For more than a generation, business strategy has been the holy grail of management theory and practice. By appending the adjective ‘strategic’ to them, even the most mundane business functions (and those who look after them) can be immediately elevated to a higher plane.
Yet it’s hard to escape the conclusion that this obsession with strategy often delivers less than it promises. At the same time, a business without any semblance of a workable strategy looks like a ship at sea sans rudder and compass – both will find it difficult to stay afloat, let alone reach their chosen destination.
The reality is that strategic planning, at least when it’s stripped down to its essentials, is about unlocking a business’ growth potential and enhancing its survivability. Small and marginally profitable businesses that ignore strategic planning are likely to remain exactly that – small and marginally profitable, if they remain at all.
Unlocking the potential for business growth
Strategic planning in the context of the family business actually involves two strategic plans: one for the business and one for the family. The family has to decide whether or not it wants to continue the business, what it wants from the business in terms of financial returns and jobs and career opportunities for family members, and what it’s prepared to sacrifice to allow the business to grow.
At some stage the family may have to consider whether it should bring in external management, or even allow outsiders to own a share of the enterprise. Perhaps the outcome of these deliberations is less a strategic plan and more a list of family objectives and ambitions.
Even so, it becomes an essential ingredient in the business’s own strategy. An effective business strategy always has to take account of the family’s needs and wishes. So what do we mean by strategic planning in a family business context?
Strategic planning for family business
At its most basic, a business strategy:
- articulates certain commercial and financial objectives the business wants to attain;
- presents a plan or map that charts a feasible course for reaching those objectives/destinations; and
- lists the specific actions required to drive the process forward.
The strategy will probably contain financial projections and other metrics against which the business’s actual progress can be benchmarked. Often it will be based on a prior SWOT analysis (strengths, weaknesses, opportunities, threats) and insight into the relevant industry and broader business environment.
It will identify the skills and other resources needed to realise business objectives. Strategic planning is about making choices, sometimes difficult ones…
Strategy boils down to clarity of business purpose
A business strategy challenges present and past business goals and practices and specifies the products, services, and markets in which the business wants to compete and those it wishes to exit. It evaluates alternative business models.
A business strategy involves constructing a framework for important business decisions such as those about capital investments, borrowings, the introduction of new products or services, expansion plans and acquisitions and divestments. Unlike most other businesses, in the family firm, the aim of strategic planning is usually considerably more than just attaining an acceptable return on investment and strengthening the firm’s financial durability.
Family members often possess an emotional attachment to the business that’s tied up with the family’s values, its self-image and reputation in the broader community. The principles in family firms can develop strong personal relationships with employees, customers and suppliers, and those feelings are frequently reciprocated.
The competitive advantage of attitudes and behaviours
Many family businesses regard their employees as ‘extended family’. The family business will often go the extra mile to help a customer, not because it makes financial sense, but because it’s what this family means by service and recognising customer loyalty.
Families are a prime source of patient capital, sacrificing short-term returns to achieve longer-term business growth and stability. These attitudes and behaviours are potent competitive advantages which need to be recognised in the strategic planning process.
A strategy’s level of complexity and detail will reflect the nature and size of the underlying business. Yet regardless of its complexity (or simplicity), on its own, a strategic plan can achieve exactly nothing – execution is everything.
Strategic planning for business reinvention
Many strategic plans fail dismally not because of their inherent deficiencies, but because their execution was never pursued with the necessary energy and commitment, often reflecting a lack of management and family buy-in. Formulating effective business strategies is never easy, and enlisting competent professional advisers in the field can help kick start the process.
Successful family firms evolve and change and reinvent themselves; robust strategic planning is one of the ways they do it. How has your family business evolved or reinvented itself?