Creating a strategic plan is as much of an art form as it is a scientific process. A great strategic plan addresses the fears of organizational members while simultaneously leveraging real-world data to identify a path toward sustained success.
One of the main purposes of a strategic plan is to allow an organization to improve its resiliency to unpredictable market conditions. The often-quoted Murphy’s Law of Combat states that “No battle plan ever survives contact with the enemy.” This old adage holds true in the business world, too, as a well-designed strategic plan can give an organization the flexibility and foresight to pivot when necessary.
In this blog, we’ll explore the key elements of a long-term strategic plan to help you navigate today’s competitive manufacturing landscape.
Element 1: Mission & Vision
Why does your business exist and what is its purpose? What does your company do? Who do you serve and how do you provide this service?
Answering these questions will help you understand and outline your company’s mission and vision. Your mission statement will embody what your company does and what drives it. And, your vision statement will delineate your aspirations for your company. While your mission statement can be condensed down to only one or two sentences, your vision can be more comprehensive. A great vision statement will promote both internal and external growth. It can also help to keep your team focused on their purpose and role within the organization.
Your mission and vision will lay the foundation for the rest of your strategic planning efforts.
Element 2: Goals & Outcomes
The next elements of strategic planning are the goals and desired outcomes. Goals can focus on the big picture and are somewhat abstract in nature. Well-defined but broad desired outcomes and goals will impact later elements of strategic planning, such as setting financial objectives and developing a marketing strategy.
Goals at this level have the following features:
- Broad in nature
- Not necessarily measurable
- Abstract ideas
- Include the desired end result
An example of a strategic goal is, “We want to expand our reach and break into a specific market.” This example includes an objective (expand our reach) and the desired outcome (break into a specific market).
Goal-setting is important to strategic planning because it helps organizational leaders determine where they want to be. In later stages of strategic planning, owners and leaders will have the opportunity to identify tactics for moving towards these goals.
Element 3: Current State & Challenges
Identifying the current state of your industry and the challenges you might face is crucial for effective long-term planning.
A SWOT analysis is one of the most integral components of effective strategic planning because it helps organizational leaders conduct a comprehensive assessment of the company’s internal and external state.
A SWOT will systematically identify:
Generally, strengths and weaknesses are internal to the organization, while opportunities and threats are external.
Organizational strengths can be used to move towards long-term goals and capitalize on emerging opportunities. Conversely, weaknesses represent deficiencies that the organization must improve upon in order to reach its true potential. Not all weaknesses can be eliminated. However, it is important that SMMs are familiar with what these weaknesses are so that they can plan around them.
For instance, a very small manufacturer will never be able to match the production volume capabilities of a larger competitor. However, they can use their strengths, such as organizational agility, in order to tap into a niche market share and remain profitable.
The final two components of a SWOT analysis are opportunities and threats. Opportunities and threats are external factors that help SMMs understand where they stand within their market so that they can better prepare for the challenges they face, as well as identify avenues to grow and gain competitive advantage. An example of an opportunity could be training for a groundbreaking technology. An example of a threat may include an emerging SMM that is offering similar products and services.
Element 4: Customers & Market Dynamics
While the SWOT analysis primarily focuses on a company’s internal environment, the next element of strategic planning addresses external factors. Specifically, SMMs must engage in thorough analysis so that they can better understand market dynamics.
The term “market dynamics” refers to the various external forces that may influence the behaviors of customers and other manufacturers. These factors include elements such as demand for products, prices of raw materials, and supply chain disruptions.
Market dynamics can alter supply and demand curves, as well as influence pricing. There are numerous economic models and theories designed to better understand market dynamics.
Element 5: Competitive Positioning & Strategy
As the name suggests, “competitive positioning” is all about putting the company in a position to be successful. SMMs must find a way to differentiate themselves from similar companies so customers find their offerings valuable.
While competitive positioning is vital for any company, it is particularly important for SMMs, as they have to carve out a place within the crowded marketplace if they hope to thrive.
SMMs must create a general strategy for reaching their desired destination. This strategy can focus on using the previously identified strengths and opportunities in order to achieve long-term goals.
Element 6: Capacity & Resource Development
The term “capacity” refers to the maximum output level that a company can sustain over time in order to provide its products or services.
It does not refer to a company’s short-term output capabilities when using an “all-hands-on-deck” approach. This is an important distinction, as many SMMs will need to call in all available resources to fulfill a major product order from time to time.
While virtually any SMM is capable of boosting its output capabilities, doing so requires team members to work extended hours. Therefore, that output is not sustainable from either a fiscal or human resources perspective.
When engaging in strategic planning, SMMs must determine their sustainable output capacity. They can identify what resources they have available to generate this level of output. These resources include staff, funding, machinery, raw materials, and storage space. During capacity development, SMMs can also determine what resource gaps they must overcome in order to achieve their output goals.
When possible, SMMs should shore up any gaps that might prevent them from reaching their business goals. This may include purchasing new equipment, hiring additional staff, applying for grants, investing in additional materials, or some combination thereof.
Element 7: Tactics & Key Performance Indicators (KPIs)
A company’s strategy is its long-term action plan, while the tactics are the individual steps that will move the company toward its goals and objectives. As it applies to SMMs, tactics are specific actions that the team must take to implement various initiatives identified in the strategy. Tactics are short-term, connected to the strategy, time-sensitive, and actionable.
During strategic planning, SMMs must identify a series of tactics or steps for moving toward their goals. Additionally, they will need to develop a means of benchmarking their progress toward achieving said goals. That is where key performance indicators (KPIs) come into play.
There are countless KPIs that SMMs can measure. However, it is vital that organizational leaders select relevant metrics to monitor their progress. Otherwise, they will become inundated by massive amounts of unhelpful information and gain few insights regarding the company’s progress.
When selecting KPIs, SMMs can focus on metrics that:
- Provide objective evidence of progress
- Offer a means of comparison to gauge performance change over time
- Can track efficiency, profitability, compliance, quality, timeliness, or resource utilization
SMMs will need to select a separate set of KPIs for financial performance, customer satisfaction, and production-related goals.
Future-Proof Your Business With CMTC
At CMTC, we understand that effective strategic planning requires a substantial commitment of time and effort. A strategic plan can help guide your business to success if given the proper attention. However, small and medium-sized manufacturers may not have the resources or bandwidth necessary to engage in effective strategic planning. Fortunately, CMTC can step in and assist. Our expert consultants can help you understand, develop, implement, and monitor every component of your strategic plan.
Whether you’re just exploring questions about strategic planning or need a little more assistance with the step-by-step tactical process, CMTC is here to help. Contact us today!