Strategic planning and strategy formulation may sound similar, but the distinction is crucial, with one offering short-term comfort and the other presenting long-term rewards. Choosing wisely between the two is paramount.

Traditionally, strategic planning involves executives assessing goals from the previous year, gauging their accomplishments, and comparing budgets to reality. Predicting the upcoming year involves discussions on factors like inflation, interest rates, political outcomes, and customer attitudes. However, this approach often lacks a critical evaluation of whether the company is in the right markets or businesses.

Conventional strategic planning includes the commonplace Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. Yet, this analysis can be skewed by personal biases, with strengths inflated and weaknesses addressed merely with increased budget allocations. Opportunities are often limited to what’s visible in the marketplace, while threats are downplayed until they become urgent.

In contrast, strategy formulation approaches the SWOT analysis not from a perspective of what is but from a perspective of what one desires it to be. Rita McGrath’s book of “Seeing Around Corners,” emphasizes the importance of identifying inflection points and leading indicators to perceive the invisible challenges, akin to noticing smoke on the horizon indicating an impending fire.

While strategic planning compiles a descriptive list of goals, strategy formulation crafts a coordinated list of goals that must align with the main objectives of the business. It’s crucial to question why emphasis is placed on goals that might not address the most critical challenges.

Unlike strategic planning, strategy formulation requires creativity and innovation, prioritizing where the business aims to be in the future. Vision, mission, and values must align with goals. In contrast, strategic planning may lead to misalignment due to competing functional silos.

In essence, strategic planning is about tactical planning, not strategy. It tends to be more short-term and lacks the holistic, long-term vision found in strategy formulation. By addressing the most crucial, high-impact challenges, businesses can surpass the limitations of traditional planning models and embrace a more innovative and strategic approach.

Leadership Mapping dramatically improves your performance and results by mapping out solutions for strategic high-impact challenges.

Contact us today to unlock your business’s full potential with Leadership Mapping.

Contact me at LeadershipMapping.com. Call me at 980-241-0189. Email me: Stan@LeadershipMapping.com.

“Chart Your Course, Change Your World!”

Stan Broesder, MBA — Strategic Performance Advisor
Leadership Mapping