The Garrison Report #2005-11

What Is Strategic Planning?

Last month's report focused on why strategic planning will increase your profits. But what is strategic planning? The term is misleading because it is not as much about planning as it about making decisions. In essence, it's about strategic thinking.

So what is strategic thinking? Simple stated, it's the ability to look into the future in order to plan for the long term while still maximizing the performance in the short term. However, this process can't occur in a vacuum; it requires that all conflicts be understood and the solutions involve the cooperation of all stakeholders. Strategic thinking is about looking at the challenges from the vantage point of all stakeholders--not just your own.

In an earlier edition of the Garrison Report, the author reported on a Harvard Business School-funded study that found companies that focus obsessively on meeting the needs of customers, employees and owners while developing leadership throughout the company outperform the competition in revenue, job creation, owner equity growth and profits. In construction the author would go further and add subcontractors to the list of those whose needs must be addressed. The reason is simple: unless all four segments' needs are addressed, the losers are likely to sabotage the process. A win-lose situation is not sustainable over the long haul. Instead, it will eventually turn into a lose-lose situation. Strategic planning is about creating a win-win situation because it's the only plan that is sustainable.

Before the strategic planning process can actually begin, you must first take stock of your business's current situation. In the terms of strategic planning this is your SWOT (strengths, weaknesses, opportunities and threats). The strengths and weaknesses are internal, and the opportunities and threats are external. To best identify your SWOT, it's recommended that you conduct a brainstorming session with your key people.

Unfortunately, too many businesses waste valuable time and resources chasing mistaken opportunities. While it's important for contractors to aggressively seek opportunities, they first need to examine how their company stacks up against that opportunity before leaping. Not every potential opportunity will fit your company's capabilities. Without the necessary strengths to carry it out, that opportunity will remain elusive.

Start the SWOT analysis process by listing all the company strengths, weaknesses, opportunities and threats. Focus on each list one at a time. When making each list, don't limit your thinking by letting yourself get bogged down with analysis. Simply write down whatever comes to mind, even if some of the items will eventually have to be removed. If you toss out suggestions during the listing process, you will tend to inhibit people from making suggestions. Furthermore, brainstorming is a free flow of ideas, so you don't want to slow the process down with analysis. Besides, even irrelevant suggestions often trigger good ideas in others.

Once you have completed the four lists, then you can go back and remove any suggestions that don't fit. Some items may simply be duplicates with slightly different names. By rephrasing others, you may cover two or more items. For example, your opportunity list might contain both office tenant fit-out and retail tenant fit-out. You might decide that tenant fit-out is more appropriate. Other items listed might not be important enough to remain on the list. For instance, 10 years of construction experience is a strength, but your competitors probably have similar experience, giving neither a competitive advantage. Having experience is not a strength, but not having it would definitely be a weakness.

The next round is more challenging because it forces you to look at your company strategically. This is especially true when considering the external elements: opportunities and threats. No analysis would be complete without considering the competition, but you can't ignore political, economic, environmental, legal and technological factors. For example, a local private university announces it plans to build several new dormitories. At first this may look like a great opportunity since you have constructed several high-rise apartments and the necessary skills look transferable. However, you learn that a competitor has constructed all of the university's previous dorms and the university is not required to take public bids. This means unless your company has something significantly unique to offer the university, your competitor has the competitive advantage. Therefore, as difficult as it may be, it's probably prudent to cross this opportunity off the list and focus on better opportunities.

The threats may be the most challenging because they usually can't be ignored. For example, the critical shortage of skilled mechanics is a huge threat. If your company has a significant number of skilled workers who are happy and highly motivated, you have probably minimized the threat. However, if you ignore this threat, you may stop doing the things that minimized the treat for your company and suddenly find your company under siege. Even defused bombs are still potentially dangerous.

Your strengths and weaknesses require a different approach since they are focused on you. There are two approaches to handling weaknesses. The first option is to avoid projects that require strengths in areas where you are weak. The second option is to eliminate the weakness. If you lack superintendents with hospital experience, you can hire experienced superintendents in hospital work.

But maybe the most difficult assessment is that of your strengths. This requires soul searching. In reality, few company strengths actually translate into a competitive advantage. Unless they create an advantage over your competitors, they are merely a ticket to the dance--in essence, a requirement. For example, all baseball players are required to catch, throw and hit, so a player's saying he can perform these requirements doesn't mean much. In comparing two players who are both merely acceptable fielders and hitters for average, there would be little to attract your attention to either. However, if one of those batters hit for power and last year led the league in home runs, this would be a competitive advantage. That player's power is his strength. In business it's no different; if you can't do something significantly different or better than your competition, it's not a strength. Usually companies have only one or two things that give them a true competitive advantage; therefore, to maximize their potential, they must focus on those strengths.

Once you have pared the lists down to the most important, you are prepared to focus on your options. You should take the remaining opportunities one at a time. Under each opportunity you should list all of your strengths that provide you an advantage on that opportunity. Next you should make a list of all the necessary skills and resources--in other words, the requirements to pursue that opportunity successfully. Once you have completed this list, you should determine which skills and resources you already possess. Those that you don't have should be listed under weaknesses. If you have any weaknesses, then you must determine how you might acquire the necessary skills and resources and how difficult it will be. If it would be too difficult to acquire them, then you should probably pass on this opportunity. Finally, you should examine the threats to make sure that none of them will negatively impact this opportunity. If they do, then you must determine if you can eliminate the threat or at least reduce it to an acceptable level.

You should repeat this process for each opportunity on your list. Then you can evaluate which opportunities offer the greatest potential and what's required to pursue them. At this point you are ready to select the best opportunity for your company based on your capabilities, resources and potential. If you have identified one or more opportunities where your company can possess a competitive advantage, you have identified some legitimate opportunities. On the other hand, if you can't identify a realistic opportunity, then you may have identified the reason your company is forced to compete on price and you feel your profits are being squeezed. This means you must work harder to uncover a viable opportunity. This process isn't like playing poker; you can't bluff your way to a winning pot. If you don't have the winning hand, you will usually lose.

Once you have completed the above process, you're ready to actually start the strategic planning process, which includes the development of your vision and mission statements, your objectives, your strategies and your priorities. In next month's issue, the author will explore those steps in greater detail.


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