Strategic Planning Thoughts

Is Retail Strategy different from other strategy?

2011-05-04T10:29:00.000-07:00

When I do public strategic planning programs for a broad audience, I am sometimes asked “Is strategic planning for a retail business different from strategic planning for a different kind of business, such as a manufacturer?” The answer, not surprisingly, is “yes AND no”. The differences and similarities may surprise you.

To begin with, the “product” of a retail store is different from most product and service creating businesses in that it is not part of a discrete transaction conducted with the customer – that is, as a retailer, you do not get a separate payment from your customer for the value you produce. Instead, you always (or almost always) make money on payments from your customers for goods and/or services produced by others. Of course, there are exceptions – for example, if you do food preparation on your premises, you are getting paid directly for that value – but in most cases, retailers make their money on the markup on the goods and/or services they are selling.

To put a finer point on this distinction, as a retailer you get some compensation from customers – largely for the experience you generate around their purchase – and some compensation from suppliers – largely for the infrastructure you provide for their distribution. How much compensation comes from either source is a tangled topic we can address elsewhere, but the point is, you make your money as a retailer by providing infrastructure and experience.

And here is one place where strategic planning for retailers is just like strategy done for anyone else: as a rule, the more easily a service/product can be measured and duplicated, the harder it is to sell it as a specialty. In retail, the value of infrastructure is exactly that – something that is easily measured and duplicated. This is not always so – a huge distribution network like Wal-Mart’s is hard to duplicate, and so is a highly specialized semi-monopoly network like Duty Free America. Still, for most suppliers, access to customers through one infrastructure network is pretty much the same as the others. For customers, however, the differences can be notable and – in the eye of the customer – worth quite a bit.

If you run a retail business, where do your stores stand? Do you sell an experience or infrastructure? How does your strategic competency add to your uniqueness and the value you create for your customers?

Strategic Vision at Apple: Will it change under Tim Cook?

2011-02-23T06:14:00.000-08:00

As Steve Jobs' health becomes a greater concern at Apple, attention has been focused on Apple's number two exec, Tim Cook. This transition raises some questions that are interesting strategic planning issues, and will be a fascinating case study in business strategy over the next three or four years.

First, many credit Jobs' vision for the success of Apple. In some ways, this is not far off the mark - Jobs, especially after his return to Apple in 1998, pushed Apple in some weird directions that clearly distinguished the tech company from its competitors. Probably the best part of this strategy was an emphasis on design and a willingness to take a shot at unusual new products before it was clear consumers wanted to buy them.

The first item - emphasis on design - could arguably be Apple's strategic competency. Every successful Apple product has had a design that notably distinguishes it from competitors, and in most cases, the Apple product has re-defined its market.

The second item - a willingness to take risks on new products - lies at the heart of entrepreneurial success in any industry, and is only notable at Apple because size tends to extinguish this vital recklessness. The Fortune 500 is littered with companies that used to have this gambling mentality - but no longer do. Apple still has it, and one could argue this is because of Jobs.

Enter Tim Cook - a perennial number two, according to some, Cook has been seen as an operations guy - and a brilliant one with a keen mind. Operations, unlike design and marketing, does not often reward entrepreneurial recklessness, though - so will Cook bring a vision that can sustain Apple's weird status in the future? On the one hand, people who know Cook say he is a great strategic thinker. On the other hand, operational responsibilities can infect your mind with a gray practicality that deadens the innovative spirit of an organization. It's truly too soon to tell, but don't bet on Apple going dead in the water immediately. Cook knows he has a lot of very keen people around him who have been part of Apple's success over the past ten years - and he is smart enough to know how to work with them. Let's hope he doesn't try to "re-make" Apple in his image just to satisfy his ego - any sign of that would be the kiss of death, as it has been for countless other successful companies in transition.

Why Wal-Mart is not invincible

2011-02-07T05:43:00.000-08:00

After a couple of years of news stories trumpeting the success of Wal-Mart (again), sales at Wal-Mart stores showed a decline last year. Why? There are two very different reasons. The first is economic, the second is competitive. The economic reason is that all shoppers shift spending downward when they see themselves affected by an economic downturn. This means people who shop at higher-end stores when times are good may stay pinching pennies by making the same purchases at a commodity store like Wal-Mart when things get tight. The competitive reason is that some of Wal-Mart's closest competitors - notably the dollar stores like Family Dollar and Dollar Tree - have started to close the gap on some of the weaknesses that caused customers to shift away from them and towards Wal-Mart. The first shift isn't really big news - commodity players always fare better when the economy is doing badly, and worse when things brighten up. But the second shift should be worrying to the folks at Wal-Mart. The commodity game, unlike a specialty strategy, allows only one winner. Any change that reduces volume for the lead player makes it that much more likely that an upstart will be able to remove the commodity crown from the top dog. Wal-Mart has undertaken some big expenses in the past few years that their smaller competitors have not - notably advertising and opening/closing stores. These are both strategic moves, and properly done may lead to higher profit at Wal-Mart - BUT improperly done, these moves may just be another chink in Wal-Mart's armor.
While I'm not a big fan of commodity strategies in general, so much has been made of Wal-Mart's management approach that I will find future developments in this market space very interesting to watch.
Here is a question for you in your strategic planning: Are YOU staying on top of your game? Are you considering pursuit of strategic moves that may create chinks in your armor? And how are you preparing yourself for a better 2011 and beyond?

Making things matter

2011-01-18T09:06:00.000-08:00

A quick strategic planning observation: so many great profitable strategies work off of this one simple idea, I thought I'd share it with you. We live in a world where many of the frustrations we have come from people treating things as if they don't matter. If you can find something that matters to your customers that your competitors treat this way, you have a potential gold mine on your hands. In your strategic planning, make sure you ask yourself if you understand what matters to everyone in your profit system - your customers, your employees and your suppliers, most of all. If your business matters to those people, it's bound to succeed.

Strategic Planning: The "disappearing middle" of the job market

2010-12-03T13:12:00.000-08:00

A common question in strategic planning revolves around the strong profitability of clear, focused specialty and commodity strategies. Apparently, this is becoming a factor in the labor market, as well.
An article in The Lookout on Yahoo notes that there is a "disappearing middle" in the job market. This trend - growth in lower-tier unskilled jobs and upper-tier skilled jobs, looks suspiciously like the "saddle curve" we use to explain the profit impact of pursuing specialty and commodity strategies. Is is possible that the labor market is now coming to reflect the same specialty and commodity tendencies we have observed in other markets? An interesting question is: why has this tendency not been apparent in the past? Strategically, you should ask yourself: is my company employing specialty employees or commodity employees - and how does that fit with our strategic planning?

Help! I can't get my team thinking strategically!

2010-06-14T17:58:00.000-07:00

This is a cry for help I get a few times a year. Fortunately, I'm good at fixing this problem. Of course, you are wondering how.
Here are four simple tips for getting a team to think more strategically:

1. Force thinking to the future. The more distant future brings up questions about the survival of the industry, not just your company.

2. Ask why we exist. Not how are we going to exist, but why.

3. Use strategic imagery. Don't talk about swimming faster - talk about swimming in the right direction.

4. Challenge the team to make their own luck. Get them thinking about how to get your company doing the right thing, in the right place, at the right time.

5. Every time someone suggests a tactical solution, respond negatively: "That's only going to make us a little more successful next year. I want something bigger".

If these don't work - or if they do, for that matter - you should seriously consider bringing in a professional who focuses on challenging teams to think more strategically. Drop me a line and I'll tell you how to get me to come do it in person.

Strategic Planning: Why Wal-Mart is a bad place to buy books

2010-05-11T02:37:00.000-07:00

A recent article on Yahoo Finance got me thinking about a fascinating strategic planning question: why is Wal-Mart is a great place to buy some things (such as video game consoles) and a terrible place to buy books?

Wal-Mart wants to turn over its merchandise quickly, and prices hot items (like the Nintendo Wii) to sell quickly. When it comes to books, there is a serious problem in this. Wal-Mart has been having a price war with Amazon over best-selling titles. Fortunately for Amazon, Wal-Mart has to do this, because Wal-Mart would never win a value war with Amazon. Amazon has invested huge amounts in having millions of titles available - arguably, a better selection of books than any other source on the planet. Wal-Mart - true to their commodity strategy - only wants to sell huge quantities of the best-selling books. This means that Wal-Mart, at best, might carry one thousand titles, compared to Amazon's millions. This brings us to the classic reason to buy - or not buy - from Wal-Mart. Want a cheap price on a New York Times bestseller? Wal-Mart will probably have it, and they will try to price it less than Amazon. This is still a challenge, since Wal-Mart is still largely a bricks-and-mortar operation, but their advanced distribution and purchasing power enables them to give Amazon a run for it's money.

But let's look at the flip side: Want any one of a million titles - say, a book about fossil hunting in Florida? Wal-Mart will never carry such a title, because the turnover rate would be too poor. In fact, there are thousands of books in a typical Borders or Barnes and Noble that Wal-Mart wouldn't want to carry because they don't have the volume demand that, say, the latest Twilight book would have. This approach might make little difference to readers who only buy a book or two to take to the beach in the summer - which is a valid, addressable market that Wal-Mart already caters to - but it makes buying books at Wal-Mart about the same as buying clothing at a convenience store. Sure, you might find what you are looking for, but you'll waste a lot less time going to a specialty retailer whose strategy is centered on giving you the selection you want. This is true whether you are talking about online sales or bricks-and-mortar sales: selection is both a cost and a consumer preference in the book market (and arguably, the fashion market and many others).

Wal-Mart can succeed by sacrificing the preference for selection because price is also a strong preference. For retailers like Amazon, however, the strategy of leaning into Wal-Mart's weakness (product selection) will always garner a sizeable chunk of market share. The challenge for even more specialty-oriented stores (small, independent booksellers, for example) is to provide other values that Amazon (or Waldenbooks) won't, such as personal service, focused selection, ambiance, and browsing configurations.

I'd go a step beyond this and say that people who buy books at Wal-Mart are also doing society a disservice, because civilization suffers when economic resources are diverted only to cultural production that sells in mass quantities, but that's a somewhat elitist viewpoint. Still, a culture that only supports best-sellers isn't just bland, it is systematically likely to sink to the lowest common denominator in literature. Call me a snob, but I'd prefer not to build a civilization on Harlequin romances.

How about your business? Are you like a Wal-Mart, an Amazon, or a small independent bookstore? How do you create value for your customers? Does your strategic planning give you the ability to out-serve your biggest competitors in a huge portion of your market?

The State of the Art

2009-10-30T04:02:00.000-07:00

Despite what people might tell you, strategic planning is an art. As with other arts, you can do better with good training and tools, but at the end of the day, there is no replacement for skill and experience.

In times of economic turmoil - or even just turmoil in a specific industry - many companies turn away from their strategic planning to focus on short-term issues. In many cases this is warranted - your course may not be as important if the ship is sinking - but in far more cases, this departure can lead to bad strategy and failure.

One of the best (and to me, the most painful) examples of this departure from the path of good strategy occurred at Disney from 2001 to 2008. In the years before this - from 1991 to 2001 - Disney operated an excellent park at Disney World called Pleasure Island. This park filled in an important gap for both families and convention attendees in the area - the absence of nightlife for adults. While this fell outside the Disney strategic competency of family entertainment (viewed on its own), it was well within that competency when seen as a part of the bigger picture, answering the question "How can we keep the whole family happy during a week at Disney World?". Unlike any other place in the world, Pleasure Island offered (during its peak years) family oriented nightlife - a place where I wouldn't mind taking my young children to go dancing or take in a comedy show.

In 2001, the aftermath of 9/11 devastated the travel industry, and hit Disney hard. To overcome this, Pleasure Island management started targeting the local nightclub crowd, making changes to the operation that made it more appealing to young local people. This change may have decreased losses in 2001-2002, but it also decreased the family appeal of the attraction, and Pleasure Island started to fade as a part of the Disney destination as it became more of a local hang-out spot. As you might expect, the very non-family oriented problems of nightclubs - drugs, violence, gangs - also seemed to be increasing during this time. Attendance -especially by families and Disney vacation-goers- declined steadily as the Pleasure Island operation became less of a distinct entity and more of an imitation of Citywalk at Universal Studios nearby.

In 2008, the entire operation was shut down, to make room for more shops in the Downtown Disney area. Thus, a unique part of the strategic competency of Disney World suffered a strategic loss due to changes that were made for tactical reasons seven years before.

While the decisions involved in the decline of Pleasure Island may well have been made in strategic planning, there was a clear departure from strategic competency-based thinking for more tactical considerations of short-term revenue enhancement in 2001-2002. Small changes, like the cessation of fireworks and live shows, and big changes, like the removal of admission gates from the island entrance, led very directly to the decline and, ultimately, the failure of the operation.

Has your company departed from its strategy in the past year? Do you need to return to strategic competency-based planning to renew the true distinction that your company can have in the marketplace? Now would be a good time to consider returning to a discipline of formal strategic planning to assure success not just next year, but for years to come.

When Should You Get on the Bandwagon?

2009-08-18T11:51:00.000-07:00

You have no doubt seen many of the indicators that the recession may soon be over (if it isn't already, a view held by some very smart economists). This doesn't mean everything will return to the rosy days of, say, 2006, but it does mean the economy will begin growing again. With this knowledge, you are probably thinking about when you should consider revving up the profit engine in your company. The timing of this can be a critical question in many industries.

As a general rule, you don't want to rev up too early, because you will increase your expenses to do so, and profitability will suffer as you spend on capacity that you do not need. On the other hand, you also don't want to rev up too late, because this could easily lead to a loss of market share as your inability to fill orders in the short term pulls you up short. A more difficult and probable effect of undercapacity is that parts of your distribution channel - and even individual customers - are likely to switch to competitors when you cannot meet their needs.

These two factors push against each other - the risk of increasing expenses too early tempers your desire to reduce the risk of losing market share in a recovery. Obviously, excellent forecasting - or at least close attention to real economic data - can be very valuable to you here. Beyond timing your return to expansion precisely, you should also assess the real risks of both scenarios. If you are pursuing commodity strategies, the cost of increasing costs too soon may be unbearable with your super-lean cost structure. On the other hand, a specialty strategy may lead you to see the cost issue as small compared to the risk of losing market share, especially when some market share loss may be permanent.

How should you handle this in your strategic planning? An objective look at your current financial model and market position should be a part of at least some of your monthly strategy implementation review meetings. Until we have passed the current economic inflection point, you will be well-served to look at the upside AND downside of both increasing costs and losing market share.

Strategic Planning - Better Business Models, part 2

2009-05-14T08:38:00.001-07:00

Business models work because they work for customers – and coincidentally, for your company. Self-deception here can lead companies to optimistically adopt a business model that fails because it was designed for the supplying company rather than for the customer. Time and again, I see business models that are broken not because the starting point for their design is what the supplier wants – rather than what the customer wants. One of the key reasons that specialty and commodity strategies are more often successful when they are distinct from each other is that the concept of specialty and commodity limits suppliers to ONE facet of their own desires – and then subjects the business model to a wide range of the customer’s desires.

