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The Strategic Management Process

by Tom Wright, on Oct 30, 2019 6:12:00 PM

Strategic management refers to how organizations define the business outcomes that they want to achieve, and then how they will utilize their resources to achieve those outcomes. Strategic management covers strategic planning, implementation and strategy iteration.

To make strategic management tangible, it's helpful to apply a structured strategic management process. This process describes the steps, in order, that an organization should perform to figure out where they want to get to, how they're going to get there and whether or not they're succeeding.

BONUS: You can download this entire process as an eBook for your reference for FREE!

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This is a comprehensive guide to strategic management, so to make things easier to navigate, here's a table of contents for everything we're going to cover.

  • Why is Strategic Management Important?
  • What is a Strategic Management Process?
    • 1: The Plan Phase of Strategic Management
      • 1.1: Goal Setting
        • Vision Statement
        • Focus Areas
        • Corporate Level Strategic Objectives
      • 1.2: Understanding Your Environment
        • Internal Strategic Analysis
        • External Strategic Analysis
        • SWOT Analysis
      • 1.3: Strategy Formulation
        • Business Level Strategic Objectives
        • Projects
        • KPIs

    • 2: The Manage Phase of Strategic Management
      • 2.1: Strategic Governance
        • Meeting Structures
        • Strategy Reporting
      • 2.2: Strategic Communication
      • 2.3: Performance Management
      • 2.4: Common Pitfalls of Strategic Implementation

    • 3: The Track Phase of Strategic Management
      • 3.1: Strategic Analysis
        • Implementing KPIs
        • Automating Reporting
        • Implementing a Strategy Tracking Tool
        • Applying Strategic Frameworks
      • 3.2: Iterating Strategy
  • The Final Word: Strategic Management = Culture

Image-Strategic-plannnig-process

Why is Strategic Management Important?

There's an old Japanese saying that I like, which to me sums up pretty succinctly why strategic management is important:

When you’re dying of thirst, it's too late to start thinking about digging a well.

Not the cheeriest of proverbs, but it makes a solid point, I think you'll agree. More specifically, strategic management is important because it:

  1. Increases the speed of your decision making at a tactical level
    Having strategic direction means that you can make tactical decisions much more quickly. Understanding the ultimate outcomes of your organization helps you to prioritize your tactics based on their effect upon those outcomes.
  2. Improves employee engagement
    Having a commonly understood and well respected set of goals, as well a clear plan of how to get there, is far more motivating for employees than simply showing up and working for the sake of it.
  3. Makes hiring decisions easier
    When you know what you want, it's much easier to figure out what capability gaps you have. That makes the hiring process far easier and reduces the number of poor hires.
  4. Creates interest in your organization
    Having a strategic plan makes it easier for outside parties (such as potential investors) to understand and get interested in what you're doing. That makes your life much easier when you need access to the services those parties provide.

There are tons of other benefits to strategic management, but those four are for me the biggest that go beyond the basic 'it makes you better at what you do' benefit that we all know about.

What is a Strategic Management Process?

A strategic management process is a documented set of steps that you'll go through to turn the 'concept' of strategic management into reality for your organization.

We mentioned above that the main elements of a typical strategic management process include strategic planning followed by implementation, and finally strategic tracking and iteration.

To simplify the strategic management process further, we like to think of it as follows:

Plan >> Manage >> Track.

The Strategic Management Process Cascade Strategy

Let's dive into those three elements of the strategic management process in more detail.

1: The Plan Phase of the Strategic Management Process

The first part of the strategic management process involves figuring out what you want to accomplish, and how you're going to get there. The Plan phase can be further broken down into the following subsections:

setting-goals-Strategic-plannnig-process

1.1: Goal Setting

Goal setting encompasses the process of defining your high-level goals. It's distinct from strategy formulation which is where you'll come up with tactics, which we'll cover a little later on. Goal setting has three main elements:

A Vision Statement

It all starts with a vision. The organizations who are the most successful are those who are able to clearly articulate what they're trying to achieve. They'll also stand almost dogmatically behind that vision throughout everything they do. Briefly, the main reasons why defining your vision is so critical for the strategic management process are:

  • It gets all parties on the same page about what the organization is ultimately trying to achieve.

