Strategic Planning Methodologies Explained (Beginner Friendly)
Updated: Jun 12
Table of contents
The best strategy management methodologies include Balanced Scorecards (BSC), Objectives Key Results (OKR), Management by Objectives (MBO), Objective-Goals-Strategies-Measures (OGSM), Scenario strategic planning, and Blue Ocean strategy, and they have many similarities.
They help connect the strategy parts logically and systematically, increasing strategy alignment and communication with managers and employees. These strategic planning models also help track and monitor strategy execution.
Strategic planning is looking into the future and identifying strategies to achieve business goals. It includes assessing the current situation, developing objectives, creating action plans, and identifying resources. Each strategic planning model has its unique approach to this process.
If we compare the main elements of all the most-used strategic planning models, this is what we get:
BSC: Objective > Measures > Initiatives
OKR: Objective > Key Results (Key Results include quantifiable targets)
OGSM: Objective > Goals > Strategies > Measures (Strategies covers initiatives)
MBO: Objective (Objective monitored with measures and quantifiable targets)
Scenario Strategic Planning: Scenario > Strategy (Strategy covers objectives, goals, and initiatives)
Blue Ocean Strategy: Market analysis> Creating a new space unique from competitors
In this post, we'll explain the principles of each strategic planning process, their pros and cons, and real-world examples of organizations using them.
Types of strategic planning methodologies
Analyzing, developing, and monitoring strategies is critical for any business. Strategic planning frameworks make this easy by enabling business shareholders to set goals, create actionable plans, and track their performance.
Traditional planning methodologies are the most widely used and include Balanced Scorecards, Objectives Key Results (OKR), Management by Objectives (MBO), Objective-Goals-Strategies-Measures (OGSM), and Scenario Strategic Planning.
Traditional strategic planning frameworks focus on understanding your situation and setting achievable business goals and objectives. These planning models are still popular since they allow businesses to stay updated on their progress.
The following are the most common traditional planning methodologies:
1. The Balanced Scorecard (BSC)
This performance management tool helps organizations measure and monitor progress toward organizational goals. The Balanced Scorecard better positions you to assign priority to their projects, track goals, and measure performance.
The BSC is a basic strategic planning model that provides a comprehensive approach to managing the business strategy by considering quantitative (financial) and qualitative (non-financial) performance measures. It also ensures employees understand their roles in achieving organizational goals and objectives.
BSC links objectives and initiatives (or projects) to measure performance from four balanced perspectives. These key areas make your business performance measurable and easier to monitor and control. They include:
Is your company earning a return on its investments? Every business aims to achieve profitability while managing the risks associated with running a business. Achieving these goals requires you to pay attention to the financials of your business, such as revenue, cost, and profit.
A business's financial metrics may include rate of return, annual budgeted revenue and cost goals, and income statements. These metrics help measure the company's financial performance over time and enable better decision-making.
This entity measures how your business meets customer needs and how satisfied customers are with your products or services. The customer metrics in this entity may include customer loyalty, number of complaints, retention rate, and Net Promoter Score®.
The Balanced Scorecard compares your business's reputation to your competitors. It identifies how to improve customer satisfaction and differentiates it from the competition. Some of the ways you can effectively enhance your reputation are through customer service, marketing, and customer experience initiatives.
How your business processes perform is key to achieving your customer and financial goals. Processes are the building blocks of any organization; without effective management, they can become inefficient or, worse, ineffective.
Process metrics can include process cycle time, cost per output unit, delivery times, number of defects, and quality standards. Monitoring your planning process performance will help you identify areas for improvement and maximize efficiency.
Learning & growth perspective
This perspective focuses on the people within your organization. It identifies the necessary skills, knowledge, and abilities to align them with organizational goals.
Learning & Growth metrics include employee engagement scores, training, and development programs, return on investment in learning initiatives, and employee satisfaction surveys.
These metrics help your business develop the necessary programs to help their businesses succeed. They are better positioned to improve their employee engagement and retention programs.
The Balanced Scorecard (BSC) combines parts of the strategy, such as milestones and project completion, instead of OKRs focusing on operational efforts and results. Companies that use the BSC appreciate its overall approach to strategy.
BSC focuses on top-down leadership styles, which is counterintuitive for younger companies and some industries.
Companies use the Balanced Scorecard to keep track of their operational and financial metrics. Banks are ideal examples of industries that rely on data and performance metrics to stay ahead.
Banks must monitor their loan volumes, delinquency, profitability targets, and deposit growth. They contact customers for feedback and use this information to measure customer satisfaction, complaints resolution time, and retention rates.
Other metrics banks track using the Balanced Scorecard include employee training hours, process cycle time, and terminated accounts.
The Balanced Scorecard makes strategic planning easier by providing a platform where organizations can measure and track progress toward their goals.
Manufacturing companies also use BSC to monitor production volume, safety records, and machine downtime. These metrics help shareholders make better decisions that guarantee the company's stability.
They also track financial metrics such as cost goals, income statements, and pricing strategies. Keeping track of these metrics will help the organization identify improvement areas and develop its strategic planning model.