The quintessential example of failure on this point is one of the oldest ways to create a scam – sell someone on the idea that they can get lots of money, quickly, without special skills or hard work. Sometimes these scams are simple (the Nigerian 401 scam), while sometimes they are grand and complex (Bernie Madoff and Enron come to mind). The fundamental nature of free market capitalism – that it is an engine of creative destruction – means that ANY business model that requires little work, skill, risk or time will be destroyed as quickly as competitors figure it out. Incidentally, if you think through the implications of each of these advantages (little work, little skill, little risk and little time), it becomes quite clear that business models built on top of genuine strategic competency are the only ones that have a long-term chance of success.

Strategic Planning for Acquisitions - Team Composition

2009-05-05T12:52:00.000-07:00

When you are evaluating an acquisition, who should be on your team? As a general rule, you should attempt to include anyone who has primary responsibility for an area affected by the acquisition. For example, if operations will be affected (and they almost always are), you will want to include the VP of Operations. Obviously, there are a few other areas that are always - or almost always - affected by an acquisition, which means that most (if not all) companies will also want the CEO, the CFO and the VP of Sales involved. If you have a VP of marketing with a strategic level of responsibility, he or she would also be a good addition to the team. In many companies, you will also want to consider including the heads of IT, Human Resources, and Technology/Engineering - depending on your industry, and the ability of the person in question to think strategically about the acquisition.

I'd be curious to hear if there are people you have included in acquisition teams in the past that aren't listed here. Do you have any experiences (good or bad) that might suggest ways you should consider team composition? Let me know!

Strategic Planning: How to RE-think Your Business Model

2009-04-30T05:29:00.000-07:00

This year, a LOT of people seem to be wanting to re-think their business models. This is a pretty good idea, because some things are changing in the world economy at a very fundamental level.

I do have to question the wisdom of tackling this for the first time in a recession, though - and here's why: tuning up a business model requires good information from the market.
The information from the market right now suggests (for example) that US consumers only want to buy 6 million vehicles a year. This is obviously poppycock, as anyone in the auto industry could tell you - but behaviors change during a recession.

When you are re-designing your business model, you are trying to create a structure that will work for you ALL the time - in both good times and bad. In many cases, the best business models simply don't work that well during a recession - so you have to structure your business to weather the storm.

All this being said, some markets may be changing so fundamentally that it would be suicidal NOT to re-examine your business model. So what is the best process for doing this?
In strategic planning, the business model is often one of the core strategic issues, so I often find myself tinkering with it.

In the past 20 years, I've found myself making excellent changes - and sometimes not so excellent ones. Here are a few things I've learned from the hundreds of times I've tackled this:

1. Build your model on DATA, not emotion
2. Understand ALL FLOWS in your model - not just the easy ones
3. Start with an understanding of your STRATEGIC COMPETENCY
4. Looking at your current model, ask WHY and WHY NOT about every area where customer value is not optimized
5. Pay close attention to the things EVERYONE IS DOING - and figure out how to avoid them
6. When you have a new model you like, SHOOT HOLES IN IT - and then fix them
7. Make sure you have a good EXECUTION PLAN for making sure the model changes - you will meet resistance!

My next few posts will be about each of these points, and some of the things I do to assure the output is a sturdy, viable business model.

Strategic Planning - What's Working Now

2009-04-07T08:31:00.001-07:00

I've been paying close attention to the things my clients are doing that seem to be working right now. Remember, the economy is still functioning around at least 90% of where it was a year ago, so there is plenty of money to be had out there. Here are the strategies that seem to be working:

1. Target emerging customer desires

Emerging customer desires can be general (such as an increased desire for green products) or very specific (such as the new niche for iPhone apps). This strategy requires a bit of forethought about what's going to be cool next year, but the payoff can be huge.

2. Emphasize needs based purchases

When people tighten their belts, they still buy what they need. An emphasis on basics can pay off, but don't overlook the "downshift" appeal of less expensive luxuries, where people subsitute, say, a domestic vacation for an international one, or beer for wine.

3. Use the breather to tune up your operation

You have extra capacity and manpower right now? Prepare yourself...you may not have enough in a few months. Even if you don't expect this, it's wise use a period of low capacity utilization to increase the efficiency of your operation from the ground up - and NOT just by cutting costs! This would be a perfect time to undertake a lean initiative, for example.

4. Acquire competitors who haven't planned for a recession

Some of your competitors undoubtedly didn't prepare as well as you did for a recession. Why not take advantage of this fact and sniff around to see if any of them would be willing sellers?

New Strategic Planning Process - Drinks at the Pool

2009-04-01T07:17:00.000-07:00

I have recently reviewed strategic planning results from a number of clients, and am developing a completely new design based on results over the past 10 years.

This new process, which I am calling "Drinks at the Pool" or DatP for short, reflects learning from some of the most successful organizations I've worked with over the past twenty years. It involves a structured process of drinking whiskey next to a swimming pool in a warm climate.

If you are interested in this streamlined and effective form of strategic planning, I have some dates available in April in Orlando, and would enjoy talking with you about how we can relax and imbibe our way to greater success for your company!

Strategic planning - Compensated Risk

2009-03-18T13:05:00.000-07:00

I love entrepreneurs. Not only are they the soul of job growth in the world, but they are, in many ways, the pinnacle of the accountable life. Every little thing a business owner does can have an effect on his or her company - and he or she reaps both the rewards and the penalties for those actions.

One of the things that bothers me about public companies is the separation of risk and reward, especially at the executive level. It drives behavior that is at best incongruent and at worst, destructive.

Take the example of a company that takes a wild risk to fund development of a major new product. Let's say this funding requires an investment of $2 million and has a 50/50 chance of success. For the entrepreneur, the downside is the loss of his or her $2 million - and in many cases, failure of the company.

Not so for the executive in a large public company. That loss simply becomes a blotch on his or her resume - and would not usually prevent finding another, better job when the time comes to move on. Now, granted, the entrepreneur gains more from the upside - the gains are all his or hers (after taxes). The large company executive merely gets a big feather in his or her hat and possibly a nice bonus.

Let's look at the real issue here - both of these players are gambling. But the entrepreneur gambles with his or her own money, while the public company executive gambles with the investment dollars of shareholders. If the public company is REALLY big, like General Motors or AIG, the gambling can also involve taxpayer money, which is essentially extorted from citizens to fund the career-building risks of executives in large companies.

Inside ANY company, you can find issues resulting from compensated risk. When the risk to any employee does not correlate to the risk for the company - when he or she doesn't have enough "skin in the game" - you are asking for strategic problems. A very common example of this lies in sales compensation - most salespeople are compensated on sales volume, but can have a high impact on margins, too. When you balance the compensated risk of losing the sale (and the volume-based commission that goes with it) against the non-compensated risk of low margins for the company, most salespeople will err on the side of low margins. Where do you see conflicts of compensated vs. non-compensated risk in your company?

Strategic Planning - What You Should Do Differently!

2009-03-02T09:27:00.000-08:00

Obviously, this year puts most of us in a strategic environment that is quite different from anything in the past five or ten years. Are there any things you should do differently in strategic planning this year? Absolutely! Here are a few suggestions:

1. Do make sure you are investing as much as you can in capital and acquisitions - because they are really cheap right now!

2. Do invest in your brand - again, really cheap, and the marketing noise level is low in many markets!

3. Do hire good people away from competitors that are cutting staff - good people are gold, and some of the best people may become available this year!

Here are a few other things you should NOT do:

1. Do NOT save money/time by skipping strategic planning! Now, more than ever, you need to steer your business carefully.

2. Do NOT cut key people if you can help it - they are very hard to replace.

3. Do NOT assume that current trends will continue - one thing we know is that even bad recessions don't last THAT long, so plan to position yourself well in the recovery.

If you'd like to discuss how to apply these suggestions at your business - no matter what size - please get in touch! We've helped clients improve their profits in good years AND bad since 1981 - and the Simplified Strategic Planning model can be scaled to fit any timescale and budget.

Strategic Planning: "Cancelled Meetings are Actually Costing the Economy Millions!"

2009-02-11T04:31:00.000-08:00

In response to congressional scrutiny of lavish travel perks for top executives, many in the travel industry are pointing out that meetings and incentive travel are an important part of the economy.

Yes - and no. Yes, meetings are still the most effective way for people to network, communicate and learn, because face-to-face meeting will always have higher bandwidth than any other form of meeting (or at least for the forseeable future). Yes, incentive travel is a very efficient way to motivate employees who are performing well.

No, because, at the most outrageous level, some incentive travel is going to people who need very little in the way of incentives. I'd be happy to be in the executive suite of one of the nation's top banks - and AT THAT LEVEL I wouldn't expect any incentives unless the bank was doing well. At the C-level, incentives should go up and down with the company's stock - and a company getting massive government bailout money shouldn't hand out incentives at the C-level until that money is paid back in full. An executive in a troubled company who accepts this kind of perk - with a cost that exceeds the income of some employees - should be completely prepared to have a PR nightmare on his or her hands.

This is DEFINITELY NOT THE CASE when you go to lower levels of any organization. A manager who is delivering top performance in a business unit, and increasing bottom-line performance for his or her company, should obviously be well-rewarded for that effort - especially now. So I'm particularly concerned to see Wells Fargo adopt an across-the-board elimination of incentive travel, since that is obviously a case of throwing the baby out with the bath water. What is the likely effect of this kind of misguided reaction? Loss of Wells Fargo's best performers to competing banks who will (appropriately) continue to reward their employees who are performing well. Let's put this another way: a hard-working mortgage producer who meets measurable goals this year and makes the bank a million dollars more absolutely deserves a trip to Hawaii - and I would applaud this move, as a shareholder.

Obviously, Wells Fargo and similar organizations don't face this issue at the top level where the most egregious over-incenting was taking place. No one will cry if the executives responsible for the bank's current position jump ship - and it's unlikely another bank would want them right now. Perhaps the most difficult part of being responsible for incentive travel is looking employees - even executive level employees - in the eye, and telling them why it doesn't make economic sense for them to go to meetings, when others are going. A true test of a great manager is his or her courage to do exactly this - and I hope the folks at Wells Fargo will show that kind of courage instead of the one-size-fits-all easy way out they have taken.

Meetings and incentive travel are, in fact, a critical part of the economy. Shutting them down will have a long-term negative effect on productivity growth. Let's not hamper economic recovery just because the ROI is too difficult to measure.

http://meetingsnet.com/corporatemeetingsincentives/news/mpi_meetdifferent_0209/

Strategic Planning - "What's the point, in a recession?"

2009-02-09T08:01:00.000-08:00

Some audience members at my speeches have asked me if it really makes sense to continue with their strategic planning activities during a recession. My first reaction is "of course!", but let's take a closer look at the reasons why you might not start strategic planning (or continue it...) during a recession.

1. Strategic planning takes resources.

This argument is part of the general "downward spiral" attitude - cut everything that costs money, the conventional wisdom goes, and you will end up with a profitable business. I suspect the airlines have been trying to figure out how to get rid of passengers for years, since they cost money...and that is exactly the point. Almost everything worthwhile in your business requires time and money to maintain its value. The same is true of your strategy. This is not less true during a recession - in fact, there is no better time to look for strategic opportunities as your competitors make their strategic choices based on fear and knee-jerk reactions. True, you may want to spend LESS on your strategic planning than in the past - but that is a good reason to use the SSP framework.

2. Strategic planning focuses your attention on the big picture when you need to worry about staying in business.

If you are in imminent danger of insolvency, this is absolutely true. If you can continue operations, then now is the best time to look at the big picture. Many strategic resources - people, technology, capital resources and acquisition targets - are more available and cheaper now than they have been in years. If you can take advantage of the opportunities, this is the perfect time to examine your strategy and pursue those that truly fit your business.

Beyond that, if your business model is truly broken, you have a very short window of opportunity in which you can completely change it in order to resume growth in the new business environment.

3. Strategic planning may limit you from pursuing opportunities when you need every nickel to turn a profit.

Again - if you absolutely have to have every dollar you can get in the door, you may need a very different look at your strategy. But if you are going to survive, the choices you make to get those dollars today will affect your business for a long time to come. Making good choices today will help you build healthy growth for the future - and not get you into the downward spiral of trying to be all things to all people as your company resumes growth.

The Center for Simplified Strategic Planning has a number of processes designed for every level of resource availability. My clients are CONSISTENTLY outperforming their competitors in a wide range of industries, right now. If you are concerned about your ability to plan effectively this year, please contact me to find out how we can design a schedule that will fit your situation, and better prepare you for the years ahead.

Strategic Planning - How are you preparing for the END of the recession?

2009-01-21T09:44:00.000-08:00

I'm hearing a lot of interesting things about how to adapt your business to a recession, but the fact is, the most successful strategies we've seen in the past two recessions involved preparing the company for the END of the recession.

Partly, this is because the knee-jerk reaction to recession is to begin the cost cutting/value cutting syndrome that leads to a downward spiral...and partly, it's because there is NO better time to plan for a reinvigorated strategy than when you have a little bit of breathing room.

Let's look at this another way - during the peak season at a tourist destination, everything is crowded and expensive. Hotels, airlines, rental car companies all charge top dollar because they can, when there is more demand than supply. In the off-season, everything is cheaper and less crowded.

If you think of the US economy as being in the "off-season" right now, you'll realize there are some things that savvy companies ARE spending money on - right now. A classic example of this is something we teach in our strategic planning classes - that mature cash cow companies ALWAYS invest in marketing during recessions. This is because brand is still important to a cash cow - but waiting for recessions to invest in your brand helps to optimize overall cash flow.

Our experience bears this out - our top-performing clients not only managed costs carefully during previous recessions, but also invested in preparing for future growth - and beat their competitors to the punch by doing so.

What are YOU doing to prepare to return to growth?

Strategic Planning and strategic thinking - what should employees know?

2008-12-16T15:38:00.000-08:00

What are the most important things for employees to know to think more strategically? A quick survey of recent attendees at our strategic planning seminar yielded these areas for improvement:

1. Thinking about our business from the customer's perspective
2. Understanding the economics of our industry
3. Knowing the competition and their strong and weak points
4. Understanding our strategy and the reasons for it

Beyond this, I would contend that employees do need to understand some of the fundamentals of strategy - the concepts of strategic capability, focus, specialty and commodity strategies, and market share are all very useful in many jobs, not just executive ones.

Do your employees know these things? If they did, how would it help your company?

Strategic Planning - Recession Opportunities

2008-12-08T12:58:00.000-08:00

We all fear recessions – in most industries, we hate going through them. But recessions are an inevitable part of a dynamic economy. No amount of planning or regulation will prevent this (in fact quite the opposite). So how do we come through the inevitable in good shape?

