In today’s rapidly changing business landscape, strategic planning is the roadmap that defines where a business is headed and how it intends to get there. A well-crafted three-year strategic plan not only sets the direction but also aligns the entire organisation toward a common purpose. It’s the blueprint for your success.
This month’s theme is “Strategy and Planning” as we start to prepare for the year ahead, with this article focused on the crucial topic of crafting a three-year strategic plan. A three-year timeframe provides a balance between short-term agility and long-term vision. It allows you to set ambitious yet achievable goals and provides a roadmap for growth and successfully achieving these goals.
We’ll explore the significance of setting or updating your BHAG (Big Hairy Audacious Goal) and breaking it down into SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) near-term goals that people can better identify with.
It’s important to emphasise the need to start the planning process early if you’re to have the time to do it properly: setting meeting dates with the board and your team to formulate the direction and plan, culminating in board approval and effective communication to your staff, so they can start the new year with their goals firmly in mind.
Let’s embark on this strategic journey together.
First: Your Business Analysis
Before diving into strategic planning, it’s essential to conduct a thorough analysis of your business and its environment – you can refer to some of last month’s articles on “Assessing Your Situation” for this (links to these can be found at the end of this article).
A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) helps you identify internal strengths and weaknesses, as well as external opportunities and threats. By understanding these factors, you can make informed decisions and capitalise on your strengths while mitigating potential risks.
Start by assessing your internal strengths. What are your core competencies? What unique value do you bring to the market? Identify areas where you excel and can differentiate yourself from competitors. Simultaneously, be honest about your weaknesses and areas that need improvement. This analysis will help you identify opportunities for growth and areas where you need to allocate resources for improvement.
Next, evaluate the external landscape. What market trends and opportunities exist? Are there any emerging technologies or changes in consumer behaviour that could impact your business? Additionally, consider potential threats such as new competitors or regulatory changes. By understanding the external factors that influence your business, you can proactively adapt and position yourself for success.
Then update your Competitor Analysis – by understanding what they have done well and poorly, you can gain insights into how they are likely to behave in the future. The analysis also provides a benchmark against which you can measure your performance and identify areas for improvement, giving you the information necessary to develop your own strategies and tactics to stay ahead of the competition.
With this background analysis complete, identify 3-5 priority areas to focus on. These initiatives will help you respond to your current business context and move towards your long-term vision.
Examples may include expanding into new markets or segments, enhancing technology capabilities, improving customer experience, implementing sustainability practices, or developing leadership bench strength.
The Foundation: Your BHAG
Having updated your background information and priorities, setting or updating your BHAG is the next step in crafting a three-year strategic plan. Coined by Jim Collins and Jerry Porras in their book “Built to Last,” a BHAG (Big Hairy Audacious Goal) is a visionary and ambitious goal – daring, yet achievable – that stretches the organisation’s limits and provides a clear focus for the future; it inspires and unifies your team.
Revisiting and refining your BHAG is the first step in the strategic planning process. Ask yourself, and/or brainstorm with your team:
- Has our BHAG evolved with changing market dynamics and our growth trajectory?
- Does it still resonate with our staff and other stakeholders?
- Is it ambitious enough to fuel our passion and determination for the next three years?
A well-defined BHAG should be inspiring, challenging, and specific to your organisation’s mission. It’s not just about achieving a financial target but creating a meaningful impact on your industry or community.
For example, consider Merck’s stated BHAG from the 1930s, “Transform this company from a chemical manufacturer into one of the preeminent drug-making companies in the world.”
And remember that it’s essential that your BHAG is aligned with your vision, mission and values.
Breaking Down the BHAG: SMART Near-Term Goals
With your BHAG established or refined, the next critical step is to break it down into more relatable way points. This is crucial for progress and momentum as it prevents people stalling when the climb appears too great.
For example, working back from a financial BHAG, determine where you would need to be after year 2 to achieve this, and then what your financial picture should look like at the end of the 1st year. Then, break this first year down into quarters, and the first two quarters into months. By doing this, you’re testing the achievability of the goal and can then modify it, or the steps to it, as necessary.
As a different example, if you had set a more embracing BHAG, along the lines of Merck’s (longer term) one referenced above, you might break it down in the following way:
Year 1: Focus on foundational goals that lay the groundwork for future growth. These goals might include market research, product development, or operational improvements.
Year 2: Build on the achievements of the first year and pursue more ambitious milestones. This is the time to expand into new markets, enhance customer experience, or invest in talent development.
Year 3: Consolidate previous progress and set the stage for further expansion and innovation. This could involve scaling operations, exploring strategic partnerships, or launching new products or services.
Once you’ve broken down the BHAG into more relatable steps, you need to ensure these steps can be captured in a measurable form. You need SMART goals: Specific, Measurable, Achievable, Relevant, and Time-bound. These provide clarity and ensure everyone understands their role in achieving the larger vision.
- Specific: Goals should be precise and clear. Avoid vague objectives that leave room for interpretation. Define exactly what you want to accomplish.
- Measurable: Establish criteria for measuring progress. Metrics are your best friends here. Define how you’ll measure success, whether it’s revenue growth, market share, or customer satisfaction.
- Achievable: While it’s essential to aim high, ensure that your goals are realistic. Stretching your capabilities is admirable, but setting unattainable targets can demotivate your team.
