Gartner’s latest research shows that only 29% of strategists agree their organisations change plans fast enough to respond to disruption[1]. Many business leaders are finding it increasingly challenging to develop strategic plans in the face of all the scenarios posed by today’s fast-changing business environment, and finance teams are under increasing pressure to deliver accurate, insightful breakdowns to help inform decision-making.

Despite the fact that most organisations pair the word “strategy” with the word “plan”, most companies struggle to convert their capabilities and projections into real results. Instead, businesses tend to prepare plans, backed up by detailed spreadsheets that project costs and revenue quite far into the future, that only lightly touch on the company’s short- and long-term strategies.

Strategic planning is about more than just creating projections and trying to reach them; it’s about accounting for a variety of scenarios and being able to change enterprise strategy in response to market conditions. Good strategic planning starts with target setting, but it truly becomes a business enabler through technology and processes that support an agile, repeatable process that drives value and alignment with key stakeholders within the organisation.

The right approach

Strategic planning relies on a financial plan designed to help the business achieve strategic goals and understand the financial impact of those. Before the strategic planning process can take place, then, the finance team must set and understand organisational goals and targets. Strategic planning fits into the existing budgeting, planning and forecasting process by driving the budget because the financial impact of any important strategic initiatives – which impacts the budget and forecasts – should have been modelled and determined during the strategic planning process. 

As a result, “strategic plans” run the risk of becoming a budget’s descriptive front end, often projecting five years of financials in order to appear “strategic”. While this arguably makes for more thoughtful and thorough budgets, it doesn’t result in an effective, actionable strategy. Planning typically isn’t explicit about what the organisation chooses not to do and why. It does not question assumptions, and its dominant logic is affordability – the plan consists of whichever initiatives fit the company’s resources.

According to Gartner, there are nine steps to effective strategic planning, allowing for a methodical approach to selecting initiatives that will drive enterprise ambitions. These are:

• • Outlining expectations

• • Verifying the business context

• • Setting and differentiating goals and objectives

• • Assessing capabilities

• • Developing an action plan

• • Setting measures and metrics

• • Putting the strategy on the page

• • Driving the plan home

• • Preparing to respond to change

Preparing for the future

While there is a lot more to strategic planning, budgeting is a vital step in the process. Integrating budgeting into the strategic planning process helps close the loop between planning and execution, as well increasing engagement, ownership and even the productivity of staff.

Budgetary transparency—the ability to see where everyone stands in the process—can greatly impact leadership’s ability to meet strategic objectives. Having a plan with numbers you can trust means less money tied up in “cushioned” or contingency funds, creating new opportunities to put that money to work throughout the year.

In today’s fast-changing global economy, organisations must be agile, with the ability to respond quickly to new market opportunities or threats. The ability to set corporate targets or budgets, combined with the ability to continually monitor performance and dynamically update planning assumptions and resource allocations on a periodic basis using dynamic planning techniques is therefore essential. By unifying planning, budgeting and forecasting with financial consolidation, reporting, analysis and data quality, an EPM solution can make strategic planning easier and more effective.

EPM can help drive long-term strategy and analyse alternative value creation scenarios, allowing organisations to quickly develop baseline plans for organic growth strategies and potential M&A initiatives. EPM can also pressure-test assumptions and flex key value drivers to evaluate their impact on financial results, as well as making it easy to analyse alternative what-if scenarios and funding options. As the pace of market changes increases, and does so at an accelerated pace, EPM can free up finance teams to shift their focus from data gathering, reconciling data and managing key integration points to strategic planning guaranteed to provide better, faster insights to support decision-making.

Frequently Asked Questions