If actions such as implementing corrective and evolutionary measures, adapting product and service portfolios, ensuring proper market positioning, defending a company against the competition, exploring potential business opportunities, establishing strategic partnerships and improving business processes, among so many others, are difficult to carry out with proper planning, without it they may demand huge efforts and massive investments. Or they may simply not be feasible.
Every company has short-, medium- and long-term needs that require different measures. Some of these measures can be swiftly adopted while others, though urgent, may demand more time to be executed. This is one of the reasons why strategic planning is as important for software companies as for all others: future needs must be identified in the present so that time-consuming measures may be initiated earlier. Simply put, if something is needed in two years and it will take two years to achieve, actions should start now.
Strategic planning, however, is more than projecting actions on a calendar. In reality, this is just a small part of the process. Strategic planning is a moment of systematic analyses about a company’s business—its trajectory and current situation, strengths and weaknesses, current context of its market, existing opportunities and threats, alternative paths for expansion, benefits and risks of investments or disinvestment, systematic limiting factors of business processes and, finally, desires and objectives of its shareholders. These systematic analyses will reveal aspects that people generally do not identify during their suffocating daily routines. These aspects are unidentified or underestimated risks, unmapped or underevaluated opportunities, unfruitful businesses that are not interrupted, unnecessary expenses that are not eliminated, investments not made at the proper time, unanticipated moves from the competition or unmonitored changes in consumer habits. They are aspects which must be analyzed and proactively addressed in order to grant a company sustainable growth, if not its very survival.
Results obtained from these analyses, supported by unbiased evaluation of market data, provide two objective pictures. The first is the image of the company itself and its current context. The second is its rational projection into the future market environment. These pictures supply the two necessary points for drawing a path—the starting point and the desired destination. All that remains is to identify the steps necessary to get from one to the other.
Establishing a pathway based on a defined destination and mapping alternative routes, with their pros and cons, is a practical and rational task. This pathway will then be translated into actionable items—from an eventual repositioning of product lines, or of the company’s entire business, through operational matters relevant to the business in the short, medium and long term.
Just as in every journey, there will be mishaps, detours, delays and even unplanned help . Yet even though the benefits of planning a simple vacation, for example, or preparing for a child’s education are clear to most people, it is surprising to observe the numbers of executives and companies who insist on conducting their business without proper planning, which transforms this journey in a real “adventure.”
Fortunately, many companies, small and large, are aware of the importance and benefits of methodical strategic planning. They address their plans regularly by means of internally developed methods or with the help of external consultants. However, the second variable of this equation has been equally or even more neglected than planning itself—execution. After all, positive results are the fruit of good planning and proper execution.
Recent studies show that two thirds of the companies that go through strategic planning do not execute what is planned. Although it is unfair to say they waste their money and time—for time spent in focused analysis certainly increases the understanding of the interrelations of the analyzed aspects of business and the alignment of the management team, to say the least—the greater benefits, the results achievable only with proper execution, are not reached.
Methodologies for strategic planning must clearly cover more than what typical analysis workshops cover. They should comprise five essential activities: the first refers to the orientation of those who will participate in the process, informing them what will be done and how it will be conducted, besides how they should prepare and schedule for the planning process. The second activity covers preparation for the planning workshop by gathering and mapping the information to be utilized in the upcoming analyses. The third involves workshops (one or more) with the participation of the company’s executives and key players and help from a moderator. The fourth activity, which is continuous, addresses the execution of the strategic plan—the project management for implementing the identified and prioritized measures, the levers for the forecasted results. Without these measures, plans will be nothing but well-prepared, filed documents. The final and fifth activity is the periodic follow-up to adjust the plans to new realities. After all, strategic plans should be living, dynamic documents to guide the orchestration of the entire company’s actions while maintaining the flexibility necessary for fast responses to the market, thus assuring that the company does not grow stiff.
Other benefits of strategic planning worth considering include the correct sequencing of actions and measures, thus avoiding rework and losses while promoting synergies; the anticipation of needs for investment, which extends time and improves conditions for negotiation; improvement in the cost-benefit ratios in activities like recruiting and training; the preparation of political and financial environments that promote credibility, thus supporting actions that would otherwise be impossible; the development of better suppliers and materials at lower costs; and the preparation and development of partnerships, among many other possibilities that become accessible since the company now has time playing in its favor.
Often companies do not conduct an annual strategic planning due to a supposed time constraint. Other times it is due to a busy fourth quarter of the year, leaving planning for the beginning of the next fiscal year. Also, many small companies believe strategic planning is a process reserved only for larger organizations. It is important that companies understand that planning is not a “time consumer” but a “time provider,” for it greatly reduces the time usually taken for business endeavors. Similarly, companies should understand that strategic planning is not attached to calendar months but to the need to analyze business and orchestrate actions for the strengthening and growth of the company—because the market and the competition are active every day. Finally, small companies should realize that they, as much as the big corporations, will need to analyze the business environment in which they are playing and draw up their maps so that they can drive faster in an increasingly agile and complex market.
Strategic planning is not a ritual. It is a management process that must be carried out methodically and systematically and started at the moment of greatest need: when there is no strategic and tactical plan for conducting business. Software companies of all sizes should identify today the requirements and opportunities their business will face within one, two or five years and initiate the implementation of the necessary measures in advance, in the proper time. If they do not, they will risk meeting the future just as they are today—if their competitors allow them.
Ernani Ferrari is the chief consultant of the Boston-based firm Mondo Strategies (www.mondostrategies.com) and specializes in business performance in the software industry. He serves many small, medium and large companies (such as Microsoft, IBM and Wolters Kluwer), is a frequent international speaker (PMI, AMCHAM, SQE, IBM, etc.) and is the author of several articles and other publications for this market.
Software metrics and performance indicators are more than simple mathematical and statistical elements. They are also elements of psychological and behavioral impact on people and organizations ...
Updating software applications to a new technological paradigm, as were graphical user interfaces or the use of the Internet, is an intense and many ti...