Let’s take a hypothetical trip back in time to January of 2020. Your house cleaning business revenue has been steadily growing for three years and the forecasting tool in your financial software tells you that you should expect your best year yet. You increase sales goals, plan to invest in new vacuums and vehicles, and hire 20 new employees throughout the year. Through the first month, everything is going according to plan.
Then, on March 11, the World Health Organization declares COVID-19 a global pandemic, much of the world shuts down, and your strategic planning for the year loses all meaning.
Last March, we surveyed more than 300 small business leaders and found that nearly 75% would be altering their strategic plan due to COVID-19, with nearly 20% anticipating “significant” changes (methodology below).
Even in a relatively stable year, the traditional approach to strategic planning—reviewing last year’s results, making incremental adjustments, setting targets, then budgeting, communicating, and executing the new plan—is woefully ill-suited for rapidly evolving markets.
Gartner research has found that executives believe more than half of their time spent in strategic planning is wasted, and the quality of those plans fail to meet expectations.
“Strategic assumptions are often sound when they are first formed, but in today’s environment (they) are more vulnerable to becoming outdated or obsolete due to a rapid increase in the pace of change,” says Matt Shinkman, vice president with Gartner’s Risk and Audit Practice.
While it’s unfair to suggest that any business should’ve been ready for COVID-19, there are strategic planning tools and models that would have been more adaptable when the market was turned on its head.
Let’s take a look at four different approaches that you can use so you’re ready the next time the market takes an unexpected turn.
What are strategic planning tools?
Strategic planning tools are techniques and models that business leaders use to determine where their business is at present, where they want it to be in the future, and which key metrics and initiatives they should track and pursue to achieve that target state.
A few common examples of strategic planning tools include:
- SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis
- OKR (Objectives and Key Results)
- PEST (political, economic, socio-cultural, and technological) analysis
- Balanced scorecard
1. SWOT analysis
How does it work? In SWOT analysis, strategic planning teams brainstorm to come up with several strengths, weaknesses, opportunities, and threats for their business, then list those items in four quadrants.
Teams can then look for connections between the quadrants (especially connections between strengths and opportunities) to inform their strategy.
How can it be adapted for a post COVID-19 market? The great thing about SWOT analysis is that it can be used for annual strategic planning, or everyday decision making. Adapt SWOT analysis to a rapidly evolving market by using it at the individual project level.
For example, say your office cleaning service was considering expanding just before COVID-19. Using SWOT, you could come up with the following assessment:
- Strength: Efficient, established cleaning teams.
- Weakness: Limited client base.
- Opportunity: Expand services to home cleaning.
- Threat: Market is nearly saturated with existing home cleaning services.
In this case, the business could match their strength to the opportunity to expand and leverage their experienced teams to make headway in an already competitive market.
What type of businesses should use this? While SWOT analysis can be adapted for a variety of situations, it is ideally suited for growth businesses that are able to make significant changes to their strategy in order to take advantage of market opportunities. These businesses might include startups and solopreneur operations.
2. Objectives and Key Results
How does it work: Famously used for strategic planning by Google, Microsoft, and Intel, OKRs work by establishing a clearly defined goal (the objective) along with a handful of key results—that is, measurable checkpoints that build toward the target goal.
|Pre-COVID-19 objective: Double the size of business||Post-COVID-19 objective: Increase business size by 150%|
|Key results||Key results|
|Increase revenue by $150k||Increase revenue by $100k|
|Hire 10 new employees||Hire seven new employees|
|Add three high-value clients||Add two new high-value clients|
Ideally, teams should only have about a 70% success rate on key results. If teams are constantly hitting 100%, it likely means that the ultimate goal was not ambitious enough.
How can it be adapted for a post COVID-19 market? One strength of OKRs is that they are highly adjustable. For example, if your goal at the beginning of the year is to double the size of your business, and key results include increasing revenue by $150k, hiring 10 new employees, and adding three new high-value clients, you can scale those numbers to account for the market changes. Say, increasing the size of your business by 150%, increasing revenue by $100k, hiring 7 new employees, and adding two new high-value clients.
