Staying focused: strategic plans need constant care

A business can become successful, and even remain so, after a time, based solely on good fortune. Yet success most often comes as the reward of thoughtful planning and diligent effort. The restaurant industry is replete with notable examples of the dividend to be gained by firms that steadfastly pursue a carefully formulated strategic plan. But to plan well is neither an easy task nor a one-time endeavor. Perhaps this is the reason that strategic focus so often tends to become blurred.

David Jaquith, president of Vega Industries, made especially clear the importance of business planning when he said, "Good results without good planning come from good luck, not good management."

Losing strategic focus can carry a high cost. Such cost is often imperceptible at the outset, but grows insidiously until management realizes that a serious problem is truly at hand. Related costs can assume a variety of forms, including diminished traffic count, increased food or labor expense, reduced check averages, higher overhead and lower customer satisfaction and employee morale. Seldom is only one aspect of the business affected. Combined, these costs frequently comprise a surprisingly substantial sum. The ultimate price to paid, of course, is complete loss of the business--a not uncommon event.

Maintaining strategic focus can be viewed as having two essential aspects. The first involves the planning process itself, for it is the company's business plan that, when carefully crafted, should guide management decisions on a routine basis. However, it is essential to remember that because the company operates in a highly dynamic environment, the planning process must be periodically iterated in order for the strategic focus to reflect changes within both the organization and its environment.

The second aspect of maintaining focus is assuring that key management decisions, whenever and wherever made, are consistent with the established business plan. This can be more difficult than it seems. One common reason is that upon a plan's completion it is often relegated to a bottom drawer where it remains, all but forgotten. In large, geographically-diverse companies, strategic focus can also suffer from a failure to communicate the plan clearly to those having active roles in its implementation.

When it comes to plan implementation, most managers will acknowledge that, in the relentless pursuit of increased sales, it is easy to add new menu items, expand operating hours, increase service levels, or open new units, all without pausing to ask if such actions truly fit the company's strategic focus. The ever-present and highly-alluring temptation to be all things to all people is undoubtedly the biggest stumbling block to maintaining strategic focus. In an effort to do a great many things well, companies frequently strain existing resources and consequently do most things inadequately. This, unfortunately, leaves a foothold to watchful competitors.

How, then, does management recognize when business is drifting from its intended course? What can be done to restore the organization to its original path? How can management be certain that its chosen course and strategy are best in light of present conditions and the company's long-term goals? Finally, what can be done to assure that strategic focus is maintained in the future?

The short answer to all of these questions is planning. It is the planning process that, when properly implemented, provides the strategic direction that drives the company. It guides management in making operating, marketing, and financial decisions that directly affect the future course of the company and its overall position in the marketplace. It assists management in preparing for ever-present changes in the market environment, thereby protecting its well being from external threats and enabling it to take advantage of new opportunities. As Thomas Campbell, the English poet said, "Coming events cast their shadows before."

Most business enterprises are indeed launched with formal business plans, especially those requiring external funding from such sources as banks and venture capitalists that insist on seeing well-written plans. Yet, even when funding is readily available, it is entirely nonsensical to begin a new business venture without first giving serious thought to risks, resources, and long-term goals involved in the project. Not to do so is akin to buying stock in a company one knows little about.

Is a formal, written plan imperative to the launch of a business? Although funding sources may not demand it, preparing one is highly advisable. Committing a plan to writing facilitates the process. It is the process of thinking strategically about the future of the marketplace, and how your company will fit within it, that is essential.

Many entrepreneurs believe that if they carefully think through the mental equivalent of a business plan, they have planned adequately. However, there are two significant drawbacks to this approach. First, a comprehensive business or strategic plan includes several often-critical elements. Overlooking just one can prove costly, and without a written plan the risk of oversights increases significantly. Secondly, a written plan can readily be reviewed by others who might detect potential problem areas or offer suggestions for its improvement. For these reasons, a written plan is always advisable, although it need not be a candidate for literary awards.

Given that a well-focused plan is in place when a business is launched, the next point where strategic focus is often lost occurs during the first year of operation. It is then that management is most likely to be beset with extraordinary pressures and time demands. In all of this busyness, it becomes an easy matter to make hasty decisions without regard to their compatibility with either the plan or a changing market environment. To remain focused, management must make an effort during this trying period to assure that each of its key decisions and actions agrees with the plan it has decided upon.

The sole exception to the above occurs when a key factor relied upon in the plan's development changes unexpectedly. Then it becomes necessary to review and adjust the plan in light of the present change. It is imperative to remember that elements of a plan are usually interdependent, meaning that a change in one can significantly affect others. For this reason, reviewing the entire plan whenever a key factor changes is recommended.

Because markets and other factors affecting the health of a business are, in fact, ever changing, planning must be viewed as a fluid and ongoing process. Large companies recognize this by establishing formal planning processes. Many hire full-time corporate planners. But, for small and mid-sized organizations this is seldom a practical approach. Nonetheless, careful planning is even more important to the health and viability of smaller business concerns than to that of larger ones because larger organizations have greater resources with which to withstand the impact of unforeseen events.

Small and mid-sized businesses, if they are to have and adhere to a meaningful strategic focus, need to implement their own planning processes. This means deliberately assigning management time on a periodic basis to review the company's current circumstances as well as those of the marketplace within which it operates. It also means making a diligent effort to anticipate how the market environment will change, the impact such change will have on the company's business, and what opportunities it may present.

How frequently should the planning process be iterated? Typically, annual updates are considered sufficient. The exception, as noted previously, is when a major change occurs within one or more of the fundamental factors on which the plan is based. In such case, a timely response can have a major financial impact, both near and long term, so interim plan adjustments can be critical.

From the standpoint of convenience, business planning is usually best done just prior to the development of the next year's budget, with which it must eventually be integrated. But, strategic planning is not to be confused with budgeting, for a budget by definition will not provide strategic direction for management decision makers.

Finally, it is important to remember that, although seldom easy, planning need not be a complex and cumbersome matter. With organization, a modest amount of preparation, and practice management's efficiency and effectiveness in the art of planning improves dramatically. Yet, more importantly, the company's health and vitality improve as well.

Peter Jacobs is president of the Wellesley Collaborative, a management consulting firm in Wellesley, Mass.

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