Strategic Plan, Business Plan, Strategic Business Plan: Is There a Difference?

A colleague of mine called me last week. He had been asked to facilitate a one-day strategic planning workshop for one of his clients. “What is your take on strategic planning Glenn?” he asked me. We had a good discussion, which has stayed on my mind over the past week, which I thought would be worth summarizing in this week’s blog post.

For most people, the word “strategic” brings up a whole range of associations. However, the reality is, most managers who get promoted to leadership positions receive little – if any – training in strategic planning. As a result, they are likely to experience many years of confusion and frustration as they struggle to govern their organisations wisely by adapting to change.

People and teams often avoid planning as it involves confronting uncertainty. We don’t know what will actually happen in the future so how can we commit ourselves to a plan?

“Part of leadership involves declaring the future: making what is uncertain, more certain.”

The future is partly an extrapolation of the past but also involves envisioning the future, free from the constraints of both the past and our current reality. This involves a two-fold process: of both sense making and sense giving.

Distinguishing the differences

Strategising is a fundamental skill for success, both in business and equally importantly in life.

Here’s my take on the subject, in brief:

  • A strategic plan needs to address and align three important time horizons: long-term, medium-term and short-term.
  • A business plan covers only one time horizon: short-term.
  • These time horizons will vary, depending on the size and complexity of the business. The leadership team needs to define each horizon for their business, so there is a shared understanding and agreement.

Short-term

Medium-term

Long-term

 Small Business

1 year

3 years

5 years

 Medium Business

1 year

5 years

10 years

 Large Business

2 years

10 years

20 years

 Terminology

Objectives

Goals

Vision

  • It can be useful to associate different words with each of these time horizons, as outlined above. This stops people using the words “goals” and “objectives” interchangeable, by distinguishing them as referring to distinctly different time horizons.
  • Short-term objectives need to be developed to achieve medium-term goals in order to fulfill the long-term vision. This helps foster alignment, of people, resources and attention.
  • The board is responsible for developing, documenting and approving the strategic plan. It needs to outline the key strategies that will guide the organisation in bridging the gap between its short-, medium- and long-term aspirations. Embedding this knowledge into the strategic plan helps the board anticipate and navigate change and direct the efforts of management, more effectively balancing these competing time horizons.
  • Management (either the CEO or management team) is responsible for translating the strategic plan into a business plan.
  • The strategic plan is a short, high level, document or presentation. It provides the CEO with a clear mandate and benchmark against which his or her performance can be appraised.
  • The business plan is a more detailed document. For example, it translates the revenue objective (i.e. 1 year) down into monthly sales targets, and then filters down to team and individual sales targets / quotas. It includes the monthly expenses forecast, demonstrating how management plans to achieve the annual profit objective outlined in the strategic plan.
  • If the board and management are the same (common in a smaller to medium sized business, where in some cases the founder is indeed the single Director and CEO), then they need to first put their “director/s” hat/s on to prepare the strategic plan, and then replace their “director/s” hat/s with their “management” hat/s, in order to approach the task of generating the business plan. Easier said than done – but possible with the assistance of a skilled facilitator.
  • Where there are multiple divisions / profit centres / territories / channels within a business, a strategic plan can be developed for each one and then they can be aggregated into a single Group Strategic Plan. From there, individual business plans can be subsequently developed.
  • The board IS NOT responsible for developing and documenting the business plan but the board IS responsible for approving the business plan.
  • The strategic plan focuses primarily on what and why, secondarily on how. The business plan primarily focuses on how through careful consideration of the who, when and where dimensions.
  • Anything with a shorter-term horizon than 1 year could be considered a “Priority”. As such, I refer to anything daily / weekly / monthly / quarterly as priorities rather than goals or objectives.
  • Personally, I think the term “Strategic Business Plan” is a misnomer and therefore should not be used, to avoid unnecessary confusion.

Planning vs Plans

  • As Eisenhower famously said: “Plans are useless, but planning is indispensable.” I both agree and disagree.
  • Plans are valuable because they capture our shared understanding of what is important, of what winning and success look like. They express our commitment to each other – to do what it takes through a process of divide and conquer that enables delegation and specialisation. Great plans bring clarity and focus to our endeavours and save us lots of time and energy when it comes to implementation. They also help overcome the human tendency for selective memory retention.
  • Planning is invaluable because it initiates and sustains a process of adapting through organisation learning. When done effectively, it enables us to see the future first, to understand it better than our competitors and there respond more appropriately. It causes us to make our assumptions explicit, generate multiple scenarios and consider how we would respond to each of those situations. It opens up novel possibilities and reveals new opportunities. It unleashes more of our creativity and ingenuity, leading to ideas, with the potential to change the world.

Making it happen

Strategic planning is a provocative exercise to engage a team in. Eliciting people’s dreams, aspirations, beliefs and assumptions can lead to passionate debate. Unresolved interpersonal issues can rise to the surface, differences in styles and competing individual agendas can “open a can of worms”.

Suspending current reality and constraints to engage with desired reality and ideal outcomes is not a skill managers have necessarily been trained in nor do they have the opportunity to practice and develop them as a group on a regular basis.

“Good luck in the lion’s den”, I told my colleague – “let me know how you go…”

By Glenn Williams.

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