In our strategic planning programs, one of the key ways we have seen companies come out of a recession well is by viewing the period as an opportunity. Clearly, your first priority should be survival, but I like to follow the advice of Warren Buffet: “Be fearful when people are greedy, be greedy when people are fearful”. Here are four areas of opportunity you should be considering in the next year:

Get new customers – customers will be looking to change how they do business because of recession pressures. Why not be that change for the customers you aren’t currently selling?
Get new employees – with a tight labor market, you have a unique opportunity to bring top shelf talent into your organization.
Add capacity – you’ll get far better deals on capital improvements you want to make now. It’s like vacationing during the off-season – cheaper, and less crowded!
Make acquisitions – some great acquisition targets may be available at bargain prices in the next few months. If you’ve been putting this off, and you have the resources, now is a great time to buy.

Are you considering other strategic opportunities because of the current economic climate? Let me know!

Strategic Planning - Great Strategic Thinking

2008-11-28T06:51:00.000-08:00

One of the secrets of the greatest companies is their ability to communicate the essence of their strategy to every level of the organization. Not only does this result in better co-ordination and input from every employee, but it yields behaviors at the front line of the organization that reinforce the core strategy.

Obviously, a good strategic plan that is well-communicated will go a long way to making this a reality. But there is also an element of strategic thinking that exists at the top of most organizations - and is often missing at other levels.

I'm curious...does your company communicate the strategic plan to its employees? What does your company do to instill strategic thinking below the top management level? What do you think could be done to improve this at your company?

Strategic Planning: How Many Market Segments?

2008-11-08T05:49:00.000-08:00

A common issue in strategic planning is "How many market segments should we have?". This issue is one that we address in the first day of our strategic planning process.

As a general rule, I like to keep market segments limited to a number that everyone can carry around in their head. Psychologists have studied what this number is, and their research suggests that the average person can recall a list of 5-9 items. Managers, who are (on average) more capable in this department, can recall 9-11 item lists. In strategic planning, this means you can expect a management team to keep a list of 10 segments straight while your average employee will only be able to keep 7 or 8 items straight. Because I like to see awareness of strategy driven through the entire organization, I suggest a guideline of 6-8 strategic market segments. This does NOT mean you shouldn't do a more thorough job of parsing data in your marketing analysis - it DOES mean you should use a list of segments that will be meaningful through the entire organization when setting strategy.

When CEOs tell me the issues they have with their strategic planning, "How many market segments?" is one of the first five questions I ask. This is because "too many market segments" is a very common problem - and one that is easily remedied in the course of strategic planning.

Strategic Planning for Acquisitions

2008-06-23T04:57:00.000-07:00

One of the issues I often encounter with new clients is acquisitions. In many cases, the acquisition has already been made when we start strategic planning, and we have to figure out how to make it work. This, of course, is a little backwards - the best way to make an acquisition is to figure out the answers to a series of questions and use those answers to guide your acquisition selection process. These questions are:

Are we ready to make an acquisition?
Why do we want an acquisition?
Who should we acquire?
Who should we NOT acquire?
How can we integrate the newly acquired company into our strategy?

We are addressing the first four of these questions in a teleseminar series that starts today at 2:00 EST. If you are interested in participating, you can sign up at the Strategic Planning for Acquisitions web site.

Strategic Planning - IT, Google, and Strategic Competency

2008-04-14T04:44:00.000-07:00

I just read an excellent article on Google as a disruptive technology over at TechRepublic.

One quote by Richard Hunter from Gartner Group caught my eye:

“Google has the potential to be the first-choice provider of many services that are now handled by internal IT organizations, starting with non-competitively-differentiating services such as email (which Google already provides to a number of enterprises), and ultimately including high-value-added functions and services such as business intelligence, mobile sales support, and others. Some IT organizations might consider it a boon to pass these functions on to Google so that the IT department can concentrate on very enterprise-specific competitively differentiating applications. IT organizations that measure their worth in terms of how much of the company’s IT needs they supply themselves will be less happy to see Google move in on their turf-and I do mean specifically that in many cases it will be an argument about turf, not enterprise value."

This comment shows a lot of strategic savvy. The interesting question is similar to the questions that plagued IT during the rise of personal computing in business in the 1980's - first, is this really a wave? Secondly, if it IS a wave, do we fight it, roll with it, or ride it? These questions should be coming up in your strategic planning.

In my thinking, the idea that IT can (and should) focus on company-specific differentiating technology is dead on - and very important for most IT departments. An IT department that isn't differentiating the company might not be worth what you are paying for it.

How about your IT department? Does it contribute to your company's strategic competency? Do you have them working on technologies that other people can already deliver?

Strategic Planning - Why your balanced scorecard isn't yielding the results you expect 4

2008-04-07T10:33:00.000-07:00

This is the last in a series of blog articles on why your balanced scorecard isn't getting the results you expect.

The fourth main reason why you may be disappointed in your balanced scorecard program is fundamental to the limitations of the scorecard itself.

-The change your business needs involves a more fundamental shift in strategy

Simply put, you can't measure your way out of some strategic issues. To use an analogy, let's say you are part of a team of jungle explorers, and you are measuring your efficiency. You might look at "miles traveled per day". Under many circumstances, this might get you where you want to go. But there is no measurement around this that addresses the more fundamental strategic questions - such as "Are we in the right jungle?" and "Should we be in a jungle in the first place?". No matter how well you perform on your measurements, being in the wrong jungle will prevent you from succeeding - and you won't even ask the right questions if you stay completely focused on any set of metrics.

So, to sum it up - a balanced scorecard is a very useful tool, one that is quite similar to the "Measures of Performance" we have been teaching since 1981. Even more importantly, measurement can drive strategically useful behavior, so a balanced scorecard program can yield excellent results. But - as with any other management process - you need to be aware that no one approach can solve all of your business problems, and there is no substitute for a robust, formal strategic planning process.

Strategic Planning - Closing the Loop

2008-04-04T05:16:00.000-07:00

I just read an interesting blog entry on “bringing perpetual reality to strategic planning”. This is EXACTLY what you need in your strategic planning – a process that drives from good strategy and vision to the hard realities of what is going to happen, who will do it, and how much it will cost. Putting real feedback into your planning process helps us to correct, improve and build on what we learn in implementation.

In Simplified Strategic Planning, we drive this approach three distinct ways:

The structure of the process flows toward an end-point that makes very specific, measurable objectives and implementation plans.
The implementation planning process leads to a regular monitoring process where progress on execution is tracked and discussed.
The entire experience is reviewed at the beginning of the subsequent cycles for learning and opportunities for improvement.

Does your strategic planning do these things? If not – let’s talk about how you can improve the “reality connection” in your strategic planning!

Strategic Planning - Finding the way forward

2008-04-03T07:09:00.000-07:00

These days I seem to be meeting more people who feel strategic planning should take second place to improving sales right now. Unless your company is on the verge of bankruptcy, this opinion is completely misplaced.

Sales can be good or bad for your company. I've seen many situations where big increases in sales have nearly killed a company - and others where the sales that were added were to completely the wrong kind of customer. Both leave you with a bigger problem - that is, your company is bigger, but your problems are bigger, too.

Good strategic planning is about finding a way forward that does not leave you to the mercy of a sometimes capricious economy. In the last two recessions, we had many clients that used the pause in market growth to build substantially sturdier and more profitable businesses. Sadly, I met some people who chose the path of more sales instead of better strategy - and more than half of those people are now out of business. I now expect this to happen to companies that don't have excellent strategies - because recessions have a way of weeding out companies with poor strategy.

Which will you choose? A stronger, stable company - or a bigger, weaker one?

Consider contacting me for a short strategic planning tune-up - even if you already have a plan, you will probably find some valuable ways to improve profitability now.

Strategic Planning in law firms

2008-04-01T06:43:00.000-07:00

I saw a fascinating tidbit in a blog on law firm profitability today...just thought I'd like to share it with you:

http://www.morepartnerincome.net/2007/12/10/law-firms-with-strategic-plans-more-profitable/

One of the most interesting points in the article is that while a huge majority of firms that do strategic planning say it improves their profitability, 74% of law firms don't do strategic planning!

It also refers to an interesting article about why strategic planning is such a problem for law firms, written by a partner in a large firm:

http://www.lawmarketing.com/pages/articles.asp?Action=Article&ArticleCategoryID=58&ArticleID=475

Strategic Planning - Why your balanced scorecard doesn't work part 4

2008-04-01T05:53:00.000-07:00

Your balanced scorecard isn't driving action.

This is most likely true, if you are doing balanced scorecard instead of true strategic planning in your company. Why do I say this? Because true strategic planning focuses attention on the things that will make a difference for your company. Balanced scorecard processes, on the other hand, tend to rely on employee understanding of the links between metrics and reality - and, because of shortcomings I've discussed in earlier posts, these links rarely motivate employees as well as understanding the underlying issues. Granted, your CFO or other technical managers may quickly grasp the relationships - but true strategic competency requires broad participation and support from all parts of the company.

Even if you have excellent training and support throughout the company for balanced scorecard, you are likely to have issues if you are not also driving execution through a routine tool for monitoring and accountability on actions (rather than numbers). The action plan process in Simplified Strategic Planning is an excellent approach to doing this, and can be helpful even if you are not using an optimal strategic planning process. There are several keys to making implementation work - it is, after all, the sore spot in strategic planning for most companies. The most important of these is to have rock solid and unified support for implementation accountability at the top levels of your company. This is a key area where executives must always act as role models for the rest of the organization - failure to do so almost always results in sloppy execution.

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If you are looking for a strategic planning speaker to help your organization learn better strategic planning implementation - or the whole strategic planning process - please check out my strategic planning speaker brochure or see what past clients have said about me at http://www.strategyspeakers.com/p_rwb.asp

Strategic Planning - Estimating the Size of Your Markets

2008-03-27T05:59:00.000-07:00

Many companies I've done strategic planning with have gotten really worked up over trying to estimate the size of a niche market when there is little or no available data on the market.
I figure there are four easy Ways to figure out the size of your market segment.

1. Total up the sales of your competitors in the segment
2. Total up the purchases of the customers in the segment
3. Take your sales in the segment, estimate your share, and multiply
4. Total up the sales of key suppliers into the segment and estimate the sales number this represents

Naturally, each of these requires that you have some information, or at least guesses about what is going on in your markets. If you'd like me to explore how to do each of these, let me know and I will write more on the topic.

Do you have another way to estimate market size? I'd be interested in hearing from you if you do.

Also, if you know anyone who is looking for a strategic planning speaker - I love to speak at conventions and corporate events...drop me a line!

Strategic Planning - Why Your Balanced Scorecard Isn't Working, Part 3

2008-03-22T09:48:00.000-07:00

You aren't measuring things that really matter.

There can be lots of reasons for this issue. Perhaps you are measuring something that has little or no impact on your competitive position. In strategic planning, this is worse than a waste of time.

Ask yourself: if ONLY this number improved, would we really be better off? In many cases, the numbers you look at overlap with other numbers. To use a simple example from financial measurements, it's somewhat redundant to look at both gross margin and net profit, because net profit is simply gross margin minus fixed costs and a few other expenses. I won't tell you which you should look at in your own company, but I will tell you it's rare that a company should include both numbers in the five to ten core metrics in a streamlined balanced scorecard. This means you need to pick one, understand that it (like all metrics) will have the flaw of not being complete, and move on.

Another reason why companies sometimes measure things that don't really matter is that the metric chosen makes the company look good. At worst, this can be a case of throwing in a number because it can be counted on to give us good news even when the other numbers are telling us bad news. Again, if the number does not affect your competitive position or your ability to succeed, consider eliminating it from your scorecard.

There is an even more insidious problem associated with measuring things that don't matter - if this is your company's problem, you are very likely shying away from measuring things that matter very much. Sometimes this is because managers fear the implications of managing to certain metrics. If managers fear measuring profit per employee, for example, because it might lead to staff reductions, you should be asking yourself whether this fear is useful. There are many industries where staff reductions are a vital strategic management tool - failing to consider them when appropriate can be a major strategic error.

Strategic Planning - Why your balanced scorecard doesn't work, part 2

2008-03-06T22:50:00.000-08:00

You have too many metrics in your scorecard.

This is most likely true, if you are doing balanced scorecard in your company. Why do I say this? There are four reasons you have probably put too many metrics into your balanced scorecard.

1. Someone thinks bigger document = better document

This is a holdover from when we had to write five page papers in high school. We are all now old enough to know that quantity does NOT equal quality, it just makes work and wastes paper.

2. You can't decide which numbers to throw out

You know you should have only two or three financial measurements, but there are so many good ones from which to choose. Is the solution to keep them all? Only if you want to make people's eyes swim and make sure only the accounting types really read your scorcard numbers.

3. You want to be inclusive and have a metric for everyone

After all, if Bill in the mailroom doesn't have a metric, how will we include him in our process? This is a hard one, because inclusion does create value - but let's have a tactical number for Bill...and avoid pretending that our company should have a mailroom strategy. Either that, or admit that your balanced scorecard process is tactical rather than strategic - which is probably will become if you have this issue.

4. You don't want to exclude certain measures because someone says you "have to" watch them

I see "have to" junk all the time in strategic planning. Whenever someone says you "have to" do something in business, I hope you'll do what I do and immediately explore what will happen if you do the exact opposite. The future belongs to the unconventional company, and you are seriously conventional if you do everything people say you "have to" do...

And what are the reasons for having fewer measures? There are only three:

1. It's less work
2. It's more effective
3. More people will read it.

For some bizarre reason, none of these is as psychologically powerful as the reasons to have a big, bloated scorecard. So when someone asks me to look at their scorecard, I always brace myself for a mind-numbing avalanche of numbers only a CPA could love. I'm rarely disappointed.

Strategic Planning - Why Your Balanced Scorecard Program Isn't Getting the Results You Expected

2008-03-03T04:30:00.000-08:00

Last week I had an interesting conversation about the Balanced Scorecard with a friend who works in a large organization. His comments reminded me of so many comments I've heard about balanced scorecard and strategic planning that I went back through my notes to see what common threads underlie the biggest issues companies have with balanced scorecard initiatives.

To begin with, balanced scorecard projects are no more strategic planning than budgeting is. Sure, you can use a scorecard to drive certain fragments of the strategic planning process, but it is still a fragment of what is needed to create the right strategic change for your organization. To make matters worse, it's often a complicated and expensive process.

Based on feedback from the companies I've met through my strategic planning seminars, speaking and client work, here are the main reasons why you might be dissatisfied with your balanced scorecard program:

1. You have too many measurements
2. You are measuring the wrong things
a. You are measuring things because they are easy to measure
b. You aren't measuring the things that really matter
3. Your scorecard isn't driving action
4. The change your business needs involves a more fundamental shift in strategy

I'll explore each of these in my next few blog posts, and discuss what you can do about each.

Of course, the best thing to do about getting the strategic change and the results you want is to do good strategic planning, and there is no better way to do this than Simplified Strategic Planning.

Strategic Planning – when should the team be expanded?

2008-02-20T10:31:00.000-08:00

The question of the size and composition of your strategic planning team should constantly annoy you. It should be annoying because there are two really important, but competing factors that should drive your choices. First, your planning will be more focused and effective with a smaller group. Second, your planning will have far greater impact if a larger number of people in your company feel they own the plan.