  • It helps to create an identity around your brand, product, people and customers.

  • It serves as the anchor-point against which to 'sense check' your actual deliverables when you get to the strategy formulation stage (1.3).

There is a reason why defining your vision is the first thing you should do in your strategic management process. Every single step that follows should flow back to delivery of this vision. Your vision is what's going to keep you honest and consistent as you move through the strategic management journey.

Focus Areas

Focus Areas should take your vision, and break it down into (usually) 3 to 5 areas of focus that should in theory get you to your vision. For example, your vision might be to "Put a computer on every desk in the world" (Microsoft, in the 1980s) - and your corresponding Focus Areas might be:

  • An intuitive user experience
  • Affordability
  • Customer experience

Focus Areas are the first step on your path to turning your vision statement into reality.

Set Corporate Level Strategic Objectives

Finally, you'll want to conclude your goal setting by creating corporate level strategic objectives. Specifically, we're talking about Strategic Objectives that will sit underneath each of your Focus Areas and provide strong direction for the actual strategy formulation which will happen at a business unit level (e.g. you have different businesses under an umbrella company E.g. Virgin) and functional level (i.e. individual functions or departments within a business E.g. Marketing).

Corporate level strategic objectives should begin to add some actual outcomes to your strategic plan rather than just areas you want to focus. 

SCAN-YOUR-ENVIRONMENT

1.2 Understand your environment

Now that you've got a high level vision for your organization, it's time for a quick reality check. You need to make sure that you have the capabilities to actually execute on that vision. You also need to make sure that your vision is one that is compatible with the external realities of the world.

Internal Strategic Analysis

Let's start by looking inward, at our own capabilities. We do this by performing an internal strategic analysis. Ask yourself questions such as:

Do we have the necessary people and skill set to deliver against our goals?

Do we need or have the necessary capital to fund our ambitions?

There are a range of tools that you can use to perform an effective internal analysis - but the key is to be brutally honest about your own capabilities so that you can either solve your deficiencies or adjust your goals accordingly.

External Strategic Analysis

Moving on to the external strategic analysis side of things, here we need to turn our gaze outside of the organization to things like:

  • The macro-economic environment
  • Our competitors
  • Regulations and compliance
  • Customer trends
  • Market trends

In other words, we need to consider factors which are potentially outside of our control and how they will affect the viability of our goals.

SWOT Analysis

One of the most famous ways of doing both internal and external strategic analyses, is through a SWOT Analysis. This technique forces you to go through an exercise which considers:

Strengths: What are you good at? What skills do you have as an organization? You should be looking to amplify these skills throughout your strategic management process.

Weaknesses: What aren't you good at? Why have you failed in the past? You should be looking either to solve for these weaknesses or worst-case, avoid situations where they could hurt you.

Opportunities: What are the unique opportunities that you can exploit in the market? Which of the strengths that you've outlined give you an edge and how will you utilize them? You should be looking to rapidly capitalize on these types of opportunities.

Threats: What aspects are there in your environment that could hurt your ability to exploit opportunities? Are there are any macro or micro economic issues that you need to be aware of? You should be looking to mitigate for these threats wherever possible.

Generally speaking - understanding your strengths and weaknesses are internal strategic analysis exercises. Understanding your opportunities and threats involves looking outside of your organization - at things like the economic and political climate, competitors, market dynamics, etc.

Understanding your environment (internally and externally) is another critical prerequisite to strategy formulation. It might even cause you to revisit your vision to ensure that it's realistically achievable. Either way, understanding your environment is a critical component to the strategic management process.

startegy-formulation

1.3 Strategy formulation

Once you have a clear set of goals including a vision, as well as a good understanding of your environment, you're ready to move onto strategy formulation. This is where you craft a detailed plan about how you're actually going to achieve your goals.

