5 Steps Planning

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What is 5 Steps Planning? Meaning.

5 Steps Planning is is a Formal (Deliberate) Planning Process used for strategic planning.

The concept of the Five Steps formal strategic planning process has been developed by J.S. Armstrong in his 1982 article “The Value of Formal Planning for Strategic Decisions”, Strategic Management Journal, Vol. 3.

The author started examining the efficacy of well-known planning approaches such as Porter’s 5 Forces, SWOT Analysis, Ashridge Mission Model, Experience Curve Model, Scenario Planning, BCG Matrix, McKinsey Matrix, beside performing a review of management literature on corporate planning.

While Armstrong found that many companies of all sizes are using such tools, he did not find much evidence of a guaranteed success with their use of a formalized approach to Strategic Planning. After having carried out research on many companies, and having completed 28 validation studies to evidence his early hypothesis, Armstrong explained his simple approach to formal strategic planning and underlined under which circumstances it might work well.

The five process steps are:

1. Set Objectives for the long run.

2. Generate Alternative Strategies.
3. Evaluate alternative strategies by comparison.
4. Monitor strategies implementation and results.
5. Obtain a high level of commitment among the Stakeholders during each step of this process.

In order to be effective, any formal planning approach requires certain circumstances or situations, as evidenced by Armstrong:

1. Major changes in a company structure such as Mergers or Acquisitions, big marketing changes or New Product Development.
2. A period of strong Uncertainty such as when companies are faced with a relevant Crisis, or during important economical or political changes.
3. Companies competing in highly inefficient markets.
4. Projects characterized by a high level of complexity, where a synergic collaboration is required from different parts of an organization.

According to Armstrong, only under such circumstances a formal approach to strategic planning can be effective for a company success. In all other situations it is advisable to adopt a Flexible or Emergent Strategy.

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