Business Planning – Understanding the Role of Strategic and Tactical Planning


One of the most important roles of a business leader is to provide clear direction and measurable objectives for their organization. This direction includes creating a future concept of the business to define what it should be. Once the future vision is created the organization will know where they are going and can create a plan to get there. This article will provide insights on how a business can accomplish this objective.

Road to Nowhere

The following simple story portrays the current state of many businesses.  Acting on an urge, a European traveler decided to take his automobile for a drive through a remote part of Germany. During the trip on the winding rural roads he became confused about which route he should take and which villages he needed to pass through. Upon entering a small village he noticed an old man sitting on a park bench and approached him and said, “Sir, I am lost, will you give me directions?”

The old man asked,” Where are you going?”

Revealing his frustration the gentleman replied, “I don’t know.”

Without hesitation the old man responded,” Then any road will take you there.”

Many businesses are like this lost traveler. They are moving along a path in their business without a set destination or overall course of action. Their organization is like a rudderless sailing ship at the mercy of the winds of chance. Their days are filled with constant problem solving and the management team continually jumps from one crisis to another. As business leaders they need to step back and review the situation they have created for themselves. Many of the problems could have been anticipated and prevented if they had only spent more time trying to envision the future of their business.

How then do we create a climate where we can get out of reactionary management and remove the fear of making a decision? The answer is to get mentally in front of the business through initiating better planning procedures. By being engaged in a proactive planning process one can anticipate potential problems and opportunities and create a plan of action for each potential future situation. Informed decisions can then be made and eliminate the need for crisis management.

Two Approaches to Planning

In order to plan better, we must first understand that there are two main types of planning: operational and strategic. Operational planning covers the minute details of directing an organization every day. Most companies engage in operational planning in order to manage their financial performance. In many small and medium-sized organizations, strategic planning, which is the more important of the two, is lacking or non-existent. However, using both in the proper combination can radically improve the success of any organization.

One way to better understand the difference between strategic and operational planning, and the important role of each, is to consider the analogy of an artist painting a landscape. The creative planning process the artist performs is very similar to strategic planning. Before ever touching a brush to canvas the artist plans the sequence of the painting steps needed to complete it. He envisions the shape, the colors used and the mood that he is trying to create. In his mind, he is attempting to visualize the end product. It is a planning and preparation process that will guide him once he begins painting. This analogy is a very accurate description of what happens when business leaders engage in the strategic planning process. They see the future of the business and create an overall action plan to make the future vision a reality.

On the other hand, operational planning relates more to managing the logistical and procedural actions that are performed within the parameters of the strategic plan. In this same analogy, the artist would be functioning within an operational role when he actually started painting the landscape. In this operational capacity, the artist insures he has purchased the right canvas and paint supplies and prepares the proper lighting. As he begins adding colors and texture to the canvas he attempts to “flesh out” the vision he created before. During the painting process he is constantly measuring it against his image of the completed painting. This feedback process compels him to make corrections in color, scale and brushstrokes to make it match his mental picture. Only when the two are the same is he truly satisfied. In this analogy and in a business situation, all the operational efforts are measured against the vision and ongoing adjustments are made to insure the vision becomes reality.

In order to build a case for the importance of using strategic planning, let us consider the same artist not being allowed to be creative. By blocking all inspiration he could only mechanically apply the colors and brushstrokes. In the end, he may end up with a smattering of colors but nothing that he would view as art. It is hard to imagine an artist being satisfied with any work unless it was inspired through some creative process. Unfortunately, many businesses operate in this mode all the time. They suffer from a lack of coherent vision for their organizations and react to whatever situation is placed in front of them. The resulting business direction is shaped by these situations rather than by a conscious planning process and, as can be expected, the businesses often fail to live up to performance expectations.

In summary, strategic planning concentrates on “doing the right thing” or “what business the organization is involved in.” It focuses on the effectiveness of the organization. It answers the question, “Are we in the right game?”  On the other hand operational planning deals with “doing things right” or “how the organization is performing its tasks”. It focuses on the efficiency of the processes. It answers the question, “Are we playing the game right?” They are both very important to the success of an organization but one should not be done without the other. Because the idea of strategic planning may be a new concept to some we will spend the balance of the article giving an overview of how this planning process works.

Strategic Planning

If there is one word that can be used to define strategic planning it is the word “vision”. As a formal definition:

Strategic planning is the analysis of the threats and opportunities facing a business, the process of creating a vision of the company’s desired future position, and identifying actions to bring about the desired outcome.

To put it simply this type of planning understands the environment, creates a new vision, and develops an action plan.

Strategic planning focuses on defining and creating a new future for the organization. It is the process where business leaders look into the long-term future and attempt to understand the internal and external business, political, and legal environments that will face their organization. Once this future concept is defined an action plan is created to make the vision of the future become a reality. After completion, this strategic plan is shared with the organization so that they too will own the vision and make it a part of their daily actions. In general, the strategic planning process consists of the following steps:

Step 1 – Defining the Business:

In this part of the process the business leaders create the future image of the company. This is a statement that defines the essence of the business, its reason for being. This statement can be a set of values or a mission statement. Either one can facilitate this process. To be effective these statements should be short, concise, understandable, and applicable. In other words, if all employees are to internalize and execute value or mission statements the declaration must make sense and be credible. At a minimum the proclamation should define the following: “Who we are, who our customer is, what we do, and how we will do it.”

Step 2 – SWOT Analysis:

This is the perhaps the longest task performed in the strategic planning process. It includes the identification of current business strengths and weaknesses as well as the opportunities and threats that face it currently and potentially in the future. Examples of the items considered in each category are shown below:

  • Strengths: Excellent staff, good facilities, prime location.
  • Weaknesses: Staff turnover, supervision weaknesses, and marketing experience.
  • Opportunities: Changing demographics, pending legislation favoring business.
  • Threats: Competition, new government regulations, facility upgrades required, risk management.

