Strategic planning is an essential function used by businesses large and small alike to create, prioritize and execute action plans that drive change and growth over the life of the business.

Typically performed one, two or four times per year, strategic planning is a process that is intended to provide a framework for thinking about, evaluating and improving the business through a series of strategic actions that will take place in addition to the activities associated with day-to-day operations. Considering how all-encompassing strategic planning can be, it is extremely helpful to use a specific model or structured approach when executing a strategic planning process.

Small businesses and startup enterprises will find four models particularly appealing. These four models are deeply researched, highly adaptable and most importantly, solidly proven to work effectively for small and emerging companies. The four models include Business Model Generation, Lean Startup, Blue Ocean Strategy and Design Thinking. Let’s take a look at each one in brief to gain a sense of how they might apply to your small business:

Business Model Generation

The approach of Business Model Generation emphasizes the idea that a new or emerging business can exist when a model for its value creation becomes apparent. In this sense, it is an excellent tool for bringing together the concepts of Lean Startup and Blue Ocean Strategy. The indicators to be assessed in this process include:

• Value Propositions
• Key Activities
• Key Partners
• Key Resources
• Customer Relationships
• Customer Segments
• Customer Channels
• Cost Structure
• Revenue Streams

What makes this model so powerful is its focused on the customer view of your business, and on following a critical path that is revenue-positive (thus avoiding the risk of pursuing projects that may be intrinsically useful but not necessarily beneficial to the bottom line).

Learn more about Business Model Generation from Strategyzer.

Lean Startup

The lean startup concept radically rethinks the traditional assumptions of startup management and strategy. Whereas in the past, most startups in the technology space or other sectors developed a specific product/service strategy and committed fully to it before commencing development, Lean Startup takes a different approach, with a focus on:

• Strategy – Focused on devising, testing, iterating and adjusting the business model.
• Product – Intensive engagement with customers from the earliest stages.
• Engineering – Agile, iterative and incremental development model.
• Organization – Focused on customer, quick learning approach, nimble and fast.
• Financials – Customer acquisition cost, lifetime customer value, churn, stickiness/virality.
• Failure – Expected, fixable via new variations and approaches. Key response is to pivot.
• Speed – Rapid evolution, uses ‘good enough’ data to make quick decisions and change.

Key concepts of the methodology include the Business Model Canvas (BMC), Validated Learning and the Validation Board, Minimum Viable Product (MVP), continuous deployment of code, split testing (A/B Testing), choosing actionable metrics over vanity metrics, and creating a continuous innovation model within the business. Measurement methods include funnel analysis, cohort analysis, net promoter score, predictive monitoring and usability testing through a customer liaison process.

Learn more about Lean Startup Methodology from the official website.

Blue Ocean Strategy

The cornerstone of Blue Ocean Strategy is the concept of Value Innovation, which is what separates red and blue oceans in the marketplace. Red oceans represent all of the industries in existence today, i.e. known market segments and defined categories. Blue oceans represent industries not yet in existence, i.e. unknown potential market segments and future categories.

The goal of the Blue Ocean Strategy model is to create new market space that is not yet formed and therefore is not crowded with competition. However, the critical requirement is to create value simultaneously for both the buyer and the company, while at the same time eliminating factors (or features) that are less valued or will soon be obsolete. Value Innovation therefore creates higher value, at a lower cost, before competition arrives, and in an area where customers will begin paying for the new value promptly.

The Blue Ocean Strategy Canvas assesses the innovation concept against two factors: offering level and competing factors. The goals of the canvas are to clarify the current nature of the marketspace (including competitive positions and investments), and focus on shifting from a focus on competitors and customers to alternatives and noncustomers (potential future customers for the value innovation). The three litmus tests for BOS opportunity are focus, divergence and a compelling offering.

Learn more about Blue Ocean Strategy from the official website.

Design Thinking

The methodology behind design thinking recognizes that business problems often remain unsolved or ineffectively addressed because there is no overarching design philosophy in place. Traditional analytical thinking (starting with the problem and working down to possible solutions) is considered the opposite approach to design thinking, which starts with a concept and builds up through a range of ideas and possibilities. In both cases, the process begins with defining and researching the problem, but in design thinking, the third step and subsequent steps align with creative concepts rather than root-cause analysis or other downward-facing approaches. The steps in design thinking include:

• Define
• Research
• Ideation
• Prototype
• Choose
• Implement
• Learn

As a result, the design thinking approach is well aligned with Lean Startup and Blue Ocean Strategy concepts, since creativity, rapid adjustment and ongoing evolution are hallmarks of all three. What’s clear in this brief review is that understanding, selecting and implementing a strategic planning model is an essential step that will help ensure the success of your small business strategic planning efforts.

Learn more about Design Thinking from IDEO U.

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