The strategy formulation process is a huge topic in itself, and I strongly encourage you to check out our How To Write A Strategic Plan Guide on the topic to learn more. Typically the strategy formulation process will consist of:

Strategic Objectives

Note that we already started to write strategic objectives at a corporate level as part of goal setting (see above) - but you need to now repeat this at a business level and a functional level throughout your organization.

Specifically, that means that each of your business units should look at the Objectives that were written at a corporate level, and then craft their own set of corresponding Objectives that they will strive towards within their business unit.

Note that 'business unit' will mean something slightly different depending on the size of your organization. Large corporations may define business units at a product level, whilst medium-sized organizations might define them as departments such as 'marketing'.

Projects

Think of 'Projects' as the specific things that you will do to deliver against your Objectives. Projects should be extremely specific deliverables, with deadlines and a series of tasks underneath them that are tangible and assigned to individuals for maximum accountability.

Some strategic plans use alternatives words to describe Projects such as 'Actions' or 'Initiatives' - that's fine, so long as they're specific and have clearly defined implementations!

KPIs

The last key component of strategy formulation is a strong set of KPIs for each of your Objectives. KPIs are there to help you measure whether or not you're achieving your Objectives. 

Ideally, your strategy formulation should incorporate two different kinds of KPIs:

  • Leading KPIs - These are early indicators that your Objective is likely to be reached.

  • Lagging KPIs - These are definitive measures of whether or not you've reached your Objective, and can only be measured after you've finished implementing a good number of your contributing Projects.

By the end of the strategy formulation phase, you should have a clear and specific strategic plan covering at least the next 3 years of activity (if not longer) for your organization.

BONUS: You can download this entire process as an eBook for your reference for FREE!

Download Your FREE Strategic Management Process eBook!  Grab the strategic management process for FREE now in PDF form so that you can  reference it when you need to! DOWNLOAD EBOOK

2: The Manage Phase of the Strategic Management Process

Now that you have a plan, it's time to start the hard work of strategy implementation. This is a huge topic in its own right, but we've briefly summarized the key elements of an effective strategy implementation process below:

governance

2.1 Strategic governance

Governance is a bit of a cold word - I sometimes prefer the term 'strategic rhythm' - but the core concept remains the same. In terms of the strategy implementation process, governance refers to the following:

  • How often you will meet to discuss the strategy.
  • What format those discussions will take, and supported by what reports.
  • Who will be involved in those discussions.
  • What information do you need to capture as part of managing the goals in your plan to make the governance process effective.
Meeting Structures

One of the most important things that you need to do when setting up an effective strategy implementation process, is to determine how 'the strategy' will integrate with the existing structures in your business. 'Meetings' are a manifestation of those structures, so it's useful to ask yourself the following questions:

  • How often you will meet to discuss the strategy.
  • What format those discussions will take, and supported by what reports.
  • Who will be involved in those discussions.
  • What information do you need to capture as part of managing the goals in your plan to make the governance process effective.
Strategy Reporting

So now you've decided when you're going to meet to discuss the strategy, the next question is what reporting tools will you use (and specifically what kind of Strategy Snapshots or Dashboards will you use).

You'll want to match your strategic reporting against the meeting structures that you outlined previously. For example:

Your quarterly board meeting might involve the use of a high level 'Board Dashboard' [see example]. Whilst your weekly team meeting might require a much more detailed 'Project Dashboard [see example] approach.

2.2 Strategic communication

Strictly speaking, you'll also want to consider the communication of your strategy as part of strategy formulation. But people often forget that communication is just as important to strategy implementation as it is to formulation.

At a minimum, you'll want your strategic communication to include:

  • An initial deep-dive into the new strategy for your entire organization.

  • Quarterly all-hands updates on the progress of your corporate level strategy.