In recent years, we have tried many different compromises driven by these two factors. We’ve done planning with teams of 20, we’ve worked with teams of 3. Some of the innovations that have come out of this are well worth trying in any company. Still, at the end of the day, some clients want to have a very large number of people participating in their strategic planning meetings. Here are a couple of approachs that have worked for different companies:

Have larger teams work on the homework from sections 1 and 4, and bring them in for the first day of meeting 2 to present their information.

Invite all members of action plan teams into meeting 3 to review their action plans and participate in the scheduling process

Have an informational meeting with a larger group at the end of the strategic planning process

Conduct a strategic issues discussion (page 5.2) with larger groups and collate the results with the top management team.

Of these, I’m very partial to (1) and (2). Approach (1) drives ownership of the information.- and the strategy – down a level in your organization. Approach (2) drives ownership of executive to the appropriate level, where people who will do the work are also responsible for management of the implementation.

In any event, I would be wary of doing any of these approaches the first time out. Your management team will be under enough stress engaging in a new (or different) process without the added problem of performing for an expanded audience. Indeed, when there are specific remedial issues to address, you probably want to keep the strategic planning team as small as possible.

Have you involved a larger group in your company’s strategic planning? I’d love to hear about other approaches that have worked well.

Strategic Planning - Do you think like your customers?

2008-02-18T06:21:00.000-08:00

Yesterday, someone brought to my attention a video of an ad that airs on late-night TV for an auto insurance company in Washington State. On the surface, it’s not a slick ad. Many insurance agents would immediately poo-poo it as unprofessional, cheap and sleazy-looking. Frankly, it would hurt to be responsible for this ad.

So why do I like it?

I like this ad because it works – and it works for a reason that bears thinking about in your strategic planning. The ad is for insurance for people who are pretty bad risks. It’s a group I would want to insure myself, but then someone has to. Here’s what I think makes this ad work: the people who see this ad, folks who are, perhaps, watching cheesy re-runs at 2 a.m., are not, for the most part, “professional”. They see an ad that shows someone pulling up to a McMansion in a BMW and immediately tune it out – because they know it’s not for them. But this ad hits those same people hard because it is for them….it’s quick, funny in a cheesy way, and there are bits that will appeal strongly to the lowest common denominator.

Obviously, there are things I do not like about this ad campaign. For one thing, there are nasty sexist bits in there that I wouldn’t touch with a ten-foot pole. But, at the end of the day, Vern Fonk keeps running these spots because they get business in a cost-effective way. And that means the spots probably work - even though most marketing folks would hate to have produced them.

So…in your strategic planning, I’d like you to ask yourselves: are we approaching our market thinking they will behave just like we do? How would our customers make different choices? What can we do to find out what really works, if we don’t really think as our customers do?

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Strategic Planning - avoiding the downward spiral

2008-02-15T06:56:00.000-08:00

This week I'm at a convention that I really have enjoyed over the years. The trouble is, I notice that the numbers have been smaller, and the association is cutting corners on lots of visible things that affect my perception of the value of the meeting.

I envision the people doing the strategic planning for this event discussing their challenges and noting that, because attendance is off, there is less money to spend. Shouldn't we meet this challenge by spending less? Of course, the answer is yes, but I think it's critical to examine the distinction between costs that add value for customers and those that do not. When we fail to do this, customers notice that every year, things suck just a little bit more. A good example of this is the entire airline industry. Southwest Airlines took advantage of this by cutting to the chase and cutting deep very early on - and they still spend extra money on things that really do affect the customer's value perception. The rest of the industry is stuck on the downward spiral...diminished expectations driving down the customers' willingness to spend leading to less money...and so on...

How can we spot this syndrome in strategic planning - and how can we avoid it? It helps to ask - would customers pay extra to get certain things? It also helps to have a firm idea of who you are for your customers. If you are an association, do you deliver value the members can't get any other way? If you are an airline, are you a comfortable, friendly way for business travelers to get wherever they are going? If you run a construction business, do you get projects done on time and under budget? These are just some examples, but they can help make it very clear where you should spend money even when things get tight. Failure to do this makes you vulnerable to a competitor who does what your customers think you should be doing. Does this mean you may have to lose some customers who aren't willing to pay you to be who you are? Yes, it does. Do you have to choose which customers you want to target in strategic planning? You bet - that's one of the reasons why it's hard.

Next time you are discussing the challenge of a tighter budget in strategic planning, you might want to ask yourself where the value lies. You may be better off charging more and getting smaller numbers anyway than following the cheapest customers into the downward spiral.

Strategic Planning – the infinite loop

2008-02-13T13:18:00.000-08:00

Yesterday, I had a strategic planning session with a fellow speaker, who mentioned to me that her strategy is to have everything she does be part of an “infinite loop”. This picqued my curiosity, so I asked her about what this meant. In her view, this meant that every new client she takes has to help her learn things that will help her get the client after. In other words, she intentionally seeks business where the her learning helps her get more of the same type of business.

In systems thinking, we would refer to this as a “recursive process” – that is, the output of the process ultimately becomes input to the process. Some engineers might recognize this as a “feedback loop”. In many cases (for example, in software), we don’t like to see feedback loops – but in business strategy, it’s a great idea. Why? Because the “problem” with feedback loops is that whatever is feeding back gets bigger and bigger with each cycle through the loop. In an audio system, this leads to that horrible screeching we hear when a microphone gets too close to a speaker…but in business, this effect can happen to beneficial results (such as learning or getting more business).

Does your business have a feedback loop? How do you maintain it? Good strategic planning should guide you towards this type of competitive advantage.

Strategic Planning - strategic competency and obsession

2008-02-11T19:02:00.000-08:00

Today I had a strategic planning meeting with a long-time client that started out in the business of selling tax forms - Greatland Corporation. I say they started out this way because today they offer numerous products and services, including software and online services, to support compliance with government regulations, mostly in the area of wage and income reporting. While their decision, years ago, to pursue other products made sense from a technological perspective, what really made it work was their obsession with compliance. Today we are looking at ways they can extend this obsession into other products and services, which makes me think this quite possibly a useful strategic competency.

In reflecting on this, it is clear to me that great strategic competencies almost always arise from obsession about something that is valuable to your customers. What are you obsessed about? Next time you do strategic planning, ask your team about what they think your company's obsession is - you might find the answers useful.

SWOT analysis - why not try another approach?

2008-02-06T20:24:00.000-08:00

People make a lot of the SWOT analysis in strategic planning. As a rudimentary approach to thinking about strategy, the SWOT works pretty well. Decades of experience has shown us that great strategy requires much more focus on strengths and opportunities.

There is so much more to great strategy than a simple SWOT analysis. Sure, it’s a great buzzword, but I’d much rather see a strategic plan built around the strategic competency work of C.K. Prahalad and Gary Hamel. Why? There are three main reasons. First, the SWOT methodology creates unnecessary friction around the weaknesses and threats. Second, SWOT-based strategies seldom push the management team hard enough on creating truly distinctive competitive advantage. And third, there has been little, if any, effort put into making the SWOT analysis more data-based (by most practitioners).

So why not just toss out your old SWOT analysis if your strategic planning isn’t working for you this year? I think this is a darn good question.

Strategic Planning - Can you help me?

2007-12-21T09:17:00.000-08:00

Every so often, someone will call or email me and ask "Can you help me with my strategic planning?".

The answer, of course, is YES.

I spend my time doing nothing but strategic planning - and I've spent 20 years paying very close attention to what works and what doesn't work in the strategic planning process.

I speak at trade association meetings, conventions, corporate meetings, and I facilitate planning meetings for companies and associations of all sizes, all over the world.

If you think your strategies could use the fresh perspective of an experienced outsider who does NOTHING BUT STRATEGIC PLANNING - give me a call today!

My direct phone number is 734-665-2971

Strategic Planning - Where is the "Value" in VAR?

2007-12-20T11:19:00.000-08:00

Every so often, when speaking about strategic planning, I meet folks who describe their business by telling me they are "Value Added Resellers". Now, for people outside of the IT world, a Value Added Reseller (or "VAR" for short) is a company that re-sells equipment, most typically computer and communications equipment. The "value added" part can come from many different sources, although most seem to have to do with installation and technical support.

Value can take on a lot of different forms from being certified with a prestigious vendor, to rapid response, deep inventory or highly trained professionals. The key thing to remember about value is that it should match up with a primary decision making factor for a significant part of your market. Also, remember that some value items - rapid response, for example - may be more valuable to front-line employees at your customer than to their supervisors. This implies that some value sources may make you prone to succeed when selling at one level in an organization - but prone to fail at other levels.

Here's an interesting question for people in the VAR world: can you identify your company's value added? How much of it is simply labor, or specific skills? How hard would it be to replace what you do by going to a competitor? If it's easy, you are in for a tough time, strategically. One of the biggest challenges for any company in business sevice markets is to develop truly distinguishing strategic competecies, and make sure that those competencies are front and center in your customers’ minds.

If your main value added items are common or easily copied, you can bet that you will sooner or later face stiff price competition. The only real remedy is to find ways to set yourself apart from the pack. Unfortunately, actually having better knowledge about how to serve your customers might be the hardest way to compete, because your customers might not have the technical expertise to recognize this value directly. So be sure that – whatever value you do use as a basis of competition – you make the value extremely visible and understandable to your customers. If you fail to do this, you can be sure that someone who isn’t as good as you are can take those customers away simply by having a lower price.

Strategic Planning for the Best Strategy Execution

2007-12-03T04:29:00.001-08:00

One of the strategic planning phenomena I’ve noticed this year is a tendency for execution to go better with some strategic action plans than others. There are several reasons why execution might not go well – outside influences, poor estimation of time requirements or time availability are the most common – but one element stands out as very common when execution goes well: the energy that members of the strategic planning team have for the project. This makes perfect sense, and it also presents us with a challenge.

The challenge is this: some of the most strategically valuable activities that occur as a result of strategic planning are also some of the most difficult. How can we get our management teams excited about taking the harder path?

I suspect the answer lies in the nature of the strategic planning process in general, and in how we assess opportunities in particular. When you look at your opportunities, it’s certainly useful to take into account how much energy your team members have for the ideas. I will hypothesize that the greatest strategic successes occur where your team is excited about doing things that people in other companies would find difficult or unpleasant, so it will often pay to use these factors in assessing opportunities.

Another possible answer for this challenge lies in the area of strategic competency. I have noticed that a truly unique strategic competency that is understood and embrace by the management team leads to excitement about opportunities that other companies would shy away from. This excitement usually comes from pride in the skills associated with your competency – and should always be encouraged.

Strategic Planning - Implementation Roadblocks

2007-10-30T14:26:00.000-07:00

One of the biggest frustrations in strategic planning is that great plans often fall short of expectations because of poor implementation. In Simplified Strategic Planning, we use several tools to improve the implementation rate of strategic objectives, one of which is the action plan. This Fall, I've taken another look at the issues companies have to deal with in implementation of action plans, and found there are four main reasons why action plans aren't completed on time:

1. Implementation is more difficult that planned
2. Resources are less than planned (especially time, and seldom money)
3. Objective is no longer appropriate
4. Priorities have changed

Which of these issues to you encounter in your strategic planning implementation?

Strategic Planning Book - a How-To Guide

2007-10-26T04:33:00.000-07:00

Some readers of my blog may not be familiar with our incredibly helpful strategic planning book - "Simplified Strategic Planning - a No-Nonsense Guide for Busy People Who Want Results Fast". If you are involved in strategic planning, this book will help you in many ways. There are agendas, worksheets and hundreds of tips based on our 26 years doing strategic planning for hundreds of companies. No other strategic planning book is based on the sheer volume of experience represented in this book - and no other book gives such a clear, but detailed approach to how to do the strategic planning process.

Strategic Planning - Vision? Mission? Buzzword?

2007-10-24T08:25:00.000-07:00

Often, when I am either doing strategic planning or conducting a seminar on strategic planning, someone will ask me if one of our worksheets (usually the strategies worksheet – page 5.4, or the mission statement – page 6.1) is like a “vision statement”, “mission statement” or some other buzzword. In general, people who ask such questions have read at least one or two books on strategic planning that use these terms. While I usually answer “yes”, the real answer is – it probably doesn’t matter.

Why would I say this? After doing close to a thousand strategic planning meetings, I can confidently say that terminology does NOT make good strategy. Quite the opposite, in fact – the more buzzwords you stuff into your strategic plan, the more I will worry that it’s not going to work. We use buzzwords in an attempt to solidify meaning around some fairly difficult and intangible concepts that are necessary to craft good strategy – but, at the end of the day, it is the quality of the strategy that matters, not whether you identify the components with the corrct buzzwords.

In practical terms, the things people are talking about when they talk about “mission” and “vision” have to do with how we think about where we are going, strategically. “Vision” should refer to where we are going – although sometimes people talk about “vision” as an intended future state. “Mission” generally refers to why we are going that way – that is, what role you intend your organization will take in society. In many cases, strategies (as used in Simplified Strategic Planning) do an excellent job of describing “vision”, while the mission statement codifies “mission” quite well.

For your own strategic planning, you should be aware that the process and its outcomes are more important that the terminology you use. One of the beauties of Simplified Strategic Planning is that all of the tools in the process have been tested, tweaked and re-worked over more than twenty-five years to produce tools that will help you generate great strategy regardless of the terminology.

Strategic Planning - the great chance

2007-09-18T11:19:00.000-07:00

Sometimes, when doing strategic planning, we encounter opportunities that scare us. Now, opportunities could scare us for a number of reasons, but I'd like to focus on opportunities that are frightening because we simply cannot know, before committing to the opportunity, whether it will work or not.

What should we do when we face such opportunities? I've noticed three distinct behaviors when such an opportunity comes up: 1. Pretend it won't matter. 2. Embrace it. 3. Figure out a way to try it, cheaply.

Of the three, I'd say #3, The Cheap Trial Run, is by far the best. I think this is because I'm partial to the scientific method - form a hypothesis, figure out a way to test it (ideally with a control!) and compare the results. The more we can do this in our business lives, the better off we will be.

Option #2 is better than #1, in the long run, unless the cost of embracing the opportunity is unaffordably high. I say this because we, as humans, have a terrible penchant for sticking with the tried and true. In business, this is almost always the enemy of innovation, and time and again I see companies get in trouble because they insist on the "safe" route which ultimately leads down the path of staleness and lost market share.

Have you seen other behaviors? How do you respond to the big unknown opportunities in your business? Some thinking about this - and the long term impact it has on your strategic success - may be a productive way to begin your next strategic planning meeting.

Strategic Planning - Commas Cause Problems

2007-09-10T08:08:00.000-07:00

This past week I gave a speech on strategy to a bunch of professional speakers in Arizona. One of the first things I asked the audience to do was write a list of the topics they speak on. When they were finished, I asked how many of the speakers had commas in their answer. For example, it's not uncommon to have a speaker say "motivation, team building, change management and leadership". I think every comma in their answers represents a focus problem that's pretty acute for a lot of speakers. And when I talked to audience members after that, I was taken with how many of their business issues were wrapped up in this focus issue.

