Most strategic plans look about 3 to 5 years into the future. Planning farther ahead than five years can be problematic. But the pressure on CEOs and boards of directors to achieve near-term results -- especially quarterly -- can put long-term strategic management at risk, unless a strategic plan has near- and mid-term benchmarks that verify progress.
Although the result of strategic planning is usually a specific document, understanding the process and processes that led to that document is essential for developing a successful strategic plan.
Strategic planning begins with key decision-makers in an organization agreeing to determine where the business is now and to articulate where they want the business to be in three to five years. This requires extensive analysis of customers and competition. On the basis of the analysis, planners decide which strategies are most likely to bring the present company to its desired future.
Once the plan has been decided, the details of implementing that plan need to be worked out. This is the point in strategic planning where many companies begin to fail. The plan must include its management and implementation, which, in turn, requires adequate resource management and funding. It's vital that the plan clearly describes its objectives and the time-frame for achievement. Clear and abundant bench marking keeps attention on the plan and allows management to assess its success and -- where needed -- to revise the plan.
How far into the future a strategic plan goes depends on a number of variables. With larger companies where more extensive data makes long range planning more dependable, reaching out as far as 25 years, although unusually long, may be effective. In general, however, most strategic plans look forward from three to five years.
In some instances, where the economy and the specific industry are turbulent, even a three-year plan may not be practical. In these instances, setting up a 12-month plan with built-in policy-revision meetings every three to six months may be a better way to go.
If a company has a three- to five-year plan, this longer term plan should have sequences of shorter term plans within it. Once the long-term goal is defined, management needs to define the steps necessary to achieve it. Each of these steps is an instance of a shorter term plan.
Each of these intermediate steps has its own objectives and each of these objectives should be bench marked. If, for example, the long-term goal is the saturation of a particular market with a specific product and currently the company has about 20 percent penetration in that market, there might be interim annual or semi-annual goals with incremental market penetration increases. Each of these interim plans should include one or more benchmarks. For this particular company, their earlier record of expansion in a similar market might provide data to determine if in the current instance they are on schedule. In general, the more interim evaluation of the plan, the better the outcome is likely to be.
● One potential problem for any public company is the pressure for short-term results. Sometimes the concentration on short-term results can be harmful and the best long term plan for the company may require low profits or actual losses in earlier stages of the plan. To make a long-term strategic plan work, there needs to be agreement on the need for near-term profits, and this agreement needs to be conveyed to stockholders in a way that gets them to buy in.
● In 1998, Jeff Bezos warned shareholders in his new company, Amazon, that near-term profit was not his goal. The company was unprofitable in most quarters for nearly fifteen years. In 2018, however, and largely thanks to Bezos' strategy, Amazon has become very profitable with net sales in 2017 of $178 billion.