  • An annual review with all employees to talk about any changes to the strategy as you perform your strategy iteration (see below).

Be sure to check out our article on how to get strategic communication right - it's packed with tips to help you perfect this tricky part of the strategy implementation process.

2.3 Performance management

Performance management is a critical part of the strategy implementation process, as it performs a 'hard linkage' between the strategy and people's individual goals and corresponding remuneration.

The bottom-line is that the goals which people are measured against as part of their formal reviews, should match up pretty tightly to the strategic plan of their function or business unit. Which in turn should create a link between their goals and the overall corporate level strategic plan. You'll likely want to invest in a software tool that allows you to do this easily, as managing performance management against strategy at scale can be quite a challenge.

OK, so how do you go about actually delivering on the ambitious plan that you've created? There is of course no easy answer to that question, but there are a few things you can do that will make a huge difference to your success.

Ideally this should have been covered as the final part of creating your strategic plan, but it's so important that I'm going to repeat it here. The biggest bane of any strategic management process is a lack of accountability. This is the situation where people throughout the organization all seem to generally agree with the strategic plan, but no-one really changes anything about their behaviors to make it happen.

2.4 Common pitfalls of the strategy implementation process

Strategy implementation is hard, and is the reason why many strategies fail to materialize. To help, we've compiled some of the more common pitfalls we see in the strategy implementation process:

  • Lack of Accountability
    The lack of a single named individual for ownership of goals, projects and KPIs. Teamwork is awesome, but by naming one clear 'Goal Owner' you avoid any confusion about who ultimately is responsible for delivering the different aspects of your strategic plan.

  • Poor Reporting
    Inconsistent reporting structures and processes. You need to implement regular meetings throughout the organization that focus specifically on the outcomes of the strategy. This includes reviewing the KPIs and project statuses regularly and in a consistent format throughout every level of the business.

  • Poor Data
    The lack of easy data availability. This is really more of an excuse than an issue in most cases, but nevertheless should be addressed. You need to give people a set of tools where they can access the KPI data (both lead and lag) that has been created to measure the success of the strategy.

  • Misalignment of Reward to Strategic Success
    Linking reward to strategic success. How many times have you been at an organization where the 'end of year review process' involves a box-ticking exercise against a list of goals that you created in some HR system, simply because you were told by your boss that you had to? There needs to be a clear linkage between the success of the organization's strategy and the reward and recognition given to employees.

By tackling the four common pitfalls above, you'll be going a long way towards ensuring the success of your strategy implementation.

3: The Track Phase of the Strategic Management Process

Let's fast-forward into the future. 3 years down the road, you've been implementing your strategy for a while now, and you're finally ready to start tracking, analyzing and potentially iterating it...

...which is 100% the wrong way to go about this part of the strategic management process. 😜

Tracking your strategy needs to start on the same day the implementation does. Not only that, but you need to have considered the mechanisms for how you'll be tracking your strategy as far back as phase 1! More specifically, you should already have a clear set of KPIs for each of your Strategic Objectives. Let's dive in...

3.1 Strategic Analysis

To be able to efficiently analyze the progress of your strategic plan, you need to do a number of things:

Implement KPIs

We've mentioned this a couple of times, and that's because it's absolutely critical. As part of your strategy formulation, you need to ensure that each of your Strategic Objectives

has at least 1 KPI against it. This will tell you whether or not you're making progress against that part of your strategy. More specifically, you need to ensure that you have at least one lagging KPI for each Strategic Objective, mostly likely supported by a number of leading KPIs alongside. If you're not 100% clear about the difference between leading and lagging KPIs, check out this article which we wrote recently on that very topic.

Automate Reporting

Once you've got your KPIs in place, it's time to do whatever it takes to automate reporting against them. That means setting up live integrations between the data source (e.g. your CRM system) and your dashboard / tracking tool of choice (e.g. Cascade). Automating reporting against your KPIs is a critical part of the strategic management process as it forces your organization to be accountable for the results of your strategic efforts, and removes the 'king of excuses' around the lack of availability of data.

Implement a Strategy Tracking Tool

Whilst on the subject of tools, you should consider implementing a platform that makes tracking of your strategy very easy. That tool should integrate seamlessly with your data sources and be available for as many people in the organization as possible to access. This is a #ShamelessPlug, but this is the very reason we built our own platform, Cascade - and I can hand-on-heart say that without Cascade, we wouldn't have been able to grow our business as rapidly as we have done. There are other tools out there which can deliver the same thing, so whatever you do, don't miss out on this critical step.

Apply Different Strategic Frameworks

Strategic frameworks such as the Balanced Scorecard and McKinsey's Strategic Horizons can add value to your strategic management process in many different ways - both in terms of strategy formulation, execution and analysis. When it comes to analysis, it's a great idea to overlay a tool such as McKinsey's Strategic Horizons to your plan, to ensure that you have a healthy mix of short, medium and long-term goals in your strategy (and that you're delivering successfully on each of them).

Of course, analyzing your strategic success if one thing, but actually doing something about any shortcomings is the real key to success, and that's where the final stage of our strategic management process kicks in.

3.2 Iterate the strategy

Right at the top of the page, you may remember that we had a graphic of the Plan > Manage > Track process that was actually a wheel. The reason why is simple: because the strategic management process is never-ending. It's a culture which defines your organization, rather than something which you do once and move on from. That means constant iteration, constant test-and-learn and constant frank assessments. Assessments of your strategy should include what has gone well, what has not - and what needs to be changed.

Remember those regular strategy meetings that you set up in stage 2.1? They're the perfect opportunity to make tweaks to elements of your plan that aren't working out the way you'd hoped. That doesn't mean making huge changes to your strategy every month. That would be a disaster and would seriously hurt the credibility of your strategic management process. Rather this is about making small micro-adjustments to keep your plan realistic and relevant. Tweaking a KPI here, adding a new project there, etc. We wrote an article around how exactly to iterate on your strategic plan - so check that out for more information on this stage.

Hopefully, you've found this guide to the strategic management process useful. If you remember only one thing from this article, it should be that Plan > Manage > Track is the best way to think about strategic management. In fact, it's such a good framework that we built our entire strategy execution software platform around it. When you use Cascade, you'll find the features neatly divided into these three key phases of the strategic management process. If you haven't already given it a try, we have a great 14-day free trial available so that you can see if it fits your needs.

The Final Word: Strategic Management = Culture

Before we close off this article, I want to say a quick word about the overlap between your strategic management process and the culture of your organization.

We all know that having a plan is important. The implementation of a full strategic management process goes much further than the mere formulation of a strategic plan. The true benefits of the process come from the behavioral changes that you'll drive throughout your organization. Behaviors including:

  • Thoughtful, fact-informed planning
  • Collaborative ideation
  • Realistic but ambitious goal-setting
  • Accountability
  • Reflection on the reasons behind successes and failures

To be effective in your implementation of a strategic management process, you also need to commit to certain core values in your organizational culture:

Transparency: You need to be willing to be open with your employees and colleagues. If people feel as though you're only giving them half the story when it comes to the strategy or the results, it's unlikely that they'll fully embrace the new strategic management process.

Empowerment: You'll also need to be willing to trust people to formulate and execute on their own parts of the strategy. Micro-managing every level of the strategic plan is going to be increasingly unworkable as your organization grows.

Collaboration: It sounds obvious, but your strategic management process can only succeed when coupled with a culture of collaboration and sharing. People need to be willing (and also have the tools) to share information efficiently and with clarity.

Hopefully you've found our guide to strategic management and the subsequent strategic management process informative. Let us know in the comments below!

BONUS: You can download this entire process as an eBook for your reference for FREE!

Download Your FREE Strategic Management Process eBook!  Grab the strategic management process for FREE now in PDF form so that you can  reference it when you need to! DOWNLOAD EBOOK

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