The Concept of Strategy and Why Strategic Planning is Necessary

Strategy

Strategy is the direction an organization takes over the long-term, enabling it to cope with a changing environment and gain advantage over the existing competition. Strategy allows organizations to configure and manage their main resources and competences in a way that fulfills stakeholders expectations, providing organizations with a focus-point and narrowing their scope of activities. A successful strategy is the consequence of an effective implementation and thus, one must be able to simultaneously settle long-term, simple and agreed objectives; truly understand the competitive working environment; and use its resources and capabilities in an effective way.

Strategic planning and strategic management

Strategic planning is the process of understanding the organization’s direction while allocating its resources in the most efficient way. Planning helps members of an organization focusing on their priorities, while improving their processes. However, strategic planning is neither static or predictive. Strategic planning is rather a learning and flexible process that enables organizations to adapt to constantly changing environments. In other words, strategic planning is one key factor of an organization’s performance as it enhances the adaptation to both external and internal changes.

Santos (2011) claims that “the performance of a company is the outcome of the complex dynamic interaction between its environment (E), its organization (O) and its strategy (S)”. Each element of the equation affects the other two in a dynamic, non-linear, asymmetric and non-malleable way. The EOS Model: Performance = Environment * Organization * Strategy. Therefore, flexible strategic planning is also what allows organizations to thrive. Being strategic agile requires simultaneous 1) sharpness of perception and intensity of awareness and attention (strategic sensitivity); 2) ability of top teams to make bold decisions fast (leadership unity); and 3) internal capability to reconfigure business systems and readapt resources rapidly (resource fluidity). In this manner, a deliberate strategy can converge to a more flexible state, giving room for an emergent strategy. In Mintzberg (1994) words “strategies can develop inadvertently”, while “all must combine some degree of flexible learning with some degree of cerebral control”.

While strategic planning is the mean to an end, strategic management consists on formulating the main goals and initiatives while considering one’s resources and internal and external environment (Nag et al. , 2007). Strategic management comprises three main phases: 1) analysis of the strategic position; 2) strategy formulation; and 3) strategy realization. Each phase can only start when the previous is completed. This three-step approach gives an overview of a formal strategic management process that provides the guidance for an effective implementation.

Strategic Planning in Nonprofit Organizations

Strategic planning in NPOs has the same essence as in other type of organizations, such as businesses or governments. It aims to define what to accomplish and how to do so, in order to respond to a dynamic environment. Besides, it enables NPOs to focus on both short- and long-term goals and reach these same goals. Nonetheless, it is common for NPOs to focus mainly on short-term and crisis-solving solutions due to its very unpredictable environment. Allison and Key (1997) stress that NPOs have a greater number of external and internal forces influencing their performance. NPOs are more impact-driven and thus more influenced by their key-stakeholders, such as their beneficiaries; strategic choices are directly linked to the funders’ beliefs; and their mission and values guide their operating mode. These dynamics reinforce the need for planning as a strategic tool that enhances resource allocation and facilitates the decision-making process.

In general, strategic management follows the same logic in both FPOs and NPOs. The strategic tools in either the two are the same and pursue similar effects (e. g. SWOT analysis, PEST/PESTEL analysis, Five Forces, among others). However, due to internal differences between NPOs and FPOs, the expected planning outcome differs among the two.