Strategic planning is a structured approach to anticipating the future and “exploiting the inevitable” . The strategic plan charts a path for both your internal management and competitive actions in key markets or divisions. Application of this process might take the form of a plan to maintain leadership in an important or growing category over the next five years. Strategic planning for start-ups is a process for ensuring that the budget dollars follow the plan rather than vice versa. (Paris, 2003) For start-ups, planning is not just following their business plan for growth and expansion. The strategic plan often guides retrenchment and reallocation since many external factors shift and market conditions change when competitors make investments, innovation or strategic moves.
Strategic plans make the case for resource allocation in an environment of scarcity. The strategic planning process helps your venture determine which products or programs are exemplary or offer the greatest opportunity. Ultimately, strategy is about differentiation . Differentiating your product mix is critical. However it is a more difficult task than most companies believe since they are modeled after top national or regional competitors. Ironically, most marketing material could be used by direct competitors by simply changing out the logo, colors, and tagline. Companies who do not strategically plan, fall into the trap of simply following the leader’s well-known program.
Two well-known models in use for strategic planning have their roots from the Harvard Business School. The analysis of strengths, weaknesses, opportunities and threats (SWOT) was a popular Harvard model from the early 1980’s and Michael Porter’s Five Forces is another model by which institutions can analyze their market position. The Five Forces model goes beyond the typical Strengths, Weaknesses, Opportunities and Threats analysis. It forces institutions to predict or explore substitutes for their product or service. Porter’s thesis with Five Forces is that the level of competitive rivalry is paramount to how to best strategically plan.
With the Michael Porter’s Five Forces model, outside influences such as buyer’s power (in higher education it might be student options/choice to obtain an MBA instead of continuing to be underemployed), are considered along with other key questions not included in a SWOT analysis. Porter, from the Harvard Business School, first developed the Five Forces Theory as part of his strategy treatise, “The Competitive Advantages of Nations (1986). Porter’s Five Forces theory provided an alternative framework to analyze markets beyond the strengths, weaknesses, opportunities and threats paradigm.
Since there are so many competing theories on strategy and competitive analysis many entrepreneurs legitimately ask if this analysis is applicable to their specific market. Questions such as: “Why use business analysis tools if we already have a strategic plan or few competitors? Or What tools are essential for my challenges?” . It takes time, skill, and practice to use business tools like SWOT, Five Forces, Blue Ocean, BSG Product Mix, Value Chain for competitive analysis. It requires agonizing discussions on priorities, and creates potential winners and losers in your current product mix. Despite that, there were few entrepreneurs that did not at least acknowledge the value of managing their venture with employees that can analyze their data, market, and use these business tools.
It is one reason I am here at Monmouth College. To help would be entrepreneurs apply these tools.
It may seem strange to even mention the blue ocean while seated in the middle of the great American Midwest. But one lens by which an entrepreneur can look for new opportunities and find strategic advantages is to do frequent analysis and mystery shopping yourself for your products and your competitors. Additionally, some self introspection would not hurt either. Who are your ideal customers? Other than your own venture, what competitors are knocking on the same doors for business?
Your small company can view itself through an analysis process developed in 1981 at the Harvard Business School called strengths, weaknesses, opportunities, and threat analysis ( or SWOT).
Another helpful model is the Blue Ocean Strategy. The Blue Ocean marketplace is a relatively new marketing strategy (Kim 2005). Blue Ocean is a “marketplace focused strategy” that is created by identifying an un-served set of prospects or customers, then delivering them a compelling, new value proposition. Blue Ocean Strategy was first published in 2005 by researchers W. Chan Kim and Renée Mauborgne at The INSEAD Business School in Paris, France. The authors believe the high growth and revenues for a venture are generated by creating new demand in an uncontested market space, or a “Blue Ocean”, rather than by competing head-to-head with in the same market with known customers. Red Ocean is markets were all major competitors discount or compete by cut-throat tactics. (Mauborgne, 2005)
Looking for new, untapped markets for customers is analgous taking a dip in the blue ocean. The waves may be scary, but the ride can be worthwhile. I highly recommend trying it.