Does strategic planning really work for businesses? The answer to this question used to be a resounding yes, but over the past few years the business world has begun to question its effectiveness – especially in regard to entrepreneurship.
Strategic planning is a process of creating clear objectives, strategies and policies designed to reach organisational goals. It’s a traditional, and rather fixed, approach. Does it allow for the vital ingredient of entrepreneurship?
Entrepreneurs have to be agile, exploiting all the business opportunities they can find, especially as resources and capital can be limited at the start of a new venture. This approach requires more flexibility than strategic planning might traditionally allow.
Yet entrepreneurship is a strategy in its own right and one that’s fundamental to an organisation’s financial and structural growth. Research by policy makers shows that entrepreneurship is especially important for small and medium enterprises – indeed, it can mean the difference between failure and success.
The ideal combination for today’s businesses is in fact a mix of strategic planning and entrepreneurial work, otherwise known as strategic entrepreneurship.
Strategic entrepreneurship: connecting the dots
Strategic entrepreneurship joins the dots between management and entrepreneurship theories to work towards three outcomes: innovation, opportunity seeking and growth. Innovation means bringing an innovative product to market, or improving an existing product to gain traction in new markets. Opportunity seeking focuses on understanding and finding opportunities to take risks – a key feature of entrepreneurship. As for growth, that’s not just about financial gain (although that is of course a key feature). Entrepreneurial activity should lead to gains in competitive advantage, profit or business size.
Strategic entrepreneurship in practice
Any business that works entrepreneurially within a strategic framework is practising strategic entrepreneurship.
The success of this approach will depend on an organisation’s size and industry. Smaller businesses tend to have less formal strategic plans in place due to resourcing issues, so more of a weight is placed on entrepreneurship; in turn, innovation can be hampered in larger organisations where more structures and processes exist. Yet entrepreneurship is vital for all businesses. It sustains a competitive advantage, especially in today’s fast-paced business environment. When a business successfully uses entrepreneurship in one area, it can use what it’s learned to succeed in new territory – be it new products, services or markets.
What does the future hold?
Although most businesses agree that strategic entrepreneurship is a key factor in enhancing and maintaining performance, not all of them are able to implement it successfully. The challenge, then, is this: for organisations and researchers to understand how entrepreneurship and strategy work best together. Entrepreneurship and strategy are inseparable; everybody in business needs to understand why.
By Dr Sara Fisher, lecturer, De Broc School of Business