Focus is a serious, serious problem for a professional speaker for two reasons. First, when you speak you are absolutely selling your experience, expertise and polish. These increase dramatically with repetition, and a speaker who gives the same speech twenty times is far better than one who gives twenty speeches once. Secondly, it is so very very easy to lose focus as a speaker. In manufacturing, you have to develop new products or markets, hire new people, and sometimes acquire new facilities or equipment to lose focus. For a speaker to wander off focus, all he or she has to do is read a couple of books and agree to speak on a topic that is outside of his or her focus.

Do you have commas in your list? Why are they there? And can you imagine how much better you would be if they weren't?

Strategic Planning Seminar

2007-09-06T04:38:00.000-07:00

Some of my readers will want to know that my Fall 2007 Simplified Strategic Planning seminar schedule is up on the CSSP website. This is a great program that consistently gets rave reviews - and it's a chance to talk about your strategic planning issues face to face.

I will be teaching the programs in Troy, San Francisco and Orlando - so if you'd like to see me in person, be sure to sign up!

Strategic Planning: But We Don't Have a Strategic Competency!

2007-08-19T12:39:00.000-07:00

Every year I hear this comment from dozens of companies, when I present my program on strategic competency. While the concept is quite possibly the single most powerful tool in strategic planning, the hard reality is that far too many of us do NOT have a real strategic competency.

Does this mean you should give up on the idea because it is irrelevant to you and your business?

Absolutely not.

Strategic competency is the one thing that separates the men from the boys in strategic planning. Wimpy strategic planners will back off from the idea and go after the low-hanging fruit of modest operating improvements and shrewd tactical moves in the marketplace. The muy macho approach is to take the bull by the horns - so we don't have a strategic competency? Let's get one!

The problem with this response - and the reason most companies don't respond this way - is that it's hard. No question about it, building a real strategic competency where one does not currently exist is probably the most difficult, expensive and time-consuming undertaking in strategic planning. And that is exactly why it is also the most valuable. So why do most of us shy away from committing to an obsession with our competency? I think we shy away because it's risky. Commit to the wrong competency and you will waste a ton of time and money, with poor results to show for it.

But...let's have some confidence in our strategic planning, ok? If we've done a good job on the planning process (and, if you use a real professional, you should have confidence in that), why wouldn't we commit? Sun Tzu pointed out that soldiers fought better if you made them smash their rice-pots - because commitment to winning the battle was the only way to assure they would eat. I suspect that many of us in management are unwilling to smash our own rice-pots...and we pay the price every day with less than stellar results.

Strategic Planning - Eliminating Dead Weight Loss

2007-07-22T19:49:00.000-07:00

What is dead weight loss? It's what happens when a customer wants something - and is willing to pay a given price for it - but settles for something that is either above or below his or her ideal price. In many markets, the price difference will correspond with real differences in value delivered to the customer.

A good example of this happens with airline tickets. There are times when a given route, because of intense competition, is priced very low. Let's say you would be willing to pay $200 for a ticket from New York to Miami, especially if you felt you would be getting good service. Because of competition on that route, you might find prices as low as $100. Now, in the long run, $100 is probably not a viable price for that route - because the average cost of flying the plane exceeds $100. But you buy the ticket anyway, since you want to go to Miami. The airline has suffered an dead weight loss of $100 when you buy the ticket for $100 less than you were willing to spend.

dead weight loss also occurs when you decide NOT to buy the ticket if the fare rises to $250. In that case, the dead weight loss is $200, because you did not spend any money with the airline. Airlines tend to use a process called yield management to fill as many seats as possible at a given price level with minimum dead weight loss, but it tends to be a losing battle. The main reason is that the main fare variations tend to happen in very predictable ways, and passengers understand those systems pretty well. But the basic concept does have some merits, because it enables airlines to offer multiple prices for the exact same seat, which reduces the dead weight loss. How can you do this in your business?

First, it's safe to assume that your current pricing doesn't represent the ideal price to most of your customers. In some cases, you lose customers because your price is too high, and in other cases, you are leaving money on the table because your price is too low. If customers were honest with us about the prices they are willing to pay, we could, theoretically, ask each customer and set the price for that customer. Unfortunately, this doesn't work in most real world cases, and in some cases it involves an illegal practice known as price discrimination. However, you can always offer customers a little more or a little less when you sell them anything. For example, when customers buy electronics at many chain stores, they are offered a service plan. Without going into the merits of the service plan or its real value, this is a good example of upselling customers who are willing to pay a little more for a better consumer experience.

How can you do this in your business? In my next post, I'll explore some of the ways this can be done, and after that, a process for identifying the possibilities in any business.

For those of you who are interested, our Fall Simplified Strategic Planning seminar schedule has been posted. I'll be teaching programs in Anaheim, San Francisco, Orlando and Troy, Michigan. The California programs will be the first time I've taught a public program outside of Orlando and Troy in years, so I hope my West coast readers will take advantage of it.

Keeping the Excitement in Strategic Planning

2007-07-06T04:27:00.000-07:00

The other day I was watching my son play a game on the internet. It's a tedious game, with lots of repetitive action, and I was puzzled by how much he likes this game. You see, my son gets bored pretty easily. Getting him to do his homework can be a real challenge. But there he was, clearly enjoying spending an hour on a task that looked suspiciously like work to me. Why?

People who have researched this kind of behavior point out that the key to my son's enjoyment of the game were the "levels" he was achieving. You see, playing the game properly (which isn't that hard) leads to gaining a "level". This game started out as a pretty easy one - my ten-year-old was able to gain ten levels in his first hour of play. After a while, though, it got harder...and he still kept going. He's proud of his levels. He talks about them with his friends. And it turns out they all play this game - a lot.

What can we learn from this behavior? I see three key points for keeping excitement going for anything in your business:

1. Measure, measure, measure. Everyone wants to keep score, and the things we measure help create a sense of accomplishment.

2. Give feedback. While some people are motivated by team scores, most individual effort seeks a personal score. The more immediate the feedback, the stronger the motivation. If it takes a quarter to get feedback, you won't get as much bang for your buck.

3. Allow comparison. People love to measure themselves against each other. It's the equivalent of little boys talking about what level they are in a game. Think about how to give your people useful feedback about their contributions to your efforts that make sense when compared with others.

Are there pitfalls in this approach? Absolutely. You can measure the wrong thing. Sometimes feelings will get hurt. And some measurements will make key people think they aren't contributing much - when, in fact, they are critical to your success. But a little thought can lead to great excitement about the things that really matter to you and your company.

If progress on your strategic planning seems to be slowing down, you may want to consider how to get your team to treat the process as more of a game. While some teams just don't have the spirit, a good team will always seek to win when they know there is a score.

Strategic Planning Fix #6 - How much time did you spend on the process?

2007-06-28T04:35:00.000-07:00

It's possible to spend either too little or too much time on strategic planning. Strategy is what you use to steer your company, so it's worth spending the right amount of time on. Strategic Planning is not, however, a substitute for the things that actually make your company go.

Far too many companies do strategic planning as a 2-day retreat. I imagine this has been driven by well-meaning, but amateur, "facilitators" who see strategic planning as an easy way to sell a weekend gig in between their "more important" work. In my experience - which is considerable - you need three meetings for a good strategic planning process. Each of the meetings asks a different question:

1. Where are we?
2. Where do we want to go?
3. How will we get there?

Most people pretend you can just ask the middle question. Sadly, as in any navigation, if you don't know where you are, you can't really figure out the proper direction you should be going. Worse yet, in strategic planning, if your management team doesn't AGREE on where you are, they won't agree on your course. You'll save yourself a lot of headaches by having a meeting before you strategize, to figure out what you need to know and how to structure that information. If you skip that meeting, you will likely end up with poor strategy - or, at best, a poor discussion of your strategy.

The third meeting is just as important, because it's not enough just to have a strategic plan. You have to implement the plan, and the hundreds of plans we have completed have shown conclusively that an implementation framework (and a few other tricks we use) greatly increases the number of strategic objectives achieved. In other words, with an implementation plan, you will actually end up doing most of what's in your strategic plan. Without it, you are likely to achieve only 30% of your objectives.

The last comment I'll make on spending time on strategic planning is about spending too much time on planning. Your team has work to do, and planning is only a part of that work. Four or five meetings are not better than three, and if you try to do your planning in, say, an hour a week, you will never, ever get through the process. Almost everyone should allocate between four to seven days (that's 8 hour days) for their strategic planning process every cycle - and maybe another 10-20 hours for homework. That's it. If you need more time, you are probably attempting to implement your objectives inside your strategic planning meetings. While this is admirable, in some respects, it will ultimately sink your strategic planning. So make sure you set a practical, realistic schedule for strategic planning - and stick with it. Otherwise, it can eat you alive.

Naturally, a good, experienced strategic planning professional will tell you these things, and help you navigate all of the questions that come up about the strategic planning schedule.

Strategic Planning Fix #5 - Did you use an outside planning facilitator?

2007-06-21T08:06:00.000-07:00

This is a question that I, of course, have some self-interest in, since I am an outside planning facilitator.

There are two important parts to this question, and they both lead to insights about how to improve your strategic planning.

First, should you use an outside strategic planning professional? Of course, I think the answer is yes, but not always. A professional planner (and by this, I mean someone who does NOT consult on other topics, such as marketing, team-building or manufacturing) can add a lot to your process by stimulating good strategic thinking and giving lots of examples of strategies that have worked at other companies. A planning professional can also take a lot of burden off of your team - by knowing what to do, when to do it, and how much time to spend on it. A highly experienced strategic planning professional will know exactly when to let a conversation run on and when to cut it short, in order to create a strong strategic plan with great support from your strategic planning team. When companies try to do this on their own, they inevitably have difficulties with discipline and buy-in, and worse, the person doing the planning has to divide his or her attention between the planning activity and the strategic content of the plan.

Here are the most common mistakes around the question of whether to use an outside strategic planning facilitator:

1. Not using a strategic planning professional when you need one
2. Using one when you don't need one
3. Using the wrong person

Most poorly written strategic plans that I've been asked to fix over the past twenty years have been the result of either #1 or #3.

Second, who should you use as a strategic planning facilitator? Obviously, an experienced professional who does nothing but strategic planning. Why? Because strategic planning is like surgery - yes, a doctor can do it, but if you need it, you probably want someone who does it over and over again. The difference between getting your strategy right and "pretty close" may only be one or two percent - but that can amount to millions of dollars over time for even a small company.

So what skills should you look for? Here is a list that I have found useful when hiring strategic planning professionals for my firm:

1. Strategic thinking skills
2. Team facilitation skills
3. Solid business understanding
4. The ability to absorb a large amount of information quickly
5. Strong personal integrity
6. Familiarity with a large number of different business models
7. Familiarity with the strategic planning process

Here are some skills which do NOT affect the quality of your plan (although I sometimes look for them when hiring):

1. Experience in your industry
2. Familiarity with the latest buzzwords
3. Sales ability
4. Certifications of any sort
5. Public speaking ability

Hopefully, these comments will help you understand the need for a strategic planning professional, and how to pick a good one.

Strategic Planning Fix #4 - Who Did Your Strategic Planning?

2007-06-18T13:56:00.000-07:00

The problems that come from having the wrong people do your strategic planning are sometimes harder to spot. A plan that has glaring omissions of data or perspective, a plan with poor management team support, and a plan that looks like the CEO wrote it by himself (or herself) are all examples of a plan that may have been created by the wrong people.

So - who should do your strategic planning? Ideally, the strategic planning process should be undertaken by a strategic planning team made up of the CEO and his or her direct reports. In a perfect world, this would be a team of 6-8 people who have intimate knowledge of all the different facets of your business - markets, operations, and financial issues. This group must also have the ability to implement the plan through their day-to-day involvement with the operation of your business. This means that the primary strategic decision making role should go to the people with the primary strategy implementation responsibilities. NOT the board of directors, NOT outside suppliers or union representatives, NOT customer representatives, and NOT a consultant. There are roles for all of these people in your planning process, but the decisions need to be made by the people who will actually have to carry them out. A really good strategic planning consultant, for example, will coach your team through the process in a way that saves them time and stimulates them to better strategic thinking. But by no means should such an outside actually set your strategic for you!

The key idea here is that there are two critical things required for a good plan to work: one is input from the right people, and the other is commitment from the right people. Involving the right people in your strategic planning process will get you both.

Strategic Planning Fix #3 - How Do You Track Your Implementation?

2007-06-14T05:03:00.000-07:00

Most people who claim to do strategic planning really fall down on this one. If you are ever in a position to interview someone who claims to be a strategist, make sure you ask them what percent of strategic objectives are met by their average client. Half will choke on this question, because they don't track it (and how can you optimize something you don't track?).

The cold, hard fact about strategic planning is that it isn't over when the strategic planning meeting is over (and the consultant goes home). Strategic planning is NEVER done - it is part of a cycle of activity that should be changing your company in significant, noticeable ways over time. If you are doing strategic planning and you are not seeing noticeable change, it's probably because you have no mechanism for tracking.

In Simplified Strategic Planning, we tell people to review progress on strategic objectives by writing action plans for them with monthly milestones - and then track progress on those milestones with a mandatory monthly review meeting. This meeting takes a couple of hours most months, and is well worth the time. There are two key benefits you get from this: (1) It puts accountability into the implementation plan and (2) It gives you the ability to correct your course in mid-year when reality doesn't match your plans.

In my experience, of the hundreds of companies I've done strategic planning with over the years, the top 10% ALL do a monthly monitoring meeting and the NONE of the bottom 10% do a monthly monitoring meeting. When you consider that the top 10% in my database averaged 40% per year profit improvements over 5 years, you can see why I strongly recommend this approach!

Strategic Planning Fix #2 - Set the Right Number of Objectives

2007-06-10T11:26:00.000-07:00

I've given this advice so many times since I started coaching strategic planning teams in 1981. Let's say your team can achieve 10 good-sized strategic objectives in the next 12 months. What will happen if you give yourselves a "stretch goal" and try to do 20? In my experience - almost nothing will happen. Your team, which would find 10 good objectives challenging and productive, will be lucky to get halfway done with each of the 20. At the end of the year, you will have a typically poor showing in the execution department and your team will have just a little less faith in the strategic planning process as a whole.

A good rule of thumb for objective setting is to have no more objectives than you have effective team members. For many companies, this puts the limit somewhere in the 5-10 range. Most companies I've worked with in the past five years have done very well with six objectives.

Strategic Planning Fix #1 - What Process Did You Use?

2007-06-01T05:32:00.000-07:00

This is the first question I ask anyone who asks me if I can help fix their strategic planning. The reason is simple - every process has strengths and weaknesses, and the issues you are having with your strategic planning may well be the direct result of the process you chose to use.

Surprisingly, a common answer to this question is "We didn't really use a process" or "We read a couple of books and came up with our own process". Obviously, both of these can lead to problems. There are inevitable pitfalls in process design in strategic planning, and no process, or a mishmash of elements from several processes, can get you into those pitfalls quickly. So my first point is use a strategic planning process! Ideally, you want to use a process that's been tested and refined through use in thousands of companies in many different industries over the past 25 years, with a proven track record. Anything else is probably a mishmash of other processes put together by an inexpert strategist who wants to get into the business, and just as likely to lead to problems. Your best bet, of course, is a program like Simplified Strategic Planning, which is the most popular strategic planning model in use today.

