All posts by S2TMaster

AI Title Insurance Technology Permits Automated Title Insurance Operations

The rocket speed at which artificial intelligence (AI) technologies are taking over may seem a little concerning. After all, AI  title insurance technology can be found on our phones, computers, and even in our homes. Yet, AI rapidly increases our productivity, saves us money, and helps us perform our jobs more efficiently. In industries such as title insurance, the tools that are made possible through AI title insurance technology are becoming more and more vital.

AI title insurance

At System 2 Thinking, we are at the forefront of AI in the title insurance industry. Here are the most prominent AI tools that we can expect from title insurance professionals:

  1. Data Extraction and Analysis: AI title insurance technology can automate the extraction of relevant information from various documents, such as property records, legal contracts, and historical data. Natural Language Processing (NLP) techniques can be used to understand and interpret the content, extracting key data points like property descriptions, ownership history, liens, and encumbrances. This technology is in beta but at the forefront of the minds of title insurance computer scientists.
  2. Risk Assessment and Underwriting: AI algorithms can analyze large volumes of historical title data, identifying patterns and assessing risk factors associated with specific properties or transactions. By leveraging machine learning, AI models can help underwriters make more informed decisions by predicting the likelihood of title defects, fraud, or other potential issues.
  3. Document Verification and Fraud Detection: AI-powered image recognition technology can verify the authenticity and accuracy of documents submitted for AI title insurance purposes. By comparing the submitted documents against a database of known patterns and features, AI can flag discrepancies or potential fraud indicators, reducing the risk of insuring properties with forged or tampered documents.
  4. Automated Title Search: AI can streamline the title search process by automatically retrieving and analyzing relevant property records, historical transactions, and public data sources. This automation can significantly reduce the time and effort required for manual searches, improving turnaround times and operational efficiency.
  5. Customer Support and Communication: AI-powered chatbots or virtual assistants can handle routine customer queries, provide information about policies, and assist with basic transactions. Natural language understanding and generation capabilities enable AI title insurance technology to engage in interactive conversations, offering personalized support and freeing up human agents for more complex tasks.
  6. Regulatory Compliance: AI can assist in ensuring compliance with regulations and guidelines by automatically reviewing documents and transactions for adherence to legal requirements. By flagging potential compliance issues, AI systems can help mitigate risks associated with regulatory violations and support adherence to industry standards.

It’s important to note that while AI title insurance technology can greatly enhance title insurance operations, human expertise and oversight remain crucial. AI systems should be used as tools to assist professionals in their decision-making rather than replacing human judgment entirely. Additionally, privacy and data security should be prioritized when implementing AI title insurance solutions in title insurance operations to protect sensitive customer information.

System 2 Thinking (S2T) is a boutique Title Industry Advisory Firm specializing in Title Insurance Licensing, Artificial Intelligence, Mergers and Acquisitions, Compliance Advisory, Process Improvement, and Technology Rollouts. We have been market leaders for over a decade, successfully solving the industry’s toughest challenges while providing unparalleled advisory services. Our partners range from top title agencies, mortgage businesses, and technology startups to Fortune 1000 companies, driving innovation to fuel business acceleration. No matter who you are or your unique challenge, S2T guarantees fast and efficient solutions. Search our comprehensive services today or contact us for a free consultation!

Achieve Sustainable Growth With Title Insurance Process Improvement

Title insurance process improvement and achieving sustainable growth has never been easier than with System 2 Thinking, the only management consultancy dedicated exclusively to the title industry. Here are the four basic steps that System 2 Thinking follows to make your title agency more agile and efficient. 

  1. Identify Change Opportunities

The need for change is the driving force behind effective business process improvements. System 2 Thinking shows you how a process audit allows you to find improvement opportunities. The audit identifies issues but also looks for potential risks. Your report will provide a list of required improvements that can then be prioritized. 

Your audit also allows you to assess each process and its impact on:

  • Your organization
  • Your resources
  • All stakeholders, including employees, customers, students, partners, and suppliers

You will then have a foundation from which to build your improvement plan.

  1. Analyze Your Current Process

With your list of opportunities, you can tackle how you will improve each process. System 2 Thinking will assist with the analysis of your current procedure. When you understand the process every step of the way, you will more readily identify realistic improvements so that you can set your objectives. 

There are many tools you can choose for the analysis, including process mapping, operational surveys, cause/effect analysis, and more. 

