Strategy accelerates time.
If the business environment is like a natural ecosystem, then the law of evolution applies. Only the fittest survives. But unlike in a natural environment, companies have control over their adaptive capabilities. And they exercise that control with their strategic management process.
What would take decades in a natural environment to occur could happen in a couple of years in business.
Great strategies determine who lives and who dies. Organizations that evolve and modernize their strategic processes not only survive and outlive their competitors but also thrive and dominate markets. Great strategies go beyond strategic planning and focus on execution and making the right adjustments.
Here is what it means to practice a modern strategic management process.
What is strategic management
Strategic management is the systematic analysis of an organization’s internal and external environment that leads to the development of a definitive and intentional course of action.
The modern competitive environment requires an iterative approach to strategic management where execution informs planning and planning guides execution.
Simply put, strategic management is how companies achieve and retain competitive advantage.
To make strategic management tangible, it's helpful to apply a structured strategic management process. This process describes the steps, in order, that an organization should perform to figure out where they want to get to, how they're going to get there, and whether or not they're succeeding.
This is a comprehensive guide to strategic management, so the steps of the strategic management process, in order, are:
- Why is strategic management important?
- What is a strategic management process?
- 1: The Plan Phase of the strategic management process
- 1.1: High-level goal setting
- Craft a vision statement
- Determine your focus areas
- Set corporate level strategic objectives
- 1.2: Strategic analysis & understanding your environment
- Conduct an internal strategic analysis
- Conduct an external strategic analysis
- SWOT Analysis: A strategic analysis tool
- 1.3: In-depth strategy formulation
- Business level strategic objectives
- 1.1: High-level goal setting
- 2: The Execute Phase of the strategic management process
- 2.1: Strategic governance
- Meeting structures
- Strategy reporting
- 2.2: Strategic communication
- 2.3: Strategy culture
- 2.4: Performance management
- Common pitfalls of strategic implementation
- 2.1: Strategic governance
- 3: The Track Phase of the strategic management process
- 3.1: Track progress against strategic outcomes
- Implementing KPIs
- Automating reporting
- Digitize your strategic processes
- Applying strategic frameworks
- 3.2: Iterating Strategy
- 3.1: Track progress against strategic outcomes
- 1: The Plan Phase of the strategic management process
- The role of culture in strategic management
Why is strategic management Important?
Because it clarifies and determines an organization’s identity. It enables, sustains and resolves competition. There's an old Japanese saying that sums up pretty succinctly why strategic management is important:
When you’re dying of thirst, it's too late to start thinking about digging a well.
More specifically, strategic management is important because it:
- Increases the speed of your decision making at a tactical level
Having strategic direction means that you can make tactical decisions much more quickly. Understanding your organization's ultimate outcomes helps you prioritize your tactics based on their effect upon those outcomes.
- Improves employee engagement
Having a commonly understood and well-respected set of goals, as well a clear plan of how to get there, is far more motivating for employees than simply showing up and working for the sake of it.
- Makes hiring decisions easier
When you know what you want, it’s much easier to figure out your capability gaps. That makes the hiring process far easier and reduces the number of poor hires.
- Creates interest in your organization
Having a strategic plan makes it easier for outside parties (such as potential investors) to understand and get interested in what you're doing. That makes your life much easier when you need access to the services those parties provide.
There are many other benefits to strategic management, but those four translate the abstract “survive and thrive” into concrete, realistic statements.
What is a strategic management process?
A strategic management process is a documented set of steps that you'll go through to turn the “concept” of strategic management into reality for your organization.
It’s how organizations define the business outcomes they want to achieve and how they will utilize their resources to achieve them. The strategic management process covers strategic planning, implementation, and strategy iteration. To simplify the strategic management process further, we like to think of it as follows:
Plan >> Execute >> Track.
Let's dive into those three elements of the strategic management process in more detail.
1: The Plan Phase of the strategic management process
The first part of the strategic management process involves figuring out what you want to accomplish and how you're going to get there. The Plan phase can be further broken down into the following subsections:
1.1: High-level goal setting
High-level goal setting encompasses the process of defining what you want to achieve in the big-picture sense. It's distinct from strategy formulation, which is where you'll come up with tactics, which we'll cover a little later on. Goal setting has three main elements:
Craft a vision statement
It all starts with a vision.
The most successful organizations are those that are able to clearly articulate what they're trying to achieve. They'll also stand almost dogmatically behind that vision throughout everything they do. Briefly, the main reasons why defining your vision is so critical for the strategic management process are:
- It gets all parties on the same page about what the organization is ultimately trying to achieve.
