Your strategic plan sets your priorities for your business. It determines where you are going to focus your energy and resources, and sets goals for your employees and other stakeholders.

Strategic planning helps you look at all the things your business could do and narrows it down to the things that will actually help you grow your business.
The Lean Business Plan Template

You’ll know strategy when you see it

More years ago than I care to say, as a vice president with Creative Strategies International, I gave up trying to define strategy. During the years I was in that business, I discovered, slowly, that most people believe they are naturally good at strategy. They may not be able to define it or draw it in business diagrams, but they understand it.

I think I’ve seen that most strategy development is intuitive:

  • People generally understand that strategy involves focusing on priorities, and why that’s good for a business.
  • People generally understand that strategy involves playing toward strengths, and away from weaknesses.

So, whether or not you can define strategy, you know it when you see it. That’s what I’ve seen through the years.

The real problems with strategy

In one of my long-term consulting relationships, a large and very successful company would send groups of managers to two-or-three-day offsite meetings to develop their strategy.

I watched in wonder as groups of very bright young managers developed brilliant strategies at these meetings, but failed, year after year, to implement them. The ideas that energized the offsite meetings were lost back in the office, drowned in the daily routine of putting out fires, answering the telephone, and solving the everyday problems.

I learned the hard way that the problem with strategy isn’t as much developing a good strategy, as it is in implementing the strategy. Not that we should underestimate the importance of strategy, but we should at least be cynical about how much of business strategy remains in the realm of ideas only, and doesn’t really change a business.

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Strategic conceptual models

I’ve worked with many different conceptual models used to diagram and dissect strategy. The Strategy Pyramid is probably my favorite, first because it emphasizes implementation, and also, of course, because it is my own work, my own service mark.

However, I really think that many different conceptual models are valuable, and the choice of the model doesn’t matter that much. People think in different ways. If a model works to help you see through the cloud, helps you focus, and enables you to develop your strategy, then it is a good thing.

Somebody else will use a different conceptual diagram and arrive at the same place, or at an equally good place. Some models work better for some people, and anything that helps you visualize and understand reality is a big step forward.

General principles of small business strategy

This is not an academic exercise and I can’t claim results of research. The following principles are based on what I’ve seen over 29 years of consulting and research, plus my Stanford MBA, and a lot of wisdom contributed by some very smart clients.

Strategy is focus

Allocate resources where they will do the most good. Work toward your strengths and away from your weaknesses. Develop the company by doing the most important things, according to your long-term objectives.

Strategy is consistent over the long term

Better a mediocre strategy consistently applied over several years, than a series of brilliant strategies. It takes time to develop and implement a strategy, more time for the world to react and turn in the right direction.

It’s very hard to stick with a strategy because the people executing the strategy tire of it long before the rest of the world does.

Your business’s strategy is unique

Context is everything. Formulas and generalizations don’t apply. Understand your situation, both external and internal, and develop your strategy to work toward your strengths and away from your weaknesses.

Understand your situation, where you are, and what knobs you can turn. Imagine yourself sitting in the driver’s seat of a vehicle, and recognize that your controls are limited. You have controls for faster and slower, but not for up and down. Look at your business in the same way—understand what you can do, and what you can’t do.

Understand the problem of displacement

Strategy is subject to displacement, meaning that everything you do rules out something else that you can’t do.

Drop a brick into a full pail of water and watch what happens: splashing. That’s displacement. Small business strategy has to deal with displacement.

The main elements of the strategic plan

A strategic plan should include some or all of the following points:

1. High-level strategy

Strategy is focus. It guides your growth. Strategy assigns priorities.

Of the whole range of possible market segments, and the whole range of services and possible sales and marketing activities, which are your main priorities? Strategy is often a matter of understanding when and how to say no, and selecting among opportunities.

2. Tactical foundations of strategy

In the real world, strategy by itself isn’t enough. It’s just too easy to develop strategy and then forget about it.

A strategic plan should base its strategy on specific tactics that make that strategy realistic, implementable, and trackable.

3. Specific responsibilities, activities, deadlines, and budgets

We call these milestones. They are the bricks and mortar of business planning, and are critical to business success.

4. Financial plan

One of the most important gains from an annual plan is the financial plan, which of course hinges on cash flow. A business needs to stress its priorities by making sure they get the right amount of money. Growth costs cash.

Tim BerryTim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry.