In our last blog, Don’t Let Your Business Plan Become A Dust Collector, we outlined a series of derailers that, if not avoided, can transform your strategic business plan into little more than an expensive dust collector. In this entry, we provide a scalable framework for crafting plans that can gain traction with stakeholders.
For many of us, the strategic planning process has historically been akin to a black hole. Meetings occur, informal discussions take place, and then, somehow, magic happens – a three ring binder appears, supposedly summarizing the decisions agreed to by the leadership team. Unfortunately, that’s typically where the magic ends. More often than not, the document is rarely reviewed, seldom consulted, and is left to languish on a credenza till next year.
World-class companies, however, understand the value of strategic planning and appreciate that it is a PROCESS with inputs, outputs, and deliverables. Working with many companies of varying size, scope, and complexity has allowed us to distill this process into the following four steps:
Step 1: Understand The External Environment
This work calls for obtaining a realistic perspective as to what is happening outside of the organization that can have a profound impact on the company’s success. This step involves collecting data on your current and potential competitors, their sources of competitive advantage, likely strategies, and areas of vulnerability.
A detailed review should also be completed on your customers. Elements of this analysis typically include various segmentation strategies, their preferences/desired product/service attributes, which customers are most/least profitable, and most importantly, a review of their unmet needs.
It’s also important to undertake a thorough analysis of the industry/markets – a critical step skipped by many senior leaders. You must understand the size of each market, its growth rate, and profitability. Depending on the size and sophistication of your organization, it may also be necessary to look at other external variables, such as a geopolitical and stakeholder analysis, which could include your suppliers, channel partners, and unions.
The key deliverables during this part of the strategic planning process are a summary and prioritization of the opportunities and threats, as well as obtaining consensus across the senior leadership team as to “what it takes to win” or your key success factors.
- 1) Use analytical tools like value chain analysis to understand your competitors’ cost structure and process hierarchy. This step will help identify specific areas of weakness and vulnerability that are prime for attack.
- 2) Identify “disruptive technologies” that can either allow you to leapfrog your competitors or beat them on the existing playing field.
Step 2: Understand Your Capabilities
We have developed the TOPS Model to describe the architecture present within all organizations. It is comprised of three components: Technology, Organization, and Process. (See Figure 1)
An integral ingredient of the strategic planning “secret sauce” is being able to understand your current capability verses what is needed in the future. Additionally, it is important to be able to identify your internal strengths and weaknesses. Assessing your organization against this framework will provide a variety of findings, including areas of strength to leverage, weaknesses to shore-up, and mid-ground components that would benefit from a mild investment / process enhancement.
- 1) Make sure there is consensus across the executive team on your sources of competitive advantage. Never shortchange these areas in terms of resourcing and budgeting.
- 2) Remember, just because there is a market opportunity, doesn’t mean you have the internal capabilities to successfully take advantage of it. Most strategies and market opportunities require certain core capabilities. If you don't have them you will not be successful in chasing an external opportunity.
Step 3: Develop Your Strategy
This step is by far the most important in the process, and entails using the collected data to identify alternative strategies. Measuring these tactics against objective and quantifiable decision filters (ROI, risk analysis, etc.) will allow you to select the best approach, and then translate it into a balanced scorecard of metrics that are cascaded throughout the organization.
When completing this portion of the work, you must ensure you have tightly aligned your HR practices, such as rewards/recognition, talent acquisition, performance management, and leadership development to your strategy.
- 1) Stay away from the “feel good” work. Unless your organization is at the proverbial crossroads, don’t spend a lot of time developing a vision and mission statement – the reality is nobody cares!
- 2) Developing a business strategy is much more than just identifying the strategic initiatives your firm will undertake. It’s about “placing your bets on the right number” – specifically what markets will you enter, decrease, or exit. It’s about how much revenue you expect to generate from each internal and external growth engine. And it’s about the big picture questions you must answer to “win”.
- 3) Develop a plan for evolving the culture to closely support your business plan. Create consequences for desired and undesired behaviors/results.
Step 4: Deploy the Strategy
Many management teams suffer from ADHD. They feel that their job is finished once the plan is complete. The books are printed and they quickly focus their attention on the next “initiative du jour.” Strategy deployment, however, is all about leaders providing visible sponsorship, allocating appropriate resources, and making tough decisions when needed.
- 1) Strategy deployment is about “organization alignment.” The senior team must quickly identify gaps between the current and future architecture needed to deploy the business plan.
- 2) No matter how well you plan, “un-programmed” things happen. Develop a formal contingency plan with triggers around your major risk factors.
In our next blog, we will complete our review of strategic business planning with a look at best practices for strategy execution.
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