A strategic plan is an essential management process and tool. It significantly contributes to organizing the thinking and actions required to ensure a valued and profitable use of resources sufficient to sustain and enhance the profitability and continued existence of the business or organization.
Every organization is a voluntary association of individuals who have come together to pursue a common goal and purpose. As such, every organization should have a defined purpose to guide and coordinate its work in relation to its purpose and goals, and a plan to get there.
Together, the components of the strategic plan define, articulate, and communicate the purpose, values, priorities, and actions of an organization in the form of a roadmap for profitable or beneficial action.
The purpose of an organization and its behavior in pursuing that purpose must relate to the needs and values of people because it is people who decide whether or not they value the output of the work of the organization and will pay for what is offered. Values exist as desires of the people who act to attain and keep them and are only relevant with regards to human purposes.
Some organizations are formed and exist only to serve the narrow interests of their members, as with clubs of various types. Other organizations are more broadly based, having been created to serve the interests of individuals beyond the boundaries of the organization itself and amongst the general public. They need to be customer centered. This is the case with regards to organizations participating in the commercial, government, and social sectors.
In some manner these organizations are formed to engage in work that customers value because customers perceive that what they are acquiring solves a problem or provides a solution that makes their lives better as compared to the available alternatives. Only the customer determines whether the offering has perceived value and meets their expectations, not the seller.
Working towards the goal of meeting customer expectations by engaging in customer-centered innovation in order to improve the lives of customers or constituents and what they perceive to be to their own benefit, is the underlying purpose of every legitimate organization in a free-market-oriented democratic society. It is important to remember that it is the customer, not the business, who determines whether the product or service offering and delivery is positive or negative.
Freedom of exchange in the service of amplifying values sought by both parties of the exchange (the organization and its customers) is the mechanism through which a business obtains the ability to remain viable and earns the profit and goodwill necessary to enable its continued existence.
Embedded in the purpose of business organizations (as distinct from the government and social sector) is the necessity to avoid losses and earn profits at a level that justifies ongoing entrepreneurial effort and investment (internal or external). Organizations that are not earning a profit must operate within their acquired financial and resource budgets and make a positive social contribution to remain viable.
At the risk of over-generalizing, an organization—profit-oriented or otherwise—that is not perceived as creating value by the people it is trying to serve, is seen by those intended customers as having insufficient value-enhancing purpose relative to the available alternatives. Their efforts may even be seen by their desired customers as destroying value and creating losses by interfering in the lives of individuals in ways that prevent or prohibit or increase the cost of pursuing or creating solutions deemed to be more profitable and preferable to what is being offered or imposed. Such instances are wasteful of resources (including the brain power required to operate the organization and bring products to market) that could be better used elsewhere in the economy for more productive purposes.
The survival of your organization requires the approval of the people who are or will be customers and must take into account their desires and deliver what they perceive to be valuable in order to win their business (contribution to profit) over other alternatives available to them. As Peter Drucker once famously said, “’Quality’ in a service or product is not what you put into it. It is what the client or customer gets out of it and is willing to pay for. … Customers pay only for what is of use to them and gives them value.” (Drucker, Innovation and Entrepreneurship, 1985, P. 228).
The same mechanism is at play for employees, suppliers, and others. The secret to success is the co-creation between producer and consumer of reciprocated value.
It should now be clear why the need for a strategic plan should be seen as requisite and uncontroversial. It is necessary because it is consistent with the facts and logic of human action: that humans act with a purpose. Strategic planning helps to make clear that purpose in the context of an organization by following the ongoing cycle of identifying goals, creating plans, taking action, assessing outcomes, reframing the situation, and taking further action if required.
In this way, strategic planning and purposeful plan implementation provides a systematic way of thinking about and addressing complex problems faced by organizations in their struggle to produce solutions that customers value and pay for to advance the organization’s survival.
© 2021, Barry L. Linetsky
Barry Linetsky is has been helping executives and owners define and align their business purpose with customer values since 1994. Barry is the author of the acclaimed book The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press), and an Honorary Disney History Institute Historian. His two most recent books, Understanding and Creating Vision and Mission Statements and Understanding and Creating Strategic Performance Indicators and Business Scenarios are both available from amazon. Barry’s thought-leadership articles have been published by Ivey Business Journal, Rotman Magazine, Mises Wire, and the Economist Intelligence Unit in conjunction with Harvard Business School. In addition to being a business strategy enabler, Barry is also a writer, researcher, analyst, photographer, and songwriter. Read his blog and learn more at barrylinetsky.com. Follow him on Twitter @BizPhilosopher.