System 2 Thinking offers insight into the questions you have to ask. When you answer these questions, you will see patterns and be able to get started on resolving issues. 

  1. Obtain Commitment and Support From Senior Management

When adopting new business process improvements, you require buy-in from senior management. System 2 Thinking helps you acquire senior management commitment so that you can effect change. This is the most important step to see the success of your changes. Managerial support changes optics and allows each department to see the necessity of the improvements for the entire business. 

In order to ensure buy-in and support, a clear presentation of the changes and how they will positively impact the bottom line will help secure support. System 2 Thinking helps management understand the potential consequences of maintaining current processes. 

  1. Create Your Improvement Strategy

The final step is to develop your strategy. System 2 Thinking helps you identify the steps that are being addressed, why they are broken, and how you will fix them. You can use your answers to determine how improvements can be made to develop realistic objectives for your improvements. You can then set measurable objectives that tie in with your strategic goals.

System 2 Thinking helps title agencies improve processes in the following areas:

  • Licensing
  • Escrow accounting procedures
  • Privacy and information security
  • Settlement procedures
  • Title policy production and delivery
  • Professional liability

This accelerated program maps a core group of processes in your business, with the option of real-time process optimization sessions for instant results.

Title Insurance Process Improvement with System 2 Thinking

System 2 Thinking’s Rapid Impact Project was designed for organizations seeking fast, effective solutions to process optimization. Your project can be completed in less than five business days. Our consultants dive in with process optimization education to prepare and motivate your process owners. 

System 2 Thinking is trusted by real estate service providers, tech startups, and Fortune 1000 companies to consistently deliver transformational outcomes in competitive environments.

Visit our homepage to learn more.

Title Insurance Licensing: How to Expand to 50 States

The title insurance industry has never been more dynamic, with a growing interest in mergers and acquisitions, the adoption of e-transactions, and growing concerns with privacy and security. Today, more than ever before, the acquisition and maintenance of resident and out-of-state title insurance licensing can pose more challenges, making it an arduous task to expand. So how do you expand your title insurance agency to 50 states? 

50 Unique Situations

The National Association of Insurance Commissioners (NAIC) has attempted to centralize and unify the nationwide title agency licensing process. However, each state still has its own rules, regulations, and customs. The digital age, the Internet of Things, and the centralization of processing have made it a necessity to be licensed in as many states as possible. That allows agencies to capitalize on opportunities with regional or national lenders.

Unfortunately, it is no easy task. With fifty jurisdictions, there are fifty different sets of rules, regulations, and requirements, each with its own potential pitfalls and each subject to change at the drop of a hat. 

Streamlining Licensure

System 2 Thinking guides title agencies into a strategic national expansion. With an in-depth knowledge of the industry and all its varying regulations, we can streamline the non-resident licensure, demystifying the complicated process. However, agencies are still faced with challenges when undergoing national expansion. 

The lack of a centralized, synthesized resource explaining the guidelines makes it an ongoing challenge to expand, whether you are looking at a few more states or all 50. Although the information you need to proceed is there, it’s not available in an easy-to-follow, centralized location. This requires time and money for research to hunt down every last bit of information before moving forward. With strict compliance a necessity, even a minor slip-up could be extremely costly for your agency.

What System 2 Thinking Offers Title Agencies

A title agency licensing expert can provide advice on licensing strategically. System 2 Thinking solves all of the real estate industry’s toughest challenges by providing unparalleled advice in:

  • Strategy
  • Compliance
  • Licensing
  • Competitive consulting
  • Technology
  • Operations

By partnering with real estate service providers and technology startups all the way to Fortune 1000 companies, System 2 Thinking drives innovation to fuel business acceleration. With technical expertise and seasoned veterans, transformational outcomes are more easily reached in this highly demanding and competitive environment.

Streamlined Title Insurance Licensing with System 2 Thinking

System 2 Thinking is a consulting group that has helped some of the top title agencies in the nation strategize their expansion. Our title insurance licensing services are available in all jurisdictions to leverage years of experience and technical expertise. 

We work closely with businesses to ensure that their licensing strategies are cost-effective and compliant. System 2 Thinking helps you obtain licenses on a state-by-state basis, notify you of impending license renewals, process renewals and carrier appointments on your behalf, and notify insurance departments of any changes.