The Balanced Scoreboard allows companies to prioritize their goals and objectives by setting a clear direction. This framework ensures your business maximizes on available resources to achieve the common objective.
BSC also helps you identify areas that require improvement to remain productive and competitive.
The only downside to this top-down approach is that small businesses may find it hard to implement it. It is costly and time-consuming. BSC may also be inaccurate when measuring customer loyalty and employee satisfaction.
2. Objectives and key results (OKRs)
OKR is a goal-driven strategic planning model that is often used to guide and monitor outcome-based success. Using outcomes instead of tasks as drivers, OKRs encourage accountability in achieving success through indicators.
OKRs are hierarchical. Employees set their goals and progress upward through the ranks. The idea is that when employees achieve their goals, then managers achieve theirs from the bottom up.
OKRs are broken down into two parts:
Objectives are the concrete, measurable goals you need to achieve. They give your company a clear goal to strive for and clarify what you need to do. You should have a maximum of 3 objectives for each OKR, which should be challenging but attainable.
Achieving objectives depends on key results, pinpointing measurable outcomes indicating success. Typically, each objective is linked to 3-5 key results. Knowing these results empowers employees to stay on track and take ownership of their responsibilities.
The OKR methodology establishes three to five goals and assigns them the same objectives.
Software development companies mainly adopt OKRs to monitor their projects. Their objectives may include reducing bugs, developing new updates, or increasing user engagement.
They break down these objectives into the key results you need to reach to accomplish them. These key results include time-to-market, customer satisfaction ratings, and bug reports.
Other companies, such as large retail stores or manufacturing companies, use OKRs to track the performance of their planning process. They may set objectives such as reducing delivery times, increasing efficiency in production processes, or improving customer service.
OKRs provide a powerful framework that aligns your organization's goals with every individual's targets. By setting clear objectives and key results, your team can better measure progress and stay on track. With OKRs, teamwork becomes even more essential, encouraging collaboration toward a shared success.
Leveling up your organization's objectives and key results (OKR) requires serious commitment. The setup, monitoring, and adjustments must be done right. Plus, measuring success or failure is tricky since some goals are subjective and hard to quantify.
Additionally, if the OKR is not properly communicated or understood, it can lead to confusion and frustration.
3. Objective-Goals-Strategies-Measures (OGSM)
OGSM is a world-class older strategic planning model that transforms objectives, goals, strategies, and measures into actionable and executable plans. OGSM brings alignment, transparency of priorities, and metrics that define success. This framework frames the business's goals and how it will get there.
OGSM defines success and helps groups work together across functions, geographies, and up and down the line. “Strategies” in OGSM guide the work activities (initiatives) and allocation of limited resources across the organization.
The four elements that comprise OGSM make this planning model comprehensive and effective. They include:
Your long-term visions define the objectives of your strategic plan. Objectives should be clear, achievable, and measurable. They will provide the overall direction of what you want to accomplish and should be revisited periodically.
Focus on the "who, what, when" of strategic planning by setting clear goals. Determine who needs to do what and by when to accomplish your organization's objectives.
Unlocking your strategic plan's full potential lies in successful strategies. These are concrete steps designed to power your initiatives and activities, ultimately bringing you closer to your desired objectives.
Measures offer valuable metrics to assess if you're meeting your goals and objectives. Keeping tabs on your success ensures you're on course and equips you with insights for future decisions.
The OGSM is a basic model that offers a comprehensive approach to strategic planning, empowering you to define objectives, set goals, create strategies, and track progress. Aligning your aspirations with actionable plans allows you to effectively achieve your vision and measure your progress.
The OGSM planning model is applicable to multiple industries, including healthcare and manufacturing. It can help map out set objectives and strategies and provide insight for project improvement.
OGSM is a framework manufacturing industries use to set production goals and develop strategies to maximize productivity. Technology companies can also use it to measure marketing objectives and other critical metrics.
OGSM provides a comprehensive approach to a strategic planning process. It helps teams focus on achieving objectives by making informed decisions.
The OGSM framework can focus too much on long-term objectives and goals, making it difficult to adjust short-term strategies. You will also need strategic planning tools that make monitoring progress and adjusting strategies easy.
4. Management by Objectives (MBO)
MBO aims to improve company performance by defining objectives to which management and employees agree. The theory encourages objective setting and participation.
In addition, it creates a level of commitment on behalf of the employees, which motivates them more. Most companies that deploy MBO-style performance management review their performance annually.
Objectives (and related measures and targets) are set at the beginning of the year and then evaluated at the end. Objectives tend to be broad and strategic versus focused and tactical.
MBO typically follows the mnemonic SMART – Specific, Measurable, Achievable, Relevant, and Time-bound.
MBO can apply to any company or industry. It's commonly used in the service sector, where it can be used to set goals for customer satisfaction ratings and sales targets. It can also be used in the tech industry, where it can be employed to set targets for product development and innovation.