- It helps create an identity around your brand, product, people and customers.
- It serves as the anchor point against which to 'sense check' your actual deliverables when you get to the strategy formulation stage (1.3).
There is a reason why defining your vision is the first thing you should do in your strategic management process. Every single step that follows should flow back to the delivery of this vision. Your vision is what's going to keep you honest and consistent as you move through the strategic management journey.
Determine your Focus Areas
Focus Areas break your vision down into (usually) 3 to 5 areas of focus.
For example, your vision might be to "Put a computer on every desk in the world" (Microsoft, in the 1980s) - and your corresponding Focus Areas might be:
- An intuitive user experience
- Customer experience
Focus Areas are the first step on your path to turning your vision statement into reality.
Set corporate-level strategic objectives
Conclude your goal setting by creating corporate-level strategic objectives.
Specifically, Strategic Objectives that will sit underneath each of your Focus Areas and provide strong direction for the strategy formulation, which will happen at a business unit level (e.g., you have different businesses under an umbrella company, e.g. Virgin) and functional level (i.e., individual functions or departments within a business, e.g., Marketing).
Corporate-level strategic objectives should begin to add some outcomes to your strategic plan rather than just areas you want to focus on.
1.2 Strategic analysis & understanding your environment
Now, it's time for a quick reality check.
Make sure you have the capabilities to execute on that vision. Make sure that your vision is compatible with the external realities of the world. A strategic analysis consists of two parts:
Conduct an internal strategic analysis
In the first step, look inward at your own capabilities.
Perform an internal strategic analysis. Ask yourself questions such as:
- Do we have the necessary people and skill set to deliver against our goals?
- Do we need or have the necessary capital to fund our ambitions?
There is a range of tools that you can use to perform an effective internal analysis - but the key is to be brutally honest about your own capabilities so that you can either solve your deficiencies or adjust your goals accordingly.
Conduct an external strategic analysis
In the second step, turn your gaze outwards and perform an external strategic analysis that includes things like:
- The macro-economic environment
- Your competitors
- Regulations and compliance
- Customer trends
- Market trends
In other words, consider factors that are potentially outside of your control and how they will affect the viability of your goals.
SWOT analysis: a strategic analysis tool
One of the most famous ways of doing both internal and external strategic analyses is through a SWOT Analysis. This technique forces you to go through an exercise that considers:
Strengths: What are you good at? What skills do you have as an organization? Amplify these skills throughout your strategic management process.
Weaknesses: What aren't you good at? Why have you failed in the past? Solve for these weaknesses or, worst-case, avoid situations where they could hurt you.
Opportunities: What are the unique opportunities you can exploit in the market? Which of the strengths you've outlined give you an edge and how will you utilize them? Rapidly capitalize on these types of opportunities.
Threats: What aspects of your environment could hurt your ability to exploit opportunities? Are there any macro or micro economic issues that you need to be aware of? Mitigate these threats wherever possible.
Understanding your strengths and weaknesses are internal strategic analysis exercises. Understanding your opportunities and threats are external strategic analysis exercises.
Understanding your environment (internally and externally) is a critical prerequisite to strategy formulation and a critical component of the strategic management process.
1.3 In-depth strategy formulation
Once you have your vision, a clear set of goals and a good understanding of your environment, move onto in-depth strategy formulation.
This is where you craft a detailed plan about how you're actually going to achieve your goals. In our guide, we walk you through How To Write A Strategic Plan in great detail to make the process a little bit less daunting. The strategy formulation process consists of:
Business level strategic objectives
Specifically, each of your business units should look at the objectives that were written at a corporate level and then craft their own set of corresponding objectives that they will strive towards within their business unit.
Note: “Business unit” means something different depending on the size of your organization. Large corporations may define business units at a product level, while medium-sized organizations might define them as departments such as “marketing.”
Think of “Projects” as actions.
The specific things that you will do to deliver against your objectives. Projects are extremely specific deliverables, with deadlines and a series of tangible tasks underneath them assigned to specific individuals to ensure accountability.
Call them “Actions” or “Initiatives,” it doesn’t matter, so long as they're specific and have clearly defined implementations.
Create a strong set of KPIs for each of your objectives.
This is the last step of the strategy formulation. KPIs measure whether or not you're achieving your objectives. Ideally, your strategy formulation should incorporate two different kinds of KPIs:
- Leading KPIs - These are early indicators that your objective is likely to be reached. They help you be proactive.