System 2 Thinking is trusted by real estate service providers, tech startups, and Fortune 1000 companies to consistently deliver transformational outcomes in competitive environments.

We drive innovation and fuel business acceleration with compliance consulting, licensing, innovation strategies, technology rollouts, and process optimization.

System 2 Thinking (S2T) is a boutique Title Industry Advisory Firm specializing in Title Insurance Licensing, Mergers and Acquisitions, Compliance Advisory, Process Improvement, and Technology Rollouts. We have been market leaders for over a decade, successfully solving the industry’s toughest challenges while providing unparalleled advisory services. Our partners range from top title agencies, mortgage businesses, and technology startups to Fortune 1000 companies, driving innovation to fuel business acceleration. No matter who you are or your unique challenge, S2T guarantees fast and efficient solutions. Search our comprehensive services today or contact us for a free consultation!

The Beginning of the New Normal for Title Agencies

The age of fragmentation between all of the parties involved in the closing process – the title agent, the banker, the realtor, the buyer, and the seller – is coming to an end. In its place, comes the age of integration, wherein the entire process is consolidating into a single platform. Consumers and new technology are driving this consolidation, making it imperative for other companies to join in. Otherwise, they could be at risk of losing business.

In previous years, this single-platform technology was only accessible to the big names in business. However, since technological advancements have made this software easier to build and distribute, smaller independent agencies can now utilize it. As a result, if other businesses wish to thrive in the coming years, they will need to integrate this software as well. This is “the new normal” – the standard for title agencies to conduct digital transactions between separate parties.

To illustrate, Zillow has eliminated the need for a prospective buyer to use a real estate agent to find a home. Now, people interested in purchasing a home can begin their search on their own, which is partly the reason the industry is shifting towards allowing the entire process to be completed on a single platform. If title companies do not adopt this new technology, they can expect their partners and customers to leave them in favor of a different title company that offers a unified experience.

There are three entities from which title companies would feel pressure

  1. Market Consolidation:
    Large title agencies used to rely on transactions deriving from a centralized place such as Bank of America. Today, national title agencies are moving to where the independent agencies are located, moving business away from those that have yet to adopt new efficient technology. An example of this would be an small corner store pharmacy going out of business  after a CVS opened across the street
  2. Lead Consolidation:
    With the internet available in our pockets, information regarding real estate listings are more accessible than ever before. Rather than word of mouth referrals, prospective buyers can now discover and make decisions on properties on their own. This increases competition and the access to leads.
  3. Margin Compression:
    Big name companies appointed RealEC, Ellie Mae, and other eMortgage software products to make sure the fees charged by title companies are lower in price.

The new reality is that smaller agencies lagging behind in single-platform integration are slowly being squeezed out. Years of price compression following the mortgage meltdown have led to this. 2018 is now the tipping point.

Streamlined Regulatory Compliance for Title Agencies from S2T

Regulatory compliance becomes particularly complicated for title agencies operating nationally. With every state having its own regulations, whether you currently operate in multiple states or are looking to expand, your team needs to understand the implications of regulations and how it affects your clients and transactions. 

System 2 Thinking provides a streamlined approach to ensure your company is conducting proper procedures to remain compliant with all regulations nationwide. System 2 Thinking can assist in the following areas.


Your agency can easily establish and maintain the required current license(s) to provide title insurance and settlement services. System 2 Thinking lists every U.S. state and the District of Columbia, providing an individual chapter in the manual detailing the state laws, regulations, and customs.

Procedures and Controls

It is easier to adopt and maintain escrow trust accounts for the required written procedures and controls using electronic verification of reconciliation. You can ensure your funds are safeguarded as required by each state in which you operate with escrow trust accounts reconciled daily.

Privacy and Protection

Privacy and security are top of mind for your clients. You can provide a written privacy and information security program to protect Non-public Personal Information in accordance with the local, state, and federal laws as they apply to each jurisdiction. System 2 Thinking provides the appropriate written procedures and controls to protect your client’s information and every piece of data exchanged for your transactions. 

Real Estate Settlement and Procedures

Settlement procedures and policies are standardized to ensure you are compliant with Federal and State Consumer Financial Protection Laws as they apply to the Settlement process in each state. System 2 Thinking prepares your agents to effectively delineate procedures for both pre-closing and post-closing while adhering to federal, state, and underwriter-mandated requirements. 