MBO creates transparency between management and employees as objectives are agreed on mutually. It helps develop a sense of ownership among all parties involved.
It also helps to create a sense of accountability among employees. Everyone knows the goals and expectations that must be met, and there is a clear path for measuring success.
The MBO model prioritizes goals and targets, sidelining employee development and motivation. The approach creates a high-pressure, competitive environment rather than promoting collaboration.
Stressed employees will do whatever it takes to meet their objectives, even if that means resorting to unethical actions out of fear. This can result in taking shortcuts that ultimately harm the company's productivity.
5. Scenario strategic planning
To prepare for the future, a business must evaluate the potential impact of shifting economic and technological trends. This assessment, known as scenario strategic planning, helps recognize and understand the possibilities that lie ahead.
Having a glimpse of the future allows you to plan accordingly for every scenario. This strategic plan involves four steps, including:
Identify key drivers
Maximizing your business's productivity starts with recognizing how economic, technological, and industrial changes can impact your goals. Discover how each of these factors can affect your company's success.
Come up with the most likely scenario
Discover key trends impacting your organization by analyzing collected data. Focus on those with the most significant impact.
Develop a strategy for each scenario
Boost your chances of success by strategizing for every possible scenario. Be ready to modify your approach, framework, or processes accordingly.
Implement and monitor
Maximize the success of your plan by executing it effectively. Craft a clear roadmap to guide your team in implementing strategies and tracking their progress. Ensure everyone understands how to analyze data and pivot for optimal results.
If you're a farmer, you know how unpredictable the weather can be and how it can impact your profits. Scenario planning helps you analyze current weather patterns and other factors to prepare for your next harvest and make informed decisions about future investments.
Military institutions also use this planning model to predict the outcome of operations and plan for any unlikely situations. Failing to plan for scenarios has dire consequences, including missed opportunities and increased risks.
Preparing for foreseen changes helps you neutralize obstacles and maximize opportunities. All your teams, including the finance and operations teams, can respond quickly without altering the business objectives.
This methodology can be a lengthy strategic planning process for large enterprises. Collecting and analyzing data successfully can take months. Some of the factors that impact your strategic plans are drastic and can change quickly.
6. Blue Ocean strategy
The Blue Ocean Strategy continuously pursues uncontested market space by creating a unique and differentiated value proposition. A blue ocean refers to a wide-open market with a lot of potential for growth and development. The opposite, red oceans, is a market space with competition, and it can be tough to stand out.
Stop competing with other companies and start carving out your own niche with the innovative Blue Ocean Strategy. With this strategic planning model, you can expand your market share by targeting a previously untapped audience.
The goal of this strategic planning model is not to outperform your competitors. It helps you redraw boundaries within the industry and operate in a solo environment.
This strategic planning model proves customers don't have to choose between value and cost - you can provide both. By identifying what customers find valuable in your product or service, you can strategize how to make it affordable without compromising quality.
Implementing the Blue Ocean Strategy helps you secure a competitive edge in an untapped market, appealing to new customers and increasing your reach. You'll also uncover new avenues for growth and profitability – opening up bigger, better opportunities for your business.
Some popular companies that captured blue oceans are Netflix, iTunes, and Uber. All companies leveraged the Blue Ocean Strategy to create a unique value proposition that appealed to a broader audience. They are currently some of the biggest names on the market.
By leveraging the Blue Ocean Strategy, you can avoid the constant competition in red oceans and create uncontested market space.
Want to reach a wider audience and boost your profits? A solid strategic planning model could be the answer. With the right approach, you can not only stay competitive, but outperform your rivals. You can also use this model alongside other planning strategies to supercharge your growth.
In this model, your company must explore a new field with no certain foreseeable outcome, making it highly risky. Finding the right opportunity requires a lot of patience and research.
SMART Validation Tool
Most professionals use the SMART validation method to ensure that objectives (or Goals) in all methodologies are well selected and drafted.
SMART Objectives are essentially a basic guide and set of concrete rules for teams and business people that want to use objectives (or Goals) to aid in progressing their business. The SMART validation tool focuses on the building structure. It's represented by five key criteria:
Specific: What do you really want to achieve?
Measurable: What level of effort, time, and cost will it take to reach that goal?
Attainable: Is the goal really attainable after weighing all the pros and cons?
Relevant: Is the goal really relevant to you and your business?
Timely: What are your deadlines, timelines, and measurable time restrictions?
How strategic planning can help your business
Strategic planning is a way for you to set realistic business goals, evaluate your current position, and make decisions to be successful. It helps you look into the future and develop plans to help you prepare.
Effective strategy implementation can transform an organization by turning planning into action using any of the above-proven strategic planning models.
Choosing the right methodologies depends on the organization's needs, level of performance maturity, and strategic planning tools.
Kippy.cloud can serve all mentioned strategic planning models. It is flexible and has the main functionalities of containing all common strategy elements, including Perspectives, Objectives (Goals), KPIs (Measures or Metrics), Projects (Initiatives or Strategies), Milestones (Tasks or Activities), and Employees Appraisals.