The second point I want to make is that many processes that people use for strategic planning leave huge gaps where there should be data, analysis and documentation. My favorite example is Balanced Scorecard, which is an blown-up version of the Measures of Performance we started using in 1981. It's not a complete planning process - it's just a part of the process - and yet many companies treat Balanced Scorecard as their main strategy effort. That's like trying to drive from New York to LA by watching the speedometer and gas gauge - but not a map. Sure, you'll make good time...but where the heck will you be going?

The most common gap I find in other people's planning processes is implementation. Be sure to ask about how a process handles this, because implementation is the most common issue with strategic planning among attendees at our Simplified Strategic Planning seminar.

Can I Fix My Strategic Plan?

2007-05-30T12:59:00.000-07:00

Occasionally, I'll get a call from a team which has been doing strategic planning for a while on their own and are disappointed with the results. In most cases, they are just not getting value out of the time spent on the process. This is a shame, because good strategic planning usually yields excellent results for companies that approach the process with discipline.

There are a few questions I always ask, because they lead to some of the most common reasons why people have trouble with planning.

1. What strategic planning process did you use?
2. How many objectives did you set?
3. How are you tracking implementation?
4. Who did the planning?
5. Did you use an outside strategic planning facilitator?
6. How much time did you spend on the process?
7. How many market segments are you using?
8. Are you segregating your assumptions from facts?
9. How are you measuring the success of your plan?

In my next few posts, I'll discuss each of these questions, and the answers that are often warning signs that the planning process needs a major fix.

When should I do my strategic planning?

2007-05-29T04:18:00.000-07:00

I get asked this question a lot in my seminars. There are three basic ways to time your strategic planning around your annual cycles. First, you can schedule your planning process so that it precedes the budget cycle. This is useful if you feel it's important to get the money for strategic projects into your budget. This means you will have to complete and review your action plans before starting your budgeting, but it has the advantage of giving you some pretty detailed information about the expected cost of new strategic projects.

The second way to schedule your strategic planning process is to do it just after your year end. The main advantage of this is to give you the most complete, accurate and up-to-date data on your company's strategic performance. If your financial data gives you key insights about what strategies are working well for you (and it should), this approach might give you the best information for your strategic planning. One possible disadvantage is that it might not allow for inclusion of the action plan expenditures into your budgets, requiring a second look at your budget at the end of the strategic planning process.

The third scheduling approach is to time your strategic planning for a low point in management activity for the year. The main advantage of this is that you won't overload your executive team with the additional burden of planning meetings and homework. For construction, this might be the Fall or Winter, while for schools this is most likely the summer.

All of these approaches have pros and cons, and - of course - there are hybrid approaches that combine these approaches to scheduling strategic planning. I'd suggest you try one and see how it works for your team, understanding that it's always possible to change the timing of your strategic planning in the future. And, of course, a short discussion with an experienced, qualified strategic planning consultant can really help you find the timing that is right for your organization.

Strategic Planning - Should you go for the home run?

2007-05-24T12:45:00.000-07:00

Every once in a while, when I'm doing strategic planning with a client, we hit a home run. It doesn't happen with every client, and it doesn't happen every year, but it does happen. A frequently asked question is "Should we try to get a home run?"

I have two very opposing views on this. The first is that swinging at home runs can be very distracting and, when you actually get a hit - it can be downright disastrous. One of my earliest home run stories tripled the size of the company in less than a year and brought their strategic planning to a halt. Within three years, the company - partly because they had stopped planning - had serious growing pains, including cash flow issues. The great "opportunity" they had found nearly killed the company! This is not as uncommon as you would think - there is a very real danger of growing your company to death. Also, let's not ignore the fact that, as in baseball, you are likely to have a lower batting average if you are always hitting for the fences.

On the other hand, while most of my success stories are about dependable, steady growth, there are quite a few that were explosive...and that can be the just thing to get a company out of a rut. Certainly, I'm proud of the home runs that worked out well, because they were built on sound strategic thinking and created sustainable competitive advantages.

So my basic answer is this: put most of your effort into your strategic competency, and the strong, steady growth that comes from that. Consider having a project with home run potential on a side burner, especially if it relates to your competency, but don't bet the farm on it. And...if it starts to take off, be very careful of how it will affect the viability of your company in the long term. Strategic planning is an excellent tool for assessing these kinds of situations, and if you are looking for explosive growth - or in the middle of it - you will be well rewarded if you take the time to do a good job of strategic planning.

If you are looking at consultants...

2007-05-18T07:09:00.000-07:00

Remember, one of the most important concepts in strategy is focus.
Any strategic planning consultant who says "I do strategic planning and..." is not focused. They are just fooling around when it comes to strategic planning.
You wouldn't go to a brain surgeon who says "I do brain surgery and plastic surgery." So why work with someone who does something else, like marketing, operations or teambuilding consulting? Your company deserves the best, not an amateur.
Here are some useful questions for when you are choosing a consultant:

1. How many strategic plans did you work on last year? In the past 10 years?
2. What results do your clients get? Can I talk to them?
3. What else do you do besides strategic planning? Will you try to sell that to me?
4. How are you different from other people who do strategic planning?
5. Why do you think there is a fit between you and my company?
6. Do you work with my competitors? How do I know you won't share my data with them?

On that last question - you want to avoid consultants who work with your competitors. The worst strategy is the one that looks just like your competitors - and using the same consultant is a sure-fire way to get that.

Strategic Planning - better implementation

2007-05-17T08:26:00.000-07:00

I'm thinking of doing one of my future Hot Seat programs on the Four Pillars of Strategy Implementation. I think it would be an awesome program.

People who use any strategic planning model tell me that implementation is really the hard part for them. Yes, I make my living helping people come up with great strategies, but I recognize that I get to go home at the end of the meeting and the managers I work with have to actually put a lot of attention and time into turning those strategies into reality. I suspect that the time I spend on implementation - about 20-30% of the whole process - is one of the reasons my clients get such great results. Some clients tell me it feels a little weird the first time through, but after the first year, almost all of them are completely sold on my unusual approach.

One of the keys - and this is a valuable point for anyone concerned with strategy implementation - is that we pay a LOT of attention to the money involved in most of our projects, and very little attention is devoted to the time involved. This has always seemed backwards to me, because (in the hundreds of projects I've worked on) 95% of the projects that fail in execution do so because people at the top of the organization didn't spend enough time on the project.

So my idea for the Implementation Program is to lay out each company's objectives, action plans, and resource issues, and discuss those in depth, probing for areas where little changes can yield big results in effectiveness. I'm guessing there will be some really great stuff we can do in a program like that on three areas: (1) writing better objectives, (2) writing better action plans and (3) structuring the resource allocation process to yield more realistic commitments. This is just an idea, so I'd love to hear what you think about this!

I think any company who is doing strategic planning could leave the room with a much better implementation plan - maybe even people who are already working with me! If you are interested in this program, drop me a line. I haven't decided where to hold it yet - it might be anywhere in the world.

On that note, I still have a couple of days available when I'm in Europe in late June- early August - my plan is to spend most of that time in Switzerland, but I'd love a chance to do a Simplified Strategic Planning workshop for anyone who hasn't had a chance to see me for a while. Since my only European gig was in Norway last year, that's probably most of my readers in Europe. Drop me a line if you think some great strategic stimulus would be valuable to your company.

Strategic Planning - the four pillars of implementation

2007-05-13T04:57:00.000-07:00

At last week's Michigan State University Simplified Strategic Planning seminar, we had a great discussion about the four pillars of strategy implementation. These four things are the best practices held in common by all of the companies I've worked with who achieved 100% of their strategic objectives. They are:

1. Good objective setting
2. Well-written action plans
3. Good allocation of both time and financial resources
4. Routine monthly monitoring of action plan progress

Are you doing all of these things well? If implementation is an issue for you - as it is for most companies - you might want to think about how you can improve your effectiveness in these four areas.

Strategic Planning Implementation - The Dangers of Planning to Plan

2007-05-04T10:38:00.000-07:00

One of the things I worry about in strategic planning is the tendency some people have to want to write action plans that result in plans. If something is big and complicated enough, it might require a plan to plan, but sometimes this is just a smokescreen for a bigger issue. Is the team avoiding making a decision for some reason? Is planning to plan a way to avoid conflict? Or is planning easier than the actual work involved in reaching the real objective? Make sure you address these questions squarely whenever you are confronted with an action plan step that starts with "Plan...".

Cash Flow - Is it Strategic?

2007-05-02T08:45:00.000-07:00

Cash flow is both very strategic and very un-strategic. What I mean by this is, cash flow is the thing that kills most companies that go out of business. I've seen otherwise profitable companies driven to insolvency by poor cash flow management. So staying on top of your cash flow is definitely a strategic priority. But cash flow is also very, very tactical. It has very little to do with the reasons why most companies succeed, and often, cash flow goes down when a company makes good strategic moves. Watching cash flow has rarely led to good strategy - and in fact, companies that are too obsessed with cash flow may be driving away otherwise very profitable customers. So, watch your cash flow, yes - because it affects your survivability. But if the ship isn't sinking, remember to stay focused on moving forward.

Strategic Planning - avoid the wannabe strategic plan

2007-04-22T11:42:00.000-07:00

One of the fascinating things I think about these days is all the nonsense that passes for "strategic planning". Strategic planning is a VERY specific process, which involves setting the course of an organization. A good strategic plan always answers the following 3 questions:

1. What do we do?
2. For whom do we do it?
3. How do we beat the competition (or absent competition, how do we excel)?

A good strategic plan also incorporates a systematic analysis of the environment, current situation, organizational capabilities, and assumptions about the future as a foundation upon which to build the answers to those questions. Finally, a good strategic plan, being a tool for creating better results, is simple and includes short-term implementation activities that make a critical difference in pursuing your organization's long-term vision.

Anything less than this is just a piece of a strategic plan that someone is calling a strategic plan so they can charge you more money for it. At best, these planning fragments will be useful but leave you exposed to many of the common pitfalls of poor strategic planning. At worst, they will waste your organization's time and money and leave people disillusioned about the entire strategic planning process.

Fortunately, the Simplified Strategic Planning process will help you avoid these pitfalls. Unlike ANY other model, it has been fine tuned through application over 25 years in hundreds of companies of all sizes.

Strategic Planning - making it more personal, part II

2007-04-15T07:35:00.000-07:00

Another exercise that helps make participation in the strategy more personal involves identifying key relationships.

Using a diagram similar to the 3-7 element flowchart mentioned in my last entry, you can ask the team which relationships/communication points are most critical to effectiveness in each area. For example, in some companies, the key to effectiveness in customer relationships is the relationship between sales and operations management. Since these areas involve very different mental disciplines, it's not unusual to find the two departments don't communicate well with each other, and there may be some excellent opportunities there to improve effectiveness.

One way to dig in to this diagram is to ask each team member how value is created or destroyed for the customer in their department. Once you have identified, say, the top three ways value is created in each department or area, you can draw lines that connect those value drivers to the departments involved. In many cases, this mapping process can identify areas where you can greatly increase your value to the customer by putting a little effort into improving how the involved departments communicate and work together.

After completing this diagram, it's useful to ask the individual team members how they might improve their role in the identified relationships. You may also want to ask individuals to pick something they do that works well in this area that the other managers might benefit from trying.

I almost always use these tools when discussing strategic issues (page 5.2) in the simplified strategic planning process, which is in the second meeting of the cycle.

Strategic Planning Reborn - Making the strategic plan more personal

2007-04-04T07:26:00.000-07:00

While personalizing the strategic plan is one of the most effective ways to bring energy and commitment to it implementation, it's also one of the most difficult ways to do this. This is because, unlike many of the variables of the strategic planning process, the complexities of the personalities involved pose analytic difficulties that are both broad - covering a wide range of possibilities - and deep - making them far more difficult to unravel than, say, a question of market responses to certain product changes. Even so, there are some ways of working with the personal nature of involvement with your strategic plan that can yield excellent results

One way of driving home the personal nature of commitment to your team's plan is to bypass personality issues and address the question in a fairly neutral way. An exercise I often use to do this involves asking the team members to identify exactly how they envision themselves contributing to forward motion along the lines of the strategy, and how they see themselves (and their activities) creating obstacles to that same forward motion. As you might guess, it's much easier to get team members to discuss their positive roles in a group setting. One way around this is to reduce the initial interactions around this to a one on one conversation. It's also a great exercise to have team members pair up and discuss the positive contributions, then have each member report on the positive elements of his/her partner.

To reassure the team, I like to tell them that this exercise is not about who is the best, or who has the least weaknesses. Instead, I point out that the greatest opportunity in this exercise lies in our ability to find the best adaptations to existing weaknesses - and that the more obstacles we can identify, the more obstacles we can get out of our way.

So...here is one process, in outline form:

1. Ask the team members to pair up and spend 5 minutes describing to their partner the ways they can drive the strategy forward.
2. Ask the team members to spend 3 minutes identifying specific ways they either (have created obstacles to this in the past) or (could create obstacles in the future).
3. Lay out what you consider to be the KEY elements of the strategy in a diagram (say, on a flipchart). Ideally, it's optimal to have just 3-7 key elements, such as "customer relationships", "quality processes" or "asset acquisition". For a FULL description of the modeling discipline I use, see Jay Forrester's Industrial Dynamics.
4. Ask people to point out where their partners can contribute the most on your diagram, and illustrate it.
5. Ask people to point out where they might/do obstruct the strategy in the same way - but be VERY encouraging about it. The key here is not to fix the person, but to get the pieces of activity that don't FIT the person moved to someone else. A useful set question here is "How could we accomplish this effectively? Are you the right person for this task? Can we use your skills better elsewhere? Is there a process, person, or piece of equipment that would take some of the difficulty of this activity off of your shoulders?"
6. One of the best ways to really tie this up is to ask the team where they feel they personally can create the biggest improvement in the effectiveness of the company. It is important NOT to permit discussion of what other can do, but rather to keep focus on how you can change yourself, or what you do, to increase effectiveness. At times, I've encouraged this by suggesting we will devote resources to the one or two best ideas, but even simple verbal encouragement will generate good results.

The point of this exercise is to really connect team members with the key elements of your strategy. As you progress with your strategy, this exercise can serve both as a reminder of this connection, for the team members, and a diagnostic for some types of implementation issues, for the CEO.

I've tried this exercise several times with different clients now, and I've been impressed with the results, even with clients who have been through several cycles of the strategic planning process already. There are some critical issues that tend to surface with this approach, and team members feel really good about what we achieve when we put this exercise into the strategic planning process.

In my next entry, I'm going to cover another exercise I use to make the strategic plan more personal.

Strategic Planning reborn - Drilling down, part II

2007-04-03T05:28:00.000-07:00

I've gotten a lot of questions about drilling down, so I'm going to outline some of my favorite techniques for doing it.

