Strategic planning can be divided into two segments: the first is strategy formulation, which includes information gathering. The second is implementation, which formulates objectives and identifies how the strategy will be carried out. This article concentrates on planning and strategy formulation. Implementation will be the topic of the final article on strategy.

Change can happen in a planned way or it can be a crisis management effort. Strategy is a plan for winning a war, and tactics a plan for winning a battle. Planning is an effort to remove weaknesses and leverage strengths. Because change has become the essence of management, to survive and prosper in the future organizations need to perfect their ‘outside-in’ thinking skills. They need to relate information about the external world to what is going on internally. Unfortunately, many organizations have difficulty thinking out of the box - the focus is on what we do each day, keeping up to the local competition, and hiring for jobs rather than knowledge.

Strategic planning tends to be developed using conventional methods such as SWOT (strengths, weaknesses, opportunities, threats), which tends to be subjective and lack detailed analysis, however, it is a good starting point if used with other tools. It will be important to assess each strength and weakness for its potential as an opportunity. Some of the possible questions for a SWOT analysis:

• What will we sell?
• To whom will we sell? What is the market?
• Why do buyers need us?
• Who are the major competitors? What is their share of the market?
• What are the competitor’s strengths?
• What are the competitor’s weaknesses?
• What, if any, are the alternatives?
• What are our key strengths and how can we turn these into opportunities?
• What are our key weaknesses and how can we minimize them?
• What strategies should be employed to take advantage of strengths and take advantage of competitor’s weaknesses?

Strategic planning exercises need to become more innovative and focused on human capabilities. Under a resource-based view, an organization assesses its tangible and intangible assets, and ensures that they have the organizational capabilities to develop its plans. The tangible assets include the infrastructure (buildings, equipment, tools). The intangible assets will include the skills and knowledge, and name brand or name recognition. Following a review of assets, the organization will assess its capabilities to accomplish its goals. A n environmental analysis is required to identify internal and external pressures on the potential strategies. This environmental analysis will review the political, economic, social and cultural environment that could affect the firm or organization.

Michael Porter, a guru on strategy formulation, believes that there are two main strategies, cost competition and differentiation (there are a few more in-between strategies but for the sake of simplicity, lets keep to these two). He also explained that each organization need to assess their competitive forces for these strategies and they include the threat of new entrants and rivalry, the power of suppliers, the power of buyers, and the threat of substitutes. Depending on how strong some of these competitive forces are, the organization may or may not be successful in implementing the strategy it is seeking.

Organizations need to trigger innovative thinking through ‘strategic innovation’ or through ‘positive turbulence. Market research methods say nothing about what customers may want if dramatic new values became available. For example, the Internet gave rise to all kinds of new products and services (cameras, security software, search engines) and changed the way we do business. Looking at what is available today cannot provide a good understanding of emerging markets, so we need to use tools like positive turbulence and encourage a larger variety of stimuli in the planning process to encourage novel ideas. As an example, Bell Labs employs a wide variety of subject matter expert speakers to allow people to think outside the box and outside their main area of interest. A recent speaker in ornithology was describing the communication system of large mammals and allowed one of Bell Lab staff members to discover a method to resolve communication problems in submarines. Focus groups, and show and tell sessions are other ways to create positive turbulence.

Michael Porter also introduced the concept of supply-chain analysis. The intention is to assess the flow of goods and services throughout the organization to determine the strengths of weaknesses of management, accounting, marketing, and production. Sometimes, it is better to contract out, or purchase suppliers (called vertical or horizontal integration), or form alliances or clusters to give the organization more strength.

Strategic thinking allows a firm or organization to think about its own current and future position on the market. The important thing is to spend some time and think strategically. Although great war leaders knew that to win, you had to resolve internal problems and make sure that people pooled their creativity, energy, resources, and stop competing against each other, nowadays, it is also important to take stock of what is happening on the outside world… convergence of technologies, amalgamations, take-overs, centralization of purchasing and management, trends in consumer behaviours, to make sure that your strategy will work and that you are prepared to win the battle and the war.