- Relevant: Goals should align with your organisation’s values and mission. They should resonate with your team and stakeholders, creating a sense of purpose.
- Time-bound: Set clear deadlines. A goal without a timeline is merely a wish. It should be evident when you expect to achieve each milestone.
Let’s consider an example: Suppose your BHAG is to become a market leader in your industry. A SMART near-term goal could be: “Increase our market share by 15% within the next 12 months by launching two new product lines and expanding into two new geographical markets.” This goal is specific, measurable, achievable, relevant, and time-bound.
Use this to build a set of goals that map you path to the BHAG, just as directions on your navigation system will tell you which roads to use and when to turn at each point.
Moving From Desire to Success: Execution Plans
Of course, all the BHAGS and SMART goals in the world amount to little more that wishes unless you know how you are going to do it, so the next step is to develop your execution plan.
As Sun Tzu said, “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.” (Sun Tzu)
Your SMART goals can easily be translated to OKRs (Objectives and Key Results), from which you will set KPIs (Key Performance Indicators), defining specific actions, owners, resources required, budgets, timelines, and risks/mitigation plans, initially for the leadership team, and having these cascade down by the leaders setting KPIs for their teams, and so on.
This cascade approach will be done in conjunction with those at each successive level, so allowing them to participate in the process and buy into the goals. By enhancing ownership in this way, the likelihood of success is greatly increased.
The Early Start: Being Ready for the New Year
One common mistake in strategic planning is starting too late. Waiting until the end of the current year to begin planning for the next can hinder your ability to make informed decisions and implement changes effectively.
To set your organisation up for success, consider starting the strategic planning process well in advance. Begin as early as September or October to ensure you have sufficient time to:
- Gather Data: Collect and analyse data from the current year. Review performance, market trends, and customer feedback. Identify areas of strength and weakness.
- Engage Your Team: Involve key stakeholders in the planning process from BHAG, through SMART goals, OKRs to KPIs. Your leadership team, department heads, and even front-line employees can provide valuable insights and perspectives and this participation encourages accountability.
- Set Meeting Dates: Schedule regular meetings with your board and leadership team. These meetings should be planned from the beginning of the process and extend through November. This timeline allows for thorough discussions, revisions, and alignment.
Board Approval and Communication: The Final Steps
As you near the end of your strategic planning process, the involvement of your board becomes paramount. Their approval and support are essential to ensure the successful execution of your plan.
- Board Approval: Schedule a dedicated meeting with your board in late November or early December. Present your strategic plan, including your BHAG, SMART goals, and the rationale behind them. Address any questions or concerns and seek their approval.
- Communication to Staff: Once your strategic plan has board approval, it’s time to communicate it to your staff. Transparency is key here. Share the plan’s highlights, emphasising the organisation’s vision, goals, and their role in achieving them. Encourage questions and feedback to foster a sense of ownership.
- OKRs (Objectives and Key Results) & KPIS (Key Performance Indictors): To ensure alignment and accountability, establish OKRs for each department or team within your organisation, and KPIs at an individual level. OKRs provide a framework for tracking progress and measuring success, while KPIs give each person a clear idea of their role in achieving the goals. Ensure all teams have their OKRs and KPIs defined before the start of the new year.
The Path Forward: Transformation and Growth
Crafting a three-year strategic plan is a journey of transformation and growth. It aligns your organisation’s efforts, propelling it toward a shared vision of success. Remember, your strategic plan isn’t a static document; it’s a dynamic roadmap that should adapt to changing circumstances and market dynamics.
By setting or refining your BHAG, breaking it down into SMART near-term goals, setting the execution plan with OKRs and KPIS clearly defined, starting early, and engaging your team, board, and staff, you’ll be well-prepared to navigate the challenges and opportunities that lie ahead.
As you embark on this strategic journey, keep in mind that it’s not just about the plan itself, but the process of creating it. Involve your team, foster collaboration, and adapt as needed. Strategy is not a one-time event; it’s an ongoing commitment to excellence.
Crafting a three-year strategic plan is a journey of transformation and growth, aligning your organisation’s efforts towards a shared vision of success.
Have you started your planning for the new year? Share your experiences in the comments below.
If you’d like learn more on this topic, the following articles and posts might be of interest.
More in this month’s focus on Strategy and Planning:
- The Role of OKRs and KPIs in Strategic Planning
- Boards Shape Strategy – The Critical Role of Governance in Business Success
- Developing a Strategic Roadmap
- The Power of a SWOT Analysis – “Know yourself and you will win all battles.” – Sun Tzu
- Performing a Competitor Analysis – “Study the past if you would define the future.” – Confucius
- You’re Driving, But Does Everyone Know The Destination?
- “The best way to predict your future is to create it.” – Abraham Lincoln
- Is Your Strategy Fit for Purpose?
- 6 Secrets to Business Success This Year
- Leading Your Business Successfully in a VUCA World
- 4 Ways Your Strategy Plans Could Be Derailed Next Year
- CEOs – 6 Important Questions to Ask Yourself Before Next Year
- Pointers to a Successful Future for Your Business
- Is This the Most Important Leadership Skill for Success?
- “Lack of direction, not lack of time, is the problem. We all have twenty-four hour days.” – Zig Ziglar
Harvard Business School: Why Is Strategic Planning Important?
Harvard Business Review (HBR): How to Do Strategic Planning Like a Futurist
Brian Tracy: Reach Your Goals With Strategic Planning
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