This analysis is the basis for creating most of the plans that will shape the future actions of the organization. Listed below are different areas of the business that should be considered in the SWOT analysis. In each category are the types of questions that should be asked to determine if there are threats or opportunities that need to be addressed in the planning process.


  1. Are demographic changes coming that will impact the business?
  2. Are political or legal changes coming that will impact the business?
  3. How can the organization capitalize on these changes?
  4. Are there new products or services that should be considered?
  5. Should some current products or services be discontinued?
  6. Are marketing efforts creating demand for products and services?
  7. Are the targeted customers being reached in a cost-effective manner?


  1. Are they providing new products and services that will impact us?
  2. Is our market share being eroded?
  3. Are there opportunities we can act on that our competitors cannot?
  4. Are we delivering the right value principle for our market and customers?


  1. Capacity – Are current and future needs met?
  2. Do the facilities meet current regulatory requirements and anticipated future requirements?
  3. Are safety or health risks at the facility present that need corrected?
  4. Lease versus buying – long-term vs. short-term commitments. Should this be reviewed?
  5. Is the equipment adequate and productive enough to meet current and future needs?
  6. Are the budgets for maintenance, improvements and upgrades adequate?


  1. Will the current facilities support strategic growth plans?
  2. Are adequate levels of qualified management and staff available to support plans?


  1. Is a positive culture being created and supported by management and other personnel?
  2. Are desired qualifications, certifications and licensing requirements being met?
  3. Are training needs being addressed with employees?
  4. Is employee retention or motivation a problem?


  1. Does the incorporated structure provide liability protection to owners?
  2. Are tax benefits being optimized?
  3. Is the current credit line adequate to support growth?
  4. Are other financing arrangements needing review?

Government Regulations:

  1. Are upcoming changes planned for government spending in current programs?
  2. Are planned changes in regulations coming that will affect business?
  3. Are new government spending programs planned and can the legislation be influenced?
  4. Is our business in the position to capitalize on this new legislation?


  1. Is a formal quality program in place?
  2. Is quality defined from the customer’s viewpoint?
  3. How does the organization perform against the established quality parameters?
  4. Is quality non-conformance impacting the business?
  5. How does the organization make the improvements required?

Risk Management:

  1. Are formal safety programs and training programs in place and are they documented?
  2. Are environmental issues being addressed through training and reporting?
  3. Have background checks and screening programs for personnel been implemented?
  4. Are training programs in place for reducing risk in the legal, environmental and health areas?
  5. Is the organization staying informed of local and federal regulations, current and proposed?
  6. Is the organization staying politically active in order to represent business interests on pending legislation?
  7. Does the organization need to implement programs in anticipation of enacted legislation?

These types of questions will increase the organization’s understanding of the market, its customers, the external legal and political environment, and its own business.  Armed with this information on each area of their organization the business leaders can move on to the next step in the process.

Step 3 – Creation of Strategies:

In this step, the management team will develop strategies to eliminate or reduce the impact of threats while simultaneously creating plans to capitalize on the opportunities.  This step will factor in the organizational strengths and how they can be used to their advantage. In addition, strategies will be created that will either strengthen weaknesses or negate the negative impact on the organization. The goal here is to brainstorm and create innovative strategies to support the future vision of the business. These will be overall themes and strategies and will not address exactly how or when they will be implemented.

Step 4 – Action Plans for Implementation:

This step is where the strategies created in the previous process are evaluated.  This evaluation would include costs, implementation time, resources required and the expected benefits to the organization. Then the specifics of each strategy are compared one against the other and they are prioritized based on how well they support the overall strategic direction established for the organization. Once prioritized, each strategy will have a specific action plan created for implementing it. This action plan should include detailed actions, a timetable for the completion of each step, and the person or group responsible to carry out the activity. When completed this action plan will be the roadmap to a new future for the organization.

Step 5 – Review, Check, and Adjust:

Once the strategic implementation plan is in process, regular monthly or quarterly meetings must be held to insure the action plan is being executed properly. At these sessions progress reports are presented and, if needed, corrective actions are generated to get the assignments back on schedule. In addition, any new strategic issues can be addressed and, as necessary, the implementation plan can be modified to factor this new information into the action plan. This periodic review process is critical to making the strategic vision become a reality. Without this ongoing accountability the strategic plan will never be fully implemented.

Step 6 – Moving from Strategic to Operational Planning:

Once the strategic plan has been fully implemented the actions will come under the operational planning and management disciplines. As stated above the strategic plan establishes how the company defines itself and its overall operating philosophies. Operational planning takes these philosophies and makes them into daily management practices and disciplines. Often operational planning problems become issues that must be addressed later at a strategic level and the planning loop is initiated again to deal with this new issue.

Bringing it Home

In summary, there are many problems that are associated with poor planning including the propagation of a reactive business culture and the associated personal and financial hardships. The pain of these hardships should provide the impetus for organizations to plan better. Like the successful painter the organization must create a vision for the future. Once they get in front of their organization with good planning practices they can begin to anticipate and avoid problems, take advantage of business opportunities and lead their organizations to financial success.  If this planning process is performed successfully business leaders will not step away from the practice. I encourage each reader to consider how they currently manage their business and, if they are not satisfied with the performance of the organization, begin today to implement a program to institute strategic planning disciplines.

(Article was originally created and published on 5/24/01 on OMC website and has been updated for republishing on 7/2/09.)

Posted in Blog Post, Growing Businesses and Mergers and Acquisitions


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