Written Procedures

Your agents will ensure the timely issuances of title insurance policies with the adoption and maintenance of all written procedures related to title policy production, delivery, reporting, and premium remittance. With the maintenance of appropriate systems in place, System 2 Thinking ensures you can meet the legal and contractual obligations of your clients. 

Liability Insurance and Coverage

You need appropriate protection and must maintain appropriate professional liability insurance and fidelity coverage. System 2 Thinking will ensure your agency has appropriate Errors and Omission Insurance as well as any mandated coverages required by your underwriters.

Resolving Consumer Complaints

Keeping your clients satisfied and ensuring you are meeting their needs is key to your success. However, when issues arise, and consumer complaints threaten your reputation, the adoption and maintenance of written procedures for resolving consumer complaints can make reviewing and addressing concerns more streamlined. Consumer situations can be resolved in a timely manner to protect you from claims of poor service or compliance issues. 

Regulatory Compliance for Title Agencies

As you know, rules and regulations across regional, national, and international jurisdictions are continually amended and updated. This ongoing evolution can leave your company vulnerable to enforcement actions and fines, as well as reputational harm. 

System 2 Thinking provides streamlined compliance for title agencies, including risk assessment services through strategic benchmarking and business performance analysis. Whether you are examining your current competitive position or contemplating entering a new market, we can advise you on the potential impacts of the latest regulatory developments with our time-tested strategies and cutting-edge regulatory compliance tools.

System 2 Thinking is trusted by real estate service providers, tech startups, and Fortune 1000 companies to consistently deliver transformational outcomes in competitive environments.

We drive innovation and fuel business acceleration with compliance consulting, licensing, innovation strategies, technology rollouts, and process optimization.

Visit our homepage to learn more.

PropTech Will Disrupt These 4 Sectors of Real Estate

How will PropTech disrupt real estate? The sheer scope of disruption in store for the real estate industry is massive. Everyone knows this, but knowing that change is inevitable and knowing what that change will be are two very different things.

PropTech is technological innovation and the real estate industry intersected. The result is a slew of new products and business models that are changing and will continue to change how real estate is transferred, developed, managed and used.

One way to flesh out exactly what this disruption will look like is to break down the phrase “real estate industry” into its constituent parts. From agencies and real estate portals to developers and property managers, no sector of the industry will be unaffected.

Knowing where innovation is happening will help you create and implement a strategy so disruption takes the form of an opportunity rather than a threat.

Design and Construction


Design and construction companies, and the companies that create the tools they use, are focused on bringing real estate projects from design to completion.

There are numerous tech-savvy startups developing tools and services essential to this sector, including digital platforms that improve how projects are financed, how building materials are sourced and how project costs and tracked and managed. Architects are also using new architecture and design software powered by artificial intelligence that reduce project costs and completion times.

Lease and Management

Property leasing and property management companies, whether they’re dealing with a single property or a complex portfolio of properties, are finding new ways to conduct business.

Startups and technology companies that provide the tools and services to support this sector have introduced numerous new technologies, including innovative peer-to-peer leasing technology platforms, app-based inspection management software, tenant screening solutions, scalable lease and revenue management software and smart building software that track usage and reduce costs.

Search, Sale and Acquisition

This sector of the real estate industry is all about providing ways for people to search for, market and acquire properties.

Listing portals like Zillow and Redfin were disruptive as originally conceived, but now they are expanding beyond search and discovery and bringing other steps in the real estate transaction into their platforms. Brokerages, sales and real estate auctions are moving online. Peer-to-peer brokerages, peer-to-peer lending and digital finance and investment platforms are making “flippers” more agile than ever opening the door for more small-time investors to experience the equity upside of investing in their local real estate markets.

Urban Planning

Urban planning organizations perform various functions in planning communities, cities and rural areas, including streamlining planning approvals with local government, improving how land is used and protected and enhancing the aesthetics of urban environments.

PropTech startups with new mapping platforms, urban design software and virtual reality technology are creating new opportunities and (in some cases) disrupting this sector.

About System 2 Thinking

System 2 Thinking is trusted by real estate service providers, tech startups and Fortune 1000 companies to consistently deliver transformational outcomes in competitive environments.

We drive innovation and fuel business acceleration with compliance consulting, licensing, innovation strategies, technology rollouts and process optimization.

