Although many use these terms interchangeably, strategic planning and long-range planning differ in their emphasis on the “assumed” environment. Long-range planning is generally considered to mean the development of a plan for accomplishing a goal or set of goals over a period of several years, with the assumption that current knowledge about future conditions is sufficiently reliable to ensure the plan’s reliability over the duration of its implementation. In the late fifties and early sixties, for example, the US. economy was relatively stable and somewhat predictable, and, therefore, long-range planning was both fashionable and useful.
On the other hand, strategic planning assumes that an organization must be responsive to a dynamic, changing environment (not the more stable environment assumed for long-range planning). Strategic planning, then, stresses the importance of making decisions that will ensure the organization’s ability to successfully respond to changes in the environment.
Strategic planning is only useful if it supports strategic thinking and leads to strategic management – the basis for an effective organization. Strategic thinking means asking, “Are we doing the right thing?” Perhaps, more precisely, it means making that assessment using three key requirements about strategic thinking: a definite purpose is in mind; an understanding of the environment, particularly of the forces that affect or impede the fulfillment of that purpose; and creativity in developing effective responses to those forces.
It follows, then, that strategic management is the application of strategic thinking to the job of leading an organization. Dr. Jagdish Sheth, a respected authority on marketing and strategic planning, provides the following framework for understanding strategic management: continually asking the question, “Are we doing the right thing?” It entails attention to the “big picture” and the willingness to adapt to changing circumstances, and consists of the following three elements:
- Formulation of the organization’s future mission in light of changing external factors such as regulation, competition, technology, and customers
- Development of a competitive strategy to achieve the mission
- Creation of an organizational structure which will deploy resources to successfully carry out its competitive strategy.
Strategic management is adaptive and keeps an organization relevant. In these dynamic times it is far more likely to succeed than the traditional approach of “if it ain’t broke, don’t fix it.”
Eric S. Degen, CPA Titan Accountancy, LLC