Strategy is Theory; Planning is Action

The term strategic planning is really a conflicting statement. Strategy and planning are technically not the same thing. Strategy is the understanding of the playing field a company wishes to play in and how it will succeed on that playing field, while planning is a clear set of goals and actions that are congruent with the strategy. Strategy is meant to create an advantage for long-term success, and planning is more of a short-term set of actions to achieve.

The research into strategic management has moved away from the idea that every business is the same, to a realization that all businesses are unique in their offerings and approach. Strategy involves the theory by which a company decides what playing field they are playing on and how they will achieve their mission in this playing field. Michael Porter is a Harvard professor and a scholar of business strategy and one the leaders of modern strategic management thought.  He contends that there are three generic strategies that lead to a competitive advantage in any industry: cost leadership, differentiation, and focus. When a company is focused on presenting a product as a lowest cost alternative compared to the competition, this is a cost leadership approach. The Dollar Store or IKEA is a great example of this strategy. Next, a differentiation strategy means that the company is offering a truly unique (and often boutique) product or service, and therefore commands a higher price than the competition. Apple is great example of this approach, where they charge more for essentially the same product that Dell sells yet has a proprietary operating system and a keen attention to quality and design. Thirdly, a focused approach means that an organization is focused solely on one type of customer, market or product line and are therefore experts in the area. Service companies who focus on women in business are a great example of this strategy. Additionally, at the core of an organization’s strategy is the business model which generally involve two elements: the unique selling proposition and the pricing strategy.  These can be determined and refined using the USP canvas. An organization with a clear strategy has a clear mission, vision and set of values that informs all that they do. Cameron Herald wrote a book about Vivid Vision, where he talks about maintaining clarity with the whole organization on where it is going. Employees become engaged in the vision and growth of the company which leads to better individual decisions that align with the long-term health of the business.  Whatever strategy an organization employs, it must lead to a sustainable competitive advantage in the chosen marketplace.

Planning, on the other hand, is a process to determine a clear set of goals and actions that will lead to the achievement of those goals. If strategy is the chosen path to follow and the overall objective to pursue, planning is the guidance system or GPS to get you there. Planning is about managing resources available to set a clear set of actions to follow the path. It involves some forethought and prioritization to determine a sequence of actions that will provide the preferred outcome. Plans must also be flexible. Business is always changing and although goals are created to be achieved, they don’t always come to fruition. Therefore, managers and executives must be flexible. Plans must be allowed to change with the changing tides of the marketplace. For instance, no one could have seen COVID coming. The economic effects of the shutdowns and supply chain interruptions have been catastrophic for small businesses. Many have had to change their business model and their plans. Revenue goals had to be thrown out, and operations adjusted to bring in revenue in previously underutilized areas. Restaurants, for instance, focused on a delivery model. It was imperative for their success to adjust their emphasis from in-house dining to delivery and take-out options. Their expectations for revenue had to change, and their plans to achieve revenue were adjusted.

Planning Process

Every successful organization has a strong long-term strategy that leads to competitive advantage. This means that they also have a concise written down mission, vision of the world as it should be and a set of values.  These enterprises also have a clear and regularly scheduled planning process that outlines how they intend to achieve their unique vision. They are distinctive, yet both vitally important aspects to creating a successful business.  Strategy is theory, whereby planning is action.