that the strategic plan determines the appropriate metrics that will evaluate how the teams are faring in bringing the plan to life. For example, it is not enough to want a strategic plan to increase sales. However, if the proposal is a 30% increase in turnover by the end of the year in product line “X”, it is easy to track the results every month and realize if you are on the right path.

6. The strategic plan is not tracked

Besides defining metrics, it is important that the strategic plan is continuously followed up and monitored. It is necessary to closely follow all stages of the plan to identify and correct any problems that are affecting with the results.

Who should do the strategic planning and when?

Strategic planning should be done by the company’s management. However, it should involve the commitment and dedication of every team, so that everyone works on the same goals. Although there are no universal guidelines, the norm is that strategy planning should be done every year with a horizon of 3 to 5 years, with the initiatives and costs being valid only for the next 12 months.

How to do strategic planning, step by step

Strategic planning typically entails these essential steps.

1. Define the current state and future vision

First, it is important to determine where the company is and where it wants to go. To help with this step, gather available data on the current situation, competitors, and the latest market developments. This will give you a complete picture of your company at the present time.

2. Set goals and metrics

Next, develop strategic and area-specific goals. In other words, you can define a macro goal for the whole business, and then define the micro goals that different areas or departments will have to go through to achieve the primary goal. The targets should be SMART: Specific, Measurable, Achievable, Realistic, and Time Bound.

You will need to track the goals with a set of intermediate metrics to measure performance. The point is that with just a quick glance you can track the progress of the strategic plan.

3. Define key initiatives

In this step, get creative and brainstorm the initiatives that will help the company achieve its goals. From new products to facilities, from strategic partnerships to overhauling critical production processes such as washing, to entering new markets – at the phase every idea is on the table. The best organizations also recognize the power of strategic retreats. Revising the product range to end less profitable products, exiting less profitable markets, and reducing costs and waste can be just as important and devising new actions. In the end, you need to prioritize and come up with the so-called “vital few” – the list of a few but very relevant initiatives that you really have must to implement this year and that will move the pointer on the selected KPIs.

4. Execute and follow up

After completing the previous steps, it is time to put into practice everything that was defined earlier. With the goals organized in a SMART way and well-defined KPIs, it is possible to execute and track the plan effectively. One of the most used methods for this step is 5W2H, which helps ensure that nothing important is forgotten.

When following up, it is essential to ensure that deadlines are up to date and that actions are being properly executed. If they are not, a strategic planning review may be necessary. It is better to act than to let the plan drag on into the future.

Somengil, alongside leading companies in its sector

Strategic planning allows companies to anticipate and lead meaningful change, rather than just to react to problems or dwindle in a “business as usual” mentality. At Somengil, we help businesses with their strategic targets – especially in the food, catering, and healthcare sectors where washing quality is critical. The MultiWasher is a state-of-the-art industrial washing machine. See for yourself how this leading equipment can take your washing processes to an unprecedented level of effectiveness and efficiency.