What type of businesses should use this? OKRs are a good fit for established, profitable businesses that might need to make incremental adjustments to continue growing without throwing off a successful formula.
3. PEST analysis
How does it work: With PEST (political, economic, socio-cultural, and technological) analysis, strategic planning teams weigh socioeconomic factors into their business forecasting. PEST analysis is also frequently modified to include legal and environmental factors (PESTLE analysis). For PEST analysis to be used effectively, it helps to have representatives on the strategic planning team with a working knowledge of the component factors.
How can it be adapted for a post COVID-19 market? PEST analysis is somewhat complex, due to the breadth and depth of the factors it accounts for.
On one hand, this necessitates an experienced strategic planning team to effectively use PEST analysis. On the other hand, this makes PEST adaptable for changing conditions. Think of each of the factors that make up PEST as levers. When the market changes, you may have to pull one or more of those levers to adjust your planning.
For example, when COVID-19 struck, you likely had to make major adjustments to your economic and political strategic planning, while your socio-cultural and technological levers might have only needed minor tweaks.
What type of businesses should use this? Due to its complexity and the experience required to use PEST analysis effectively, it is best suited for larger, established businesses with sufficient resources.
4. Balanced scorecard
How does it work: Balanced scorecard is a strategic planning model designed to incorporate both financial and non-financial (customer, internal, innovation) measures. Its precise origins aren’t clearly defined, but it was popularized in a 1992 article by Robert Kaplan and David Norton published in the Harvard Business Review.
To use the balanced scorecard, strategic planning teams seek to answer the following four questions:
- How do customers see us?
- What must we excel at?
- Can we continue to improve and create value?
- How do we look to shareholders?
Teams should answer those questions in four quadrants, linking them together where possible (similar to SWOT analysis), then translate those answers into operational strategy, individual performance goals, and business planning.
How can it be adapted for the post COVID-19 market? The balanced scorecard can be adapted for the post COVID-19 market by looking at it through an agile lens, that is by communicating about your strategy, making iterative improvements, and responding to changing needs regularly. For more on incorporating an agile mindset into your strategic planning, read the next section.
What type of businesses should use this? The balanced scorecard is open-ended enough to be used by almost any type of business, including automotive, financial, healthcare, manufacturing, technology, education, and almost anything in between.
If you’d like a more guided approach, we have trained advisors standing by and ready to help you choose the perfect strategic planning software for your business. Best of all, it’s free for you and you can get started right away. Click here to schedule an appointment for a phone call or start a live chat here.
The strategic planning software guide on Software Advice (Source)
When in doubt, try agile strategic planning
What better way to prepare for an unpredictable market than to use agile planning? It’s not enough to just take the principles of agile project management–communication, iteration, responsiveness–and slap them onto your planning process, though. It helps to have a strategy.
Here are a few key points, from our guide on strategic planning for small businesses:
- Ongoing customer interaction. Your customers determine the success of your business, so their needs should always be accounted for in your strategic planning. Identify your customers or end users and account for them in during every cycle of strategic planning. If you have the resources, soliciting customer feedback through surveys is great. But even if you don’t have that capacity, creating a customer persona and building your plan around that persona is a starting point.
- Organizational accountability. If your marketing team is working toward one set of goals while your research and development team is working toward a different set of goals, your ship will fall apart and sink. Having a good strategy isn’t enough, that strategy has to be communicated and collaborated on across teams. Establish cross-functional teams and meet frequently to ensure strategic alignment.
- Situational-specific strategies. Every good plan can benefit from room for improvisation and recalibration. Whatever your plan is at the beginning of the year, it’s helpful to have space built in for strategic readjustments, whether it’s weekly, monthly, or quarterly. Encourage your managers to surface ideas for improvement throughout the year rather than “sticking to the plan.”
The Software Advice COVID-19 Reactions survey was conducted via Amazon Mechanical Turk in March 2020 and involved nearly 1,000 respondents all based in the United States. The number of respondents varied by question. The questions were worded to ensure each respondent fully understood the meaning and topic at hand. The information contained in this article has been obtained from sources believed to be reliable at the time of publication.