The foundation of strategic management is for an organization to answer three questions:
- Where are we?
- Where are we going?
- How are we going to get there?
Organizations answer the first question by assessing their organization. Often this is by looking at financial data, reviewing historical trends, and comparing the financial performance to other benchmarks such as industry averages or competitors’ performance. But financial indicators are not the only assessment measures to determine where a company is in relation to the marketplace. Other organizational performance indicators are also reviewed, such as quality measures, productivity measures, human resource indicators such as staff satisfaction and retention rates, and customer satisfaction and retention. A multitude of different measures from different perspectives allow a firm to determine how it is doing.
Organizational leadership provides the answer to the second question; where are we going? In collaboration with other stakeholders, leadership sets the vision for the firm. The vision is what the organization aspires to be, that big goal it wants to accomplish. The vision is developed within the organization’s mission: its purpose for being. The vision must also be aligned with the organization’s core values: the principles that are important as it carries out its mission and vision.
The third question, how are we going to get there, speaks to the heart of strategic management. An organization develops strategies to work toward achieving its vision. These are developed after much assessment is performed to determine the best road map to advance the organization in the marketplace.