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An unforeseen economic disruption like COVID-19 causes many business owners to panic. Unless your business is fortunate enough to be considered essential in this crisis, the problems you face likely involve severely stunted demand and significant obstacles to supply. Decisions need to be made quickly to preserve the long-term viability of your enterprise. Making quick decisions during a crisis to make your numbers work for the short-term, however, can have a detrimental impact on your long-term aspirations.
The key to being able to make good short-term decisions is having a well-articulated long-term plan. At Seaman Corporation, we do this by engaging annually in a robust strategic planning process, which I introduced in 1980, after benchmarking the process with accomplished experts. We still follow this planning practice today and I credit it for helping us pull through past significant and unexpected disruptions, including 9/11 and the 2008 financial crisis. In fact, since we put the practice into place, we have enjoyed sustained and consistent profitable growth while remaining in a strong enough financial position that allowed us to make the capital investments needed to support our growing business. I am confident that our leadership team is relying on our strategic plan today to make difficult decisions as they navigate the challenges posed by COVID-19.
The Importance of Process in Building a Strategic Plan
Having a strategic plan is important, but it is not the plan itself that leads to success. It is the process of building a strategic plan that makes an organization successful over time. The process forces senior leaders to evaluate key factors affecting the business. In my business, I have always insisted that strategic planning takes place on an ongoing basis, in our case annually. Engaging in this process every year keeps leaders informed about key factors affecting our business and, in turn, they make sounder decisions about the business if bumps show up throughout the year.
To illustrate how this has played out successfully at Seaman Corporation, I’ll share a story.
In the fall of 2008, we were completing our strategic planning process when the world financial crisis began to unfold. Because we had a planning process, we recognized earlier than many businesses that the macroeconomic conditions around the world were changing and these changes would prevent us from reaching our objectives as planned. We knew from our market studies and disciplined analyses that when we all came out of the financial crisis, the world and our markets would look different. We chose not to panic. We did not make short-term tactical changes, such as implementing 10% cost cuts across the board. Instead, we recognized which of our strategic objectives were still going to be viable and important to our growth after the recession. We made selective cost cuts that enabled us to continue investing in our priority strategic initiatives. As a result, though our first and second quarters were well below our forecast and below the previous year, by the fourth quarter we managed to achieve sales matching the previous year’s volume and we finished the year profitably.
Because we had developed a road map through our strategic planning process, we were able to successfully navigate the challenges of the 2008 financial crisis. The planning process helped us identify the initiatives that would be critical to our long term future growth. It enabled us to choose wisely where to make spending cuts and where to continue to prioritize our investments.
Key Steps to Building a Strategic Plan
Building and maintaining a strategic plan is not a one-day event. It takes good leadership, discipline, and dedication. The following steps can help guide you as you initiate strategic planning in your business:
o Commit time and resources. Pick a time of year that is conducive for a strategic planning process to support your business and make it an annual ritual.
o Separate your strategic planning process from your annual tactical business planning. Keep the strategic planning process creative and focused on broader, long-term goals.
o Make sure you allow for the investment of senior managers’ time. Consider it a key component of their ongoing leadership development.
o Hire an outside resource as a facilitator. A quality outside facilitator can keep the process objective and honest, and elevate the strategic thinking by the team. Pick someone who will not be afraid to ask tough questions.
o Understand the Key Factors Affecting Your Business. Study micro trends and megatrends that affect your industry and stay current on government regulations that impact yours or your customers’ businesses.
o Evaluate Your Customers. Understand your customers’ needs and commit to staying close enough to them to know how, why, and when those needs may change.
o Analyze the Competitive Landscape in Your markets. Evaluate both foreign and domestic players.
o Perform a SWOT analysis on your own business. Always know your own Strengths, Weaknesses, Opportunities, and Threats.
o Plan to be off-site for 1-2 days to execute the planning process. Removing leaders from their operational environment encourages them to disconnect from the daily demands on their time and yields more strategic thinking.
Strategic planning is critical to the long-term sustainability of any organization. By implementing an ongoing planning process, organizations can be more adequately prepared to navigate through unforeseen disruptions, like COVID-19, staying afloat. And, they will always be prepared to respond to the ever-changing, dynamic economy.