Visit our homepage to learn more.

Now Available: The First National Real Estate Transaction Compliance Manual

System 2 Thinking is excited to announce the publication of The Ultimate Real Estate Transaction Compliance Manual: Your Guide to Laws and Customs in all 51 Jurisdictions, the first national real estate transaction compliance manual. 

Encyclopedic, up to date & practical. The only book of its kind.

Anyone who needs to know all the laws, customs and regulations surrounding a real estate transaction in all 51 jurisdictions will discover up-to-date ShepardizedⓇ citations and references regarding:

  • Title Searches and Examination of the Land Title Records
  • Ownership – Vesting and its Idiosyncrasies
  • Death and its Effect on the Transaction
  • Statute of Limitations
  • Mortgages, Liens & Foreclosure
  • Real Estate Closings
  • Recordation into the Public Records
  • Property Taxes

The Ultimate Real Estate Transaction Compliance Manual will be an essential tool for any company operating on a national scale that is involved in real estate transactions — specifically C-level executives, operations managers, processors and compliance officers at:

  • Real Estate Brokerages
  • Real Estate Portals
  • Title Agencies and Underwriters
  • Banks and Mortgage Companies
  • Asset Management Companies
  • Foreclosure Law Firms
  • Real Estate Law Firms
  • Home Equity Lenders
  • Portfolio Valuation & Risk Analysis Companies
  • Mortgage Servicing Companies
  • Real Estate Services Providers

Buy a Copy

About the Authors

The result of 25 years of work, the manual was authored by Allen Solomon, CEO of NYC-based management consultancy System 2 Thinking; Roberto Abreu, Chief Compliance Officer at System 2 Thinking; and Steve Daigle Sr., Founder and Chairman of Punctual Abstract, one of the largest abstracting firms in the United States.

About System 2 Thinking

System 2 Thinking is trusted by real estate service providers, tech startups and Fortune 1000 companies to consistently deliver transformational outcomes in competitive environments.

We drive innovation and fuel business acceleration with compliance consulting, licensing,  innovation strategies, technology rollouts and process optimization.

Visit our homepage to learn more.

FinTech Startups Looking to Take on Title Insurance Giants

FinTech, the industry aimed at improving financial services through the incorporation of technology, has officially made its way into the title insurance market. Title insurance is imperative for home buyers if they wish to be protected from anything unexpected that can show up on a property title. FinTech startup companies have formulated a strategy for advancing the title insurance process with technology – saving homeowners and mortgage companies both time and money. Below we examine the various ways in which three FinTech startups are shaking up the title insurance market.

States Title Makes Progress

The title insurance industry has long been controlled by four companies: Fidelity National Financial Inc., First American Financial Corp., Old Republic International Corp, and Stewart Information Services Corp. Recently, California’s Department of Insurance has issued States Title a license granting them the ability to offer title insurance in the state of California. This makes States Title the first FinTech startup to receive a license in the 15 billion dollar title insurance industry.

Dave Jones, Insurance Commissioner at California’s Department of Insurance, has praised States Title for their use of technology to increase efficiency of services while also saving consumers money. The title insurance process is very time-consuming and bothersome. However, it becomes less of a burden when automation is introduced to such tasks as searching through public records – a service that States Title makes possible.

OneTitle Takes on Industry Giant

Another FinTech startup that is determined to take on the leaders of the title insurance market is OneTitle National Guaranty Company. Similarly to States Title, they use technology to search through public records at lightning speed and for less money. In fact, the CEO of OneTItle claims that without title agents they can charge customers 25% less for premiums.

All of the services that you would expect from a title insurance company are offered by OneTitle, but with one key difference—it’s all automated. That includes the underwriting of policies, lien searches, escrow services, and recording services.

Spruce Has a Different Approach

While the other FinTech companies are opting to compete directly with the big names in the title insurance market, Spruce prefers to join them. This FinTech company is merging their technology with the title insurance services of current lenders. This will allow these lenders to reduce the price of their services, and will undoubtedly be appealing to many current title insurance companies looking to increase the efficiency of their services.

The title insurance and abstracting world as we knew it, just changed.

It’s Inevitable: Real Estate Transactions Will Move Online

Over the last 20 years, a phenomenon has taken place. A huge percentage of commerce, and therefore, the world has moved online. Today everything from fresh produce to cars is being bought online, often sight unseen. The key to this transformation — besides near exponential advances in computing power and cloud storage — is convenience.