As stated before, "drilling down" is a term I use for picking apart parts of the strategy framework. I'm assuming you are using simplified strategic planning as your basic strategic planning model. If not, be sure that your planning process has the following information outlined WELL before you attempt this technique. (I say this because most strategic planning processes are written by people who don't do that much actual planning, so the important chunks may be missing):

1. A good outline of your own capabilities. If you've done a standard "SWOT" analysis, you are probably fine, but avoid focusing on the weaknesses and be wary of BS.
2. A good outline of the capabilities of your 3-5 key competitors. NOT 20 competitors...just 3-5 that really bug you.
3. A good analysis of customer behavior in your markets, in particular, needs, preferences and specialty/commodity tendencies.
4. A good understanding of your operations, current technology, and supplier markets.

If you have all of these, "drilling down" simply involves picking ONE element - such as your supplier markets - and closely examining how they affect the strategic dynamics inherent in the information provided above. For example, in one retailing client, when we first looked at supplier markets, we assumed they wouldn't have much impact on our strategy, because everyone was in the same boat vis the different suppliers. Drilling down led us to ask whether a differentiated supplier market position was possible. We looked at 4 key supplier markets:

1. Capital/real estate
2. Labor/key skills
3. Merchandise/raw materials
4. Advertising

What immediately became clear in our discussion was a firm belief that our larger competitors would quickly copy any strategic move we made in most of these markets - and beat us squarely. In key skills, however, we identified that the size of our competitors would make them reluctant to radically change their human resource practices, so we opted to examine possibilities relating to those. The "drill down" involved a very detailed, almost tactical look at opportunities and operational changes required to change our ability to attract and retain people with key skills. We specifically rated each idea for 2 characteristics:

(1) How easily would/could our competitors copy this change?
(2) How well does this change fit our strengths?

Ultimately, this helped us choose a combination of initiatives (including training and recruiting) which yielded a significant advantage in this area. In the following year, the company increased market share by 10% in a large and mature market while maintaining premium prices.

Strategic Planning - "Drilling Down" part 1

2007-03-30T05:23:00.000-07:00

Someone asked an excellent question about drilling deeper into the strategy, so I'm going to discuss that tactic, first.

When I talk about drilling deeper, I'm definitely talking about a strategic planning process that involves the top management team, and not external stakeholders or media. When you take planning outside the organization, you are generally looking to communicate why your strategy is a good one rather than how you came up with it. An example of what I mean by "drilling down" could be seen in an airline examining the customer satisfaction impact of all the contact points a passenger may have with them. This might involve some detailed analysis of the operation, combined with insights from market research on things that affect customer satisfaction. While it would look tactical to an outside observer, this kind of "drilling down" can identify places where operational, financial, IT or HR practices (to name a few) can be changed to be better aligned with the overall corporate strategy.

This kind of work is unlikely to be productive with the media, because it is time-consuming and hard for them to package. They will, however, appreciate any surprising bit you might come up with. For example, when Sears acquired K-mart, they saw the real estate involved as the key piece of the value of that deal. This was interesting, because it was a merger of two huge retail brands, not just a real estate transaction. The news media were fascinated by this, without really knowing why that made sense for Sears.

Outside stakeholders may have more appreciation for the actual "drill down" process. The best way to handle this with them (if you have the resources) is to walk them through the key questions. They won't have the data or experience of the management team, but - if you are well-prepared - you can throw those in as trump cards to move the conversation and its conclusions along.

One important point here is that the process of strategic planning is entirely different from the process of communicating the strategic plan. Both are important, but it's possible to do either poorly if you mix them together without considering how you will affect the quality of the strategy or the perception of the resulting plan.

Quick note...

2007-03-29T13:05:00.000-07:00

Many readers already know I do training and consulting on strategic planning. What they might not know is that - to simplify my travel schedule - I sometimes offer incentives to have meetings in specific cities around the country.

I currently have client dates in a number of cities where I wouldn't mind adding a day or two for a workshop, or even a full three-meeting cycle. Here are the cities I am currently looking to add dates in:

Burlington, VT
Detroit
Geneva, Switzerland
London, England
Orlando (always!)
St. Louis
San Diego
Vancouver, BC

If you would like me to coach your team through the process...or simply train them in our highly popular program...please contact me about meeting in one of these cities!

Strategic Planning - Reinvigorating your strategic planning process

2007-03-29T13:02:00.001-07:00

After a few years, clients almost always ask, "How can we put life back into our strategic planning? We've achieved great success, but we'd like to have the same level of excitement we had in the first few years."

This question often comes up for reasons that are inherent in the process itself. First, strategic planning - as an ongoing process - tends to yield easy benefits in the first couple of years, as your team focuses attention on the low-hanging fruit. After a couple of cycles of this, the fruit that is left may seem to be a little harder to reach...and often, it is. Secondly, if your process is well-run, each cycle of planning will seem more like a part of your management routine and less like a special event. This is true of any process that you repeat routinely, but with strategic planning, the first couple of years seem strange and wonderful because good strategic planning is so far outside the norm for most managers. Finally, as your team gains experience with the process of identifying strategic objectives and effectively implementing them, they also learn how much work is involved...and there may be a natural reluctance to commit to the big, exciting projects that bring so much energy to the first few years of strategic planning.

In the next few posts, I'm going to take a look at some exercises I have used to give the ongoing planning process a little more "zing". In general, these exercises fall into 3 categories:

1. Making the strategic plan more personal - many plans lose their "zing" because they seem to be about someone else...so identifying how individuals affect - and are affected by - the strategy can help reverse this.

2. Giving the vision more substance - sometimes, the vision encompassed in your strategy is too abstract for the team to "get into it". In these cases, some work on what the reality of that vision will look like can be just the thing.

3. Drilling deeper into specific parts of the strategy - in many cases, there are things just below the surface that can dramatically transform your company. A little digging in some specific areas can turn up gold!

Getting started with strategic planning

2007-03-23T06:33:00.000-07:00

What do I do to get started?

This is one of the most difficult parts of the whole strategic planning process. Getting started with strategic planning can appear to be a daunting task, even if you are using a simple template like Simplified Strategic Planning. Here are a few tips to help you get started:

1. Set a date - sounds simple, but if you have a process with a schedule, committing to that schedule will help a lot.
2. Don't wait until you are ready - sadly, a lot of companies get stuck with this. There is no time when you are more ready to do strategic planning - so just start NOW.
3. Don't wait for data - you might do a better job of strategic planning with more/better data, but, again, there is no substitute for just doing the plan.
4. Don't overcommit - do NOT use a process that takes more time than you can commit to strategic planning. A good model, like Simplified Strategic Planning, should cover everything from gathering data through implementation with just a few days invested.
5. If in doubt, take a class - a seminar on strategic planning is a great way to get started - especially if you can bring your whole team.
6. When all else fails - or even if it doesn't, you will get a LOT from using a real strategy professional. The very best do NOTHING BUT strategic planning, and have done the strategic planning process hundreds of times. A professional will get you going - and coach you to do a better job the first time than you would even with years of experience.

strategic planning, strategy, management, business, getting+started+with+strategic+planning, strategic+planning+process

Succession Planning and Strategic Planning - it pays to plan ahead

2007-03-14T12:50:00.000-07:00

In business, there are many things that can be done more effectively if you plan to do them well in advance. This is one of the reasons why strategic planning (when done well) is such an effective management tool. Succession planning is certainly one of those activities, and here's why - if you spend some time observing successor candidates and involve them in your strategic planning, you get two huge benefits. First, you get a better understanding of how the successor fits with the overall strategy and culture of the organization. Secondly, the successor gets a good look at how strategic thinking works while the outgoing executive is still in place.

Here are a few tips from successful transitions that I have seen in the past 20 years:

1. Start early! It's never too soon to think about transition.
2. Don't dwell on the weaknesses of candidates...almost always, other people can handle the things they can't, but DO look for candidates with big strengths in key areas.
3. Involve internal candidates in your strategic planning as soon as you can.
4. Use vacations and other absences to give candidates time "in your shoes"
5. Mentor the candidate positively - I've seen really good successor candidates abruptly leave companies because they were negatively mentored.
6. Help the candidates get a good sense of their own strengths and weaknesses as managers
7. Start working on professional development for the successor as soon as you can
8. If you see a big red flag come up on any candidate be willing to try another candidate

strategic+planning strategic+planning+process management business, succession+planning

Clues from Strategic Planning: Identifying a successor to the CEO

2007-03-13T04:32:00.000-07:00

The strategic planning process is a great place to learn about the members of the management team. After a couple of sessions with a team, I can generally tell who is likely to do a good job on implementation, who understands your strategy, and who is going to have the best information about certain strategic issues. All of these are important traits in a CEO, but anyone who says "A CEO must have trait A, trait B and trait C" probably doesn't understand how much the existing management team can affect the leadership needs of different companies.

Here's a thought process you may find useful: every management team needs good implementers, good strategic thinkers (planners), and good idea people (creatives). While every manager has some of each of these skill sets, the best at each of the three will likely have less of the other two. This is because the mindset of, say, a good implementer, is about doing, while the mindset of a good planner is about thinking ahead. Neither is necessarily better than the other (although some are better for certain functions in your organization). Strategically, these three management approaches need to be present, in strength, in your top management team.

When thinking about who will succeed your current CEO, you want to watch your team for evidence of one of these three strength areas:

Implementers will be very effective working on action plans, and will generally have all their homework done, well and on-time. Action plans written by Implementer types will have lots of steps, most of which are specific, concrete actions.

Planners will likewise be very prepared for your meetings, but are likely to analyze more. An action plan written by a Planner type will have many more preparation and analysis steps.

Creatives will bring a lot of clever ideas to the table - but many of them will be impractical. Creative types tend to turn in homework that is incomplete but peppered with brilliant insights, and their action plans often contain just a few really critical steps.

I won't tell you that one of these makes a better CEO than others - because different companies, at different life stages, can benefit greatly from each of these. What I will tell you is that it will pay to be aware of these three styles and strengths in your own management team, especially when you are doing your strategic planning. An effective CEO always brings one or more of these skill sets to the company, and being aware of how that mixes with the rest of the management team can help you in your selection process.

strategic+planning strategic+planning+process management business, succession+planning

Do You Need Succession Planning?

2007-03-08T07:58:00.000-08:00

Do you need to do succession planning? Of course, the knee-jerk answer to this question is "yes", but let's take a closer look.

Companies that do no succession planning usually survive the transition period from one CEO to the next. There is no clear data on the correlation between profitability and succession planning, but research on market leaders versus laggards in various industries do note some correlation between market leadership and certain succession planning practices. Those practices are:

1. Management development programs
2. Early identification of successors
3. Mentoring of identified successors

All of these take time, and they can cost money, as well, so it's a good idea to understand why you are doing succession planning before you start. Also, you want to match the investment you make in the process with the outcomes you expect. It's quite possible for a smaller firm to spend tens of thousands of dollars on the succession planning process with little measurable output on the bottom line.

I'm not saying that you shouldn't do succession planning, but I am saying that you need to choose an approach that will match your organization's resources, and the value that you will get from a successful transition. If you are already doing strategic planning, there are some specific steps you should consider adding. Over the years, I've noticed companies doing well with succession when they have undertaken projects to do the following:

1. Inventory strengths and weaknesses of the management team
2. Assure the management team has easy access to a wide range of development opportunities (eg seminars, conferences, coaching, etc.)
3. Involve possible internal successors in the strategic planning team and the action plan teams
4. Discuss possible successors with a knowledgeable outsider who is familiar with your organization
5. Arrange opportunities for non-task oriented interaction between possible successors and those who might mentor them

It's clear from available research that some succession planning activities pay off handsomely, so you may want to examine this activitiy as a possible strategic initiative for your organization. Here are a few items that suggest a high value for succession planning that may come up in your strategic planning:

1. There are predictable reasons to expect an ownership transition, such as impending retirement of the founder/CEO, or health issues
2. Succession questions are making your team reluctant to commit to a clear strategic vision
3. There is an identified weakness in the next level of management or the pool of likely successors

strategic+planning strategic+planning+process management business, succession+planning

Some thoughts on Succession Planning and Strategic Planning

2007-03-05T13:19:00.000-08:00

I'm not an expert on succession planning - at least, not in the same way I am an expert on strategic planning. Yet there are quite a few important links between the two disciplines. In particular, when succession planning involves the top management in any organization, it can have far-reaching strategic impact.

In my experience, one of the most important intersections of the two disciplines occurs when strategic planning is an ongoing part of the organization's overall strategic management. Strategic planning will very likely help you towards a successful transition in five distinct ways:

1. Strategic planning situation analysis will likely identify succession as a key issue early
2. Strategic planning will help the departing CEO to evaluate the strategic thinking of his or her top management team
3. Strategic planning can expose the new CEO to the strategic thining of the departing CEO
4. Strategic planning is an excellent joint activity for the new and departing CEOs during the transition period
5. Strategic planning helps to stabilize the organization during what might be an otherwise disruptive period

While you probably don't need benefit number one, if you are already concerned about succession planning in your organization, the other four benefits are all excellent reasons why a routine, disciplined strategic planning process should precede any planned succession and continue through the transition period.

strategic+planning strategic+planning+process management business, succession+planning

Strategic Planning - learning by reflection

2007-02-28T04:26:00.000-08:00

This is the tenth is a series of articles about how to get more from your strategic planning.

10. Reflect on Success and Failure

All organizations that are successful over long periods of time are learning organizations. This requires that the management team learns from its experience. It's worthwhile, periodically, to take some time to reflect on both your sucesses and your failures, because each has something to teach you about what works and what doesn't work. The most important thing to question is why you succeeded where you did...and also, why you failed. Do not make the mistake of focusing on one over the other, because they both offer great learning opportunities.

One of the most difficult things to do in reflecting on success and failure is to separate the effects of good decisions and good situations. This is important, because we want to learn to make good decisions under any circumstance, but circumstances are unlikely to co-operate by repeating themselves. A good example of this can be found in Disney's efforts to restore profitability in their theme park business after 9/11. The situation caused almost all of the decline in profitability, yet the management team made many shifts in strategy hoping to find a better way to make money with the park operations. In the final analysis, profitability returned as the economy resumed growth and people resumed travelling to the Disney parks. On reflection, it would be easy to confuse increased profitability in this case with good strategy, but many strategies would have resulted in increased profitability in that situation. Likewise, Wal-Mart's same-store sales numbers suffered as the economy recovered - not as a result of poor strategy, but rather because some consumers, who shifted to buying at discount stores when the economy got tight, shifted away when things improved. In my mind, these are both cases of what I think of as "living by the sword and dying by the sword". In your own strategy, if you succeed by riding the pendulum one direction, think about how you can succeed as it swings back.

strategic planning, strategy, management, business, marketing, entrepeneurship, growth, learning

Strategic Planning - Pricing for profit

2007-02-26T06:09:00.000-08:00

This is the ninth in a series of articles about how to get more out of your strategic planning.