- Lagging KPIs - These are definitive measures of whether or not you've reached your Objective and can only be measured after you've finished implementing a good number of your contributing Projects. They are a glance to the past.
By the end of the strategy formulation phase, you should have clear objectives, specific projects to drive progress and strong KPIs to measure your progress.
2: The Manage Phase of the strategic management process
Strategy implementation is where 80% of strategies fail.
This is a huge topic on its own. Here is a summary of the key elements of an effective strategy implementation process below:
2.1 Strategic governance
Governance is your strategic rhythm.
One of the most important things you need to do when setting up an effective strategy implementation process is to determine how “the strategy” will integrate with the existing structures in your business.
Meetings are a manifestation of those structures, so ask yourself the following questions:
- How often you will meet to discuss progress.
- What format those discussions will take, and supported by what reports.
- Who will be involved in those discussions.
- What information you need to manage the goals in your plan and make the governance process effective.
Since you decided on your meeting habits, the next natural question is what reporting tools will you use (specifically what kind of Strategy Snapshots or Dashboards will you use).
Cascade’s reporting dashboards are automatically generated, including only the metrics you need. They are specifically designed to meet your reporting needs.
2.2 Strategic communication
Communicating your strategic plan is terribly important to strategy implementation.
It is a process most companies ignore or dramatically underestimate to their strategy’s demise. The traditional way of communicating the organization’s strategy has been to present it to its people. But strategy presentations don’t work.
Instead, you should expose your strategy to your people. Allow them to access it at will and they will engage with it, challenge it productively and ultimately improve it. If your employees don’t regularly engage with the company’s strategy, it’s unlikely they’ll execute it and focus on what matters most.
2.3 Strategy & culture
Your culture is your strategy’s biggest ally or biggest enemy.
Let’s put it this way. If your strategy is in conflict with your culture, it will fail. You will never succeed at implementing your strategic plan.
If your culture resists your strategy, you face a significant implementation problem. At best, you'll get a lukewarm reception to the strategy (which at least you can see and do something about). At worst, you'll get a positive reception, followed by a total lack of change and engagement (which will hurt you even more, as you won't even know that your strategy hasn't been embraced until much further down the line).
If any of the following are true, step back and consider if your organization is culturally ready for major strategic change:
- There is a disconnect between management and everyone else. People use pronouns like “they” instead of “we” when talking about major initiatives.
- There are no regular reviewing meetings happening, or there are, but they're poorly attended.
- People are cynical about proposed changes and respond with things like, "We tried that, it didn't work!"
Performance management drives execution.
It connects your strategy with people's individual goals and corresponding rewards.
The goals people are measured against as part of their formal reviews should match up pretty tightly to the strategic plan of their function or business unit. Which in turn should create a link between their goals and the overall corporate-level strategic plan. Invest in a digital tool, like a strategy execution platform, to align your people and manage their performance across the entire organization.
However, the biggest bane of any strategic management process is a lack of accountability. This is the situation where people throughout the organization seem to agree with the strategic plan, but no one really changes anything about their behaviors to make it happen.
Common pitfalls of the strategy implementation process
Strategy implementation is hard.
It’s why many strategies fail to materialize. These are the common pitfalls most strategy implementation processes fall into:
- Lack of Accountability
The lack of a single named individual for ownership of goals, projects and KPIs. Teamwork is awesome, but by naming one clear “Goal Owner,” you avoid any confusion about who ultimately is responsible for delivering the different aspects of your strategic plan.
- Poor Reporting
Inconsistent reporting structures and processes. You need to implement regular meetings throughout the organization that focus specifically on the outcomes of the strategy. This includes reviewing the KPIs and project statuses regularly and in a consistent format throughout every level of the business.
- Poor Data
The lack of easy data availability. This is really more of an excuse than an issue in most cases, but nevertheless should be addressed. You need to give people a set of tools to access the KPI data (both lead and lag) that has been created to measure the strategy's success.
- Misalignment of Reward to Strategic Success
Linking reward to strategic success. How often have you been at an organization where the ‘end of year review process’ involves a box-ticking exercise against a list of goals you created in some HR system, simply because you were told by your boss that you had to? There needs to be a clear linkage between the success of the organization's strategy and the reward and recognition given to employees.
By tackling the four common pitfalls above, you'll be going a long way towards ensuring the success of your strategy implementation.
3: The Track Phase of the strategic management process
The final phase of the strategic management process is tracking the progress of your strategy and adapting it.
