8 Fatal Mistakes In Strategic Planning

by Paul Simister on February 21, 2011

There are eight common mistakes I see in strategic planning which can be avoided but can also be fatal.

The 8 Fatal Mistakes In Strategic Planning

  1. Strategic Planning Mistake 1 – Focusing on tactics not strategy. Just to be clear, strategy explains the “why”, tactics are the “what”.
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  2. Strategic Planning Mistake 2 – Not understanding what customers really want. Customers should be the main focus of your strategy since it is they who will decide if you win or lose in the market-place.
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  3. Strategic Planning Mistake 3 -Failing to be unique and clearly differentiated in your market. Being the same creates competitive stalemate and customer indifference.
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  4. Strategic Planning Mistake 4 -Failing to continually monitor the external environment for opportunities and threats
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  5. Strategic Planning Mistake 5 -Not understanding the motivations, strengths and weaknesses of competitors. I see too many strategic plans which assume growth in market share without explaining why customers should switch and how competitors will react to losing business.
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  6. Strategic Planning Mistake 6 -Not being clear on exactly how you will earn a profit. Definitely a problem from the dot.com boom and bust but it is still clear that many business people haven’t created a sound business model which generates profit and cash.
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  7. Strategic Planning Mistake 7 – Not identifying and managing risks – strategic, financial and operational. The classic examples of this failure has been the big banks who caused the credit crunch and 2009/10 recession and BP with the Deepwater Horizon disaster in the Gulf of Mexico.
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  8. Strategic Planning Mistake 8 – Not creating a culture which encourages innovative thinking and the desire to take risks by putting ideas into action.

Whilst many of the biggest blunders in business management come from a flawed strategy, there are many well established techniques for you to develop an effective strategy.

Which Are The Most Important Strategy Mistakes?

It won’t surprise you that I think numbers 2 (customer needs) and 3 (differentiation) are the most critical.

Perhaps the biggest issue that is ignored is how competitors will react to your actions to dominate your market which comes down to two issues:

  • Can they retaliate? If you manage to introduce a sustainable advantage, competitors may not be able to retaliate. They may not have the skills or the cash.
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  • Do they want to retaliate? It may seem strange when you start thinking about competitive reactions and how for example if you reduce price, will they reduce price but they may not be committed to a fight or it may not make long term economic sense to destroy industry profitability. However it may also be the only thing they can do to stop your aggressive attacks on the market.

Game theory is a very useful technique for looking at competitor reactions and the pay-offs available in the market.

This is a more detailed follow up article to Why Strategy Doesn’t Work

Paul Simister is a business coach who helps small business owners to profit from differentiating their businesses, being distinctive in the eyes of their customers and standing out in a crowded marketplace.

You too can move past your profit tipping point by answering the seven big questions of business success.

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