9. Don't Underprice

It's hard to push the idea of charging for value when some of the most notable strategic success stories of recent years have been commodity players. After all, if low prices worked for Southwest Airlines and Wal-Mart, shouldn't they work for everyone? The answer is NO. In any industry - any industry at all - there is only ONE winning company that follows the low price strategy, and that only occurs if that company has a real, tangible, differentiating advantage in cost (not price - cost). In many industries, what this means is that there is a crowd of bottom-feeders all thinking they will be the next Wal-Mart - with none of them succeeding. I can think of very few more certain recipes for failure than to pursue the low price strategy without a serious cost advantage based on strategic competency.

It's a hard fact that 90% of pricing mistakes are underpricing. The reason is quite simple - we are reluctant to lose customers for any reason, and - often - we have trouble believing in the true value of what we are selling. To succeed, we have to escape this trap. There are two essential ideas necessary for this:

1. Understand your true value and be confident in it. - it's much easier to hold your ground on price when you know what your added value is worth. The sale makes more sense to everyone - pay X get Y value, or pay less and don't get it.

2. Be willing to lose customers on price. Good products, high quality and excellent service are not for everyone. What this means is that some customers just aren't willing to pay for anything more than the minimum value. Your task is to get those low-value customers to but from someone else, so you can focus on the customers who value what you do well.

This is one of the hardest tips I've given, because it's terribly difficult to watch customers go somewhere else. Just remember, at the end of the day, it's not how much you sell, but how much you make that really matters.

strategic+planning strategic+planning+process management business pricing

Strategic Planning - executing better

2007-02-25T11:30:00.000-08:00

This is the eighth in a series of articles about how to get more out of your strategic planning process.

8. Execute Better

Execution is the Achilles' heel of strategic planning. Far too often, we create elegant, wonderful strategies that fall short of our expectations simply because of lackluster execution. There may be many reasons for this, but there are two very common reasons which can be mitigated by proper strategic planning processes.

The first common reason execution becomes an obstacle is that we always want to commit to more than we can actually accomplish. In terms of Simplified Strategic Planning, this amounts to setting more strategic objectives than your team can realistically implement. There are two basic rules of thumb I use for matching our commitments to our capacity. The first is an absolute number - no team will be effective implementing more than 10 strategic objectives. Sure, you may get more than 10 objectives done, but with real strategic objectives, you will certainly be taxing every part of your organization to do so. And why not? Because you will eliminate your ability to handle unforeseen events, and cripple your organization's ability to take advantage of serendipitous opportunities. The second rule of thumb is that you generally want as many objectives as you have effective implementation leaders in your organization. While it's possible for an implementation leader to do a great job on two or even three strategic objectives, you will be reducing his or her ability to perform in any other function in your organization. You also will lose a certain amount of focus, which is usually going to reduce effectiveness. Please note that this rule of thumb refers to "effective implementation leaders" - not "strategic planning team members". While we like to assume that all of the members of our strategic planning team will be effective implementation leaders, this is often not the case.

The second common reason execution stumbles is that we often do a poor job of monitoring our progress on implementation. Most strategic plans are poorly designed for monitoring - there are few, if any, measuable milestones and no built-in process for routine monitoring. In addition, we have a tendency to put the monitoring of strategy implementation at the bottom of our priority list, because it is seldom urgent. As we've pointed out so many times in our strategic planning books and strategic planning seminars, you must commit to monthly monitoring of your progress if you want good execution on your plans.

strategic+planning strategic+planning+process management business discipline execution implementation

Strategic Planning - the power of segmentation

2007-02-23T09:24:00.000-08:00

This is the seventh in a series of articles about how to get more out of your strategic planning.

7. Segment Better

This tip goes with some of the previous tips very well. When I tell people they need better market segmentation, I don't mean that they need more market research data, or anything like that (although some of you surely do need more market data). What I really mean is that your segmentation looks just like everyone else's segmentation.

Remember tip #3, "Be different"? This is perhaps one of the easiest ways to become different that I can think of. You see, when you define a really unusual market segment that no one else uses, you start to think strategically about how to provide better products and services for that market. Because you are the only person targeting that segment, it doesn't take long before you become the preferred supplier for that segment. Now, that may not lead to 100% market share (although sometimes it does!), but it will enable you to have the first, best shot at any customer within that segment.

Here is a good way to re-think your segmentation productively: Take a look at a list of your 10 favorite customers - the ones you really make great money on. Ask - do any of these customers belong to a grouping that is NOT recognized as a segment in my industry? If your industry is segmented by consumer age and gender, for example, perhaps you should target by ethnicity, or hobbies. If you are in a B to B market that is segmented by industrial classifications like automotive and appliance, consider segmenting by size, ownership or creditworthiness. Not every segmentation you consider will work, but those that do will create golden opportunities for you!

strategic planning, strategy, management, business, marketing, entrepeneurship, growth, market+segmentation, segmentation

Strategic Planning - Understanding Value

2007-02-22T16:20:00.000-08:00

This is the sixth in a series of articles about how to get more out of your strategic planning.

6. Understand Value

Now, when some people say value, what they really mean is "cheap", and that's not what I'm talking about here. I'm talking about (Q+S+E)/P. Here, Q=Quality, S=Service, E=Effectiveness and P=Price.

The hardest part of understanding this is to know that each customer has his or her own approach to value...and that the definition of value may change depending on the circumstances. For example, let's say my wife asks me to get a loaf of bread on the way home. Am I going to drive 10 miles to Sam's Club and buy a 12-loaf bundle? Of course not - I value my time more than that. So I have my choice of three stores within 2 miles of my home - one is cheaper, almost as cheap as Sam's, one is dreadfully expensive, but very high quality, and the third is pretty expensive but there is never a line there because the store is very well staffed.
Where will I go to get that loaf of bread? If you said "it depends", you are right. If we are having a fancy dinner, I might stop at the really expensive, high quality store. If I'm pressed for time, I might stop at the really quick store. And if I have to buy a lot of other, very commodity oriented stuff (like Kleenex and bleach), I may go to the cheap store. But in each case, my value equation has changed.

To take advantage of understanding this, you have to accept that you won't always get every customer - and, in fact, sometimes you won't get 100% of the business from ANY customer. This is OK...as long as you do get some customers some of the time, and their reasons for choosing you are well integrated into your operations, marketing and pricing. What do I mean by this? Take the expensive, high quality store in the example above. Their operation includes more highly paid people than either of the other stores, because they spend a good deal of time and money on learning about the best products and why those products are better. This helps the store to sell a pound of salami for $18, because every staffer involved can explain to you why you would choose this product over a $3.69 package of Oscar Mayer salami from another store. In addition, choosing just the right - often unique - products to sell takes a lot more know-how than goes into merchandising in a more run-of-the-mill store. And, of course, there must be additional margin to compensate for the increased difficulty of running a specialty store.

So - do you understand the value your customers see in you? Most successful companies have a firm, clear answer to this. Often, profitability problems are the result of mixing two reasons (cheap and high quality, for example), because the underlying operational requirements of optimizing different reasons usually clash, creating inefficiency. A proper strategic focus will greatly increase your ability to create strategic alignment around one, good reason to be preferred by your customers.

strategic+planning strategic+planning+process management business value marketing strategic+competency

Strategic Planning - the power of speed

2007-02-21T05:42:00.000-08:00

This is the fifth in a series of short articles about how to get more out of your strategic planning.

5. Respond Faster

"Time is money". We've all heard that, right? But does your company operate that way? Many times, I've seen companies succeed wildly simply because they do things faster than their competitors - usually, a LOT faster. This works simply because all of us, as consumers, would prefer to have whatever we want whenever we want it. In many cases, we are prepared to pay a huge premium to someone who can save us just a little time - sometimes even paying this premium for a product or service on inferior quality.

How can you use this? First, in your strategic planning, you need to understand the time performance standards of your industry. Do 90% of your competitors turn around a customer order in a week? A day? An hour? Obviously, this can vary a lot, depending on the business you are in. But whatever that standard is, you need to ask the question "Are there many customers who would find it valuable to be served in half the time?". Usually - but not always - the answer is yes. In many cases, customers will be willing to pay a premium of 10-20% to get the same product or service in half the time.

Knowing that your customers will pay a premium for faster service is only half the battle. Naturally, you actually have to deliver on this - and make sure the customer knows you deliver. A simple time-flowchart can help you to identify where your customers' time is spent in your operation, and give you some ideas about how to cut that time down. This analysis should be done in the strategic issues section of the strategic planning process (page 5.2). Here are the top five time wasting places I've found in various industries over the years:

1. Credit approval
2. Waiting for engineering
3. Communicating the order slowly
4. Packaging for delivery
5. Waiting to be delivered

Granted, these are more applicable to products than services, but service examples tend to be very industry-centric (ie. an airline wastes time in different places from a restaurant). Anyway, try doing a little flowchart of your own operation and see if you can't find some treasure for your customers - chances are, they will be glad to pay you for it!

strategic+planning strategic+planning+process management business customers speed time competitive+advantage

Strategic Planning - more power outside the box!

2007-02-20T11:39:00.000-08:00

This is the fourth in a series of articles about how to get more power out of your strategic planning.

4. Think Outside the Box

Some people will point out that "think outside the box" is a lot like yesterday's tip - "be different" - and it is. But there is more to thinking outside the box than just being different. Perhaps the most important way your company can get outside the box is to focus on the actual need your are serving for your customers, rather than just your product or service. By "actual need", I mean the reason your customer is buying from you. For example, Harvard professor Ted Levitt liked to cite the case of a company that made drills - the need was the hole, not the drill. Far too often, we get hung up on the thing we do and completely miss what it does for our customers.

How can you use this? Stop for a moment and think about why your customers are buying from you. Then ask two follow-up questions: (1) Is there any other way this need could be met (besides buying what we sell)? and (2) Is there something we can add to what we sell - maybe a completely different product or service - that will enable us to meet our customer's needs even better than we do right now?

There's much more to thinking outside the box than thinking broadly about customer needs, but this is a good way to free yourself from the constraints of doing things the way you always have. Give it a try - you'll be glad you did!

strategic+planning strategic+planning+process management business customer+needs strategic+competency

Strategic Planning - the power of uniqueness

2007-02-19T09:30:00.000-08:00

This is the third in a series of short articles about how to increase the power of your strategic planning

3. Be different

On the surface, it's obvious that you want your company to be different. But look at your company with a more objective eye - just how differently do your customers see you? One of the interesting things we've discovered from years of doing strategic planning with companies in many different industries is that being truly different is usually more important than being better. This is because everyone claims to be better - but few companies have the courage to be truly different.

Using the strategic competency tools in the Simplified Strategic Planning process, you should be able to identify some ways that you can distinguish your company from the competition. My challenge to you is to ask this simple question: What would happen if we turned this up a notch? Or even, how far could we turn this up? Can we expand upon our difference to the point that our competitors simply walk away, shaking their heads? I always like to ask this question, because - and this is the important part - if you can get your competitors to walk away, then you will not have any competition.

strategic+planning strategic+planning+process management business uniqueness strategic+competency

Strategic Planning - the power of focus

2007-02-18T05:57:00.000-08:00

This is the second in a series of short articles about how to increase the power of your strategic planning

2. Get More Focus

This approach should be in every strategic planner's toolbox, but many planners avoid it because there are some very difficult trade-offs involved. It is simply impossible for even the biggest, richest company to be all things to all people. Despite this, I constantly encounter companies who want "one stop shopping" to be their strategic competency. Now, one stop shopping can be a nice competitive advantage IF you have the resources, and IF you know who your customers are very well, but many companies pursue this approach long before either of those is true.

Why is focus so important? Look at it this way: if you spend all of your time and money trying to develop a reputation for great service in five different industries, don't you think you might get beaten by a company that spends the same amount on just ONE industry? Yes, you have the other four industries to fall back on (and I can hear the "don't put all your eggs in one basket" crowd shouting this), BUT...chances are you will run up against a focused strategy in EVERY market, eventually, because it WORKS!

So...how can you get more focus? One simple approach is to make a list of your five least favorite customers and ask why you don't like them...or maybe, why they don't like you. This is always a useful exercise, and often yields some surprising answers. But more importantly, I strongly suggest you go through the Strategic Competency exercises in the Simplified Strategic Planning process (on pages 3.2 and 5.2)...and use that compenteny to define your focus. You'll be glad you did.

strategic+planning strategic+planning+process management business focus strategic+competency

Strategic Planning - the power of discipline

2007-02-17T07:18:00.000-08:00

This is the first of a series of short posts on how to increase the power of your strategic plan.

1. Be Disciplined in Your Strategic Planning

This is a funny way to have more powerful strategies...and it's important in two different ways. First, you should have the discipline to create a strategic plan.
This means you have to take the time - even make the time - to sit down and write out exactly what your plan is. I've seen companies succeed without a formal strategic plan, but I've seen a lot more companies fail. One of the key things to do here is to set dates when you are going to get things done. In many companies, it helps to have an outside facilitator who will set and keep you to this schedule.

The second way you need to be disciplined is in actually following what you say in your plan. It does no one any good to, for example, say we are going to be focused on a given market, and then turn around and sell everything to everyone who shows up with money to spend. It's very, very powerful to mean what you say and say what you mean in your strategic planning, so be sure to think long and hard about anything that may be an obstacle to that. If you don't, your plans will lack credibility, and ultimately, it will be very difficult to get people to support your strategic vision. If you do follow through on what is in your plan, however, people will see a winner - and enthusiastically support the next thing you plan.

strategic+planning strategic+planning+process management business discipline

Strategic Planning - making a funky schedule work

2007-02-16T07:41:00.000-08:00

Often, I'm called by someone who wants to get their strategic planning done in a two to three-day meeting. This reflects a disease in the world of strategic planning that I call "retreat-itis" - the illusion that a proper strategic plan can be created in one sitting by the management team. The most common issue with doing this kind of schedule is that the team has no chance to research their data and assumptions used in strategy formulation - leading to a poor foundation for decision making. In addition, on the implementation planning, there is no opportunity to check on resource requirements or schedules, and so the implementation plans are unrealistic, at best.

So, how can we make this work? First, if possible, I ask the team to do the best job they can filling out the worksheets in sections 1, 2 and 4 of the Simplified Strategic Planning manual before the "retreat". This gives us a base of researched and considered data to work from. It's not ideal, because I haven't really given the team good instructions on how to use the worksheets, but it's better than nothing. The real sticking point for most teams here will be market segmentation, so I sometimes do a simple segmentation for them on the phone.

The second thing I do to adapt to this is to tell the team that implementation planning won't be a part of this process - it simply can't be fit in to a 2 day retreat. If the client insists, we can try to do it in a 3 day retreat, but I warn the client that we will be missing some key data, and that I usually allow weeks of preparation for the implementation planning.

As I said, this isn't ideal, but the next time you have to do a quickie strategic plan, you can at least get the company a little closer to the results of the standard schedule outlined in our Simplified Strategic Planning course.

strategic+planning strategic+planning+process management business

Money Loves Speed!

2007-02-15T04:55:00.000-08:00

I just noticed a short bit in Terry Brock's excellent Achieve Your Success blog, in which he quotes Andrew Palmer, saying "Money Loves Speed". This is so true, especially in marketing