Tracking your strategy needs to start on the same day the implementation does. Not only that, but you need to have considered the mechanisms for how you'll be tracking your strategy as far back as phase 1! More specifically, you should already have a clear set of KPIs for each of your Strategic Objectives.
3.1 Track progress against strategic outcomes
It's easy to get lost in the implementation phase.
It can be a long and challenging process to move your organization towards a place where it's consistently delivering strategic Projects and KPIs. In fact, sometimes it takes so long that the organization forgets to revisit its Strategic Objectives to see if all its implementation work is actually moving the needle towards its ultimate goals!
To be able to efficiently analyze the progress of your strategic plan, you need to do a number of things:
We've mentioned this a couple of times, and for a good reason.
As part of your strategy formulation, you need to ensure that each of your Strategic Objectives has at least 1 KPI. This will tell you whether or not you're making progress against that part of your strategy.
More specifically, you need to ensure that you have at least one lagging KPI for each Strategic Objective, supported by a number of leading KPIs alongside.
Once you've created your KPIs in place, it's time to do whatever it takes to automate the reporting process.
That means setting up live integrations between the data source (e.g., your CRM system) and your dashboard or tracking tool of choice (e.g., Cascade). Automating reporting against your KPIs is a critical part of the strategic management process as it forces your organization to be accountable for the results of your strategic efforts and removes any excuses around the lack of availability of data.
Digitize your strategic processes
In a world where companies need to adapt fast to survive and thrive, sheets and slides have no place in the strategic processes.
Excel is an excellent tool, but it has a lot of limitations to be effective in strategy. To execute, manage and adapt your strategy, you need to move away from static tools. Many strategic processes, like tracking and reviewing, have so much friction that they make the organization rigid.
You have to automate these processes. Use a digital, dynamic environment that is sophisticated enough to handle your strategy and easy enough to use to facilitate its execution. A platform like Cascade removes friction from these processes and becomes your single source of truth.
Apply strategic frameworks
For example, the McKinsey's Strategic Horizons framework ensures that you have a healthy mix of short, medium and long-term goals in your strategy (and that you're delivering successfully on each of them).
Of course, analyzing your strategic success is one thing, actually doing something about any shortcomings is the real key to success. And that's where the final stage of our strategic management process kicks in.
3.2 Iterate the strategy
The Plan > Manage > Track process is cyclical.
The reason is simple: the strategic management process is never-ending. Strategy is iterative. It is definitive for your organization, rather than something you do once and move on from. That means constant iteration, constant test-and-learn and constant assessments.
Assessments of your strategy should include what has gone well and what has not and needs to be changed. They're how you make tweaks to elements of your plan that aren't working out the way you'd hoped. That doesn't mean huge changes every month. That would be a disaster and would seriously hurt the credibility of your strategic management process. Rather this is about making small micro-adjustments to keep your plan realistic and relevant. Tweaking a KPI here, adding a new project there, etc.
If you take away only one thing from this article, it should be that Plan > Manage > Track is the best way to think about strategic management.
In fact, it's such a good framework that we built our entire strategy execution software platform around it. When you use Cascade, you'll find the features neatly divided into these three key phases of the strategic management process.
The role of culture in strategic management
Talking about the strategic management process with only a brief mention of culture is borderline a crime.
Having a plan is important. However, the implementation of a full strategic management process goes much further than the mere formulation of a strategic plan. The true benefits of the process come from the behavioral changes that you'll drive throughout your organization. They are also the biggest challenges.
- Thoughtful, fact-informed planning
- Collaborative ideation
- Realistic but ambitious goal-setting
- Reflection on the reasons behind successes and failures
- Focusing on what matters most
- Abandoning old and useless practices
To be effective in your implementation of a strategic management process, you need to commit to a certain set of core values in your organizational culture:
Transparency: You need to be willing to be open with your employees and colleagues. If people feel as though you're only giving them half the story when it comes to the strategy or the results, it's unlikely that they'll fully embrace the new strategic management process.
Empowerment: You'll also need to be willing to trust people to formulate and execute on their own parts of the strategy. Micro-managing every level of the strategic plan is going to be increasingly unworkable as your organization grows.
Collaboration: It sounds obvious, but your strategic management process can only succeed when coupled with a culture of collaboration and sharing. People need to be willing (and have the tools) to share information efficiently and clearly.
Hopefully, you've found our guide to strategic management clarified the various processes it includes and you found a few ways to improve your own strategic management process.