Purchasing property still remains highly inconvenient from the consumer perspective. To many, it begins to feel like a full-time job. Real estate transactions still rely on physical paperwork, notaries, numerous stakeholders and face-to-face meetings.

Tradition has trumped efficiency thus far in the world of real estate transactions, but it won’t be like this forever. Real estate transactions online are coming sooner than you think. That may be music to the ears of consumers, but to many real estate professionals who are entrenched in (and highly efficient at) the current way of doing business, it may seem more like a death knell.

From our experience working with real estate service providers that conduct every process point in a real estate transaction, we have some intuition about how this will all come about. Here’s what you need to know.

From Many Portals to One

As it stands, all the parties in a real estate transaction use relatively new cloud-based portals that save time and money. Most of these tools didn’t exist 15 years ago.

Consumers use listing portals like Zillow and Redfin to find homes and get in contact with real estate agents. Lenders and title companies use title and escrow software like Qualia or ResWare to collaborate with one another to streamline the closing.

Yet, these portals are not connected with one another. Each stakeholder uses technology that makes their small part of the real estate transaction easier, but the work from each system must be combined and moved from stakeholder to stakeholder in a manual fashion.

These various portals will be stitched together along with a digital mortgage platform so that consumers can do everything in one place: find a home, compare real estate agents, apply for a mortgage, etc. In the long-run, consolidating the real estate transaction into one platform will also be beneficial for real estate professionals.

What the platform will look like and who will create it still remains to be seen, but we would put our money on a tech giant like Amazon or Google teaming up with a tech-savvy mortgage giant like QuickenLoans. The need for such an all-in-one portal all but assures that one will be created, and whoever does will have won real estate 2.0. Stay tuned.

About System 2 Thinking

System 2 Thinking is trusted by real estate service providers, tech startups and Fortune 1000 companies to consistently deliver transformational outcomes in competitive environments.

We drive innovation and fuel business acceleration with compliance consulting, licensing, innovation strategies, technology rollouts and process optimization.

Visit our homepage to learn more.

Phote credit: natmac stock /

Title Agency Strategic Planning is not for the Faint of Heart

Keeping up with a title agency’s daily operations is often difficult enough as it is. In the midst of the daily hustle and bustle, taking a step back in order to think or act in a strategic manner can be a tall order. However, the sum of our daily business actions can produce the results and transformations a company needs to stay competitive—or can result in the incremental inefficiency that brings a company down. Acting strategically requires business stamina and strategic muscle. And businesses develop those muscles by using strategic planning to improve their strengths and fortifying their weak areas.

Strategic Planning is an Imperative

Without a good plan to follow, title agencies will often experience mission drift and suffer a slow demise as a culmination of poor decisions and misguided actions exact their damage over long periods of time. Strategic planning helps bring clarity to an otherwise cloudy business vision. The very process of strategic planning helps a company identify market trends and customer preferences, which the company can then address accordingly. Laying down a solid business plan establishes the correct architecture for fiscally responsible growth, and—second only to superb execution—is the single most important determinant of organizational success. Success largely depends on an entity’s ability to build internal capacity and capability that sets in on the right path.

No Pain, No Gain

Strategic planning is rigorous work. Organizations new to the discipline sometimes get discouraged early on, wondering if the effort they are expending will be worth the payoff. Of course, most of us already know that strategic planning is well worth the effort, but for the naysayers and doubters out there, let’s spell out the benefits.

Strategic planning achieves the following goals:

Forces consideration and planning for the future: Strategic planning helps define a course of action that furthers the mission of the organization and creates the capacity to grow successfully. A thorough strategic planning process identifies potential growth markets that can be investment opportunities for the organization’s resources. Such markets can become the next generation of revenue sources and replace those that are becoming saturated, undergoing fundamental changes that pose risk to the business, or experiencing decline.

Identifies the correct organizational priorities: Because strategic planning involves a structured analysis of initiatives, it forces companies to align their spending with their priorities. On a more subtle level, strategic planning relates to hiring decisions. Correct hiring practices support strategic programs by supplying the business with the right talent at the right time. The operational plans, within the strategic planning umbrella, spell out those requirements. Additionally, strategic planning promotes job performance accountability and gives incentives for completing goal-related initiatives. For the roles and responsibilities of an organization’s personnel to remain clear, the right incentives must be provided for those who perform high quality work. Employees that understand their role in the company and know exactly how to perform their job and contribute positively to the organization become empowered team players.

Provides structure and accountability: People thrive best in structured environments—including well-organized workplaces. A strategic plan aligns thinking, action, and values, and it helps motivate management and employees by giving them a clear direction to work toward. Strong line-level managers and employees are better able to guide the operations of a company and take the reins for the goal-supporting initiatives that fuel a company’s future. Using organizational performance indicators and metrics makes controlling and managing workflow easier, as this information indicates the need for evaluation and analysis early, when corrections can be made more easily and at less cost. Once proper accountability is established, those closest to the action in a business can respond quickly and appropriately when needed—always operating within predefined spheres of control and in concert with the strategic goals. This system allows employees to embrace the business vision and fully participate in its tactical execution.

Strengthens culture: Ultimately, strategic plans help strengthen an organization’s corporate culture. In practical terms, the process of planning the execution of strategy means energizing and inspiring people so that they truly invest themselves in the organization’s continued success. In order to achieve this goal, the CEO must serve as a sort of “strategy ambassador.” Everyone in the organization should fully believe that their actions are relevant to the business’s achieving its mission and strategic objectives. This sense of involvement should include all executive management, senior managers and employees; but it also extends to customers, vendors, partners, investors and even boards of directors. Open and honest communication about a company’s strategy a vital ingredient to achieving employee buy-in—and the motivation and inspiration that results from it. In fact, a key aspect of the planning process is creating the most effective communication pathways possible. Good communication unifies the organization behind a goal, and subsequently the culture grows stronger and healthier.

The Cost of Not Acting Strategically

Just as there are payoffs to diligently performing strategic planning, there are consequences for neglecting to do so. Consider Borders Books. Once a prominent brand, they no longer exist today and have even vanished from the online shopping world.

The old Borders website redirects shoppers to the Barnes & Noble website with a welcome message to Borders customers.

Undoubtedly, Borders Books is a sad example of a business that failed to plan for their future correctly. As a result, in September 2011 Borders Books closed its doors forever. The company liquidated all of its assets and delivered pink slips to approximately 11,000 employees.

Meanwhile, as a result of smarter strategies that recognized and accounted for changing dynamics in their marketplace, competitors like Barnes & Noble fared much better. How can two such similar bookstore giants end up on such divergent paths?

For starters, as early as the 1990‘s, Barnes & Nobles noted the growth and popularity of online book sales and e-books. The company adopted a strategy to become a player in online book sales and invested in programs that would make it a major player in the sale of books over the Internet. This strategy paid off. Their early entrance into online sales arrived in time to capture market share and establish a beachhead. Likewise, Barnes & Noble developed the Nook to strategically position themselves with the market segment that prefers to read e-books. On the other hand, Borders Books ignored the market trend, outsourcing its online sales to competitor Amazon—a decision that turned out to be a huge strategic blunder for Borders. Borders also pumped money into plant capacity to support distribution of physical books, despite the declining market, and updated their retail store across their large network. Instead of taking a dynamic stance, they stayed in the same rut even as the market changed. Borders wasn’t able to evolve quickly enough, and it suffered as a result of its lack of strategy.

Finding the Right Strategy for Your Company

In terms of a business operation, capacity refers to the actual or potential ability to perform smoothly, yield results, and withstand challenges. Capability means actually living up to this potential. Capability is the sum of expertise, hard work, and capacity. Strategic planning helps systematically expand a company’s capacity and develop its capability. However, be aware that strategic planning is rigorous work. Organizations new to the discipline often get discouraged when the first challenges arise. It’s much easier to follow a rut than to interact dynamically with your current and potential markets.

For business organizations to consistently demonstrate strategic behavior, the enterprise must have developed the strategic “muscle” it takes to get the job done and the business stamina to actually accomplish its goals. Businesses build strategic muscle by developing their strengths (increasing capability) and fortifying in their weak areas (increasing capacity) through strategic planning.

Without a good plan to follow, businesses languish in their current-state and fail to evolve into modern competitive enterprises. So start thinking today about how you can start developing and flexing those strategic muscles—and watch the success that follows from having a proactive, strategic outlook. But remember: strategic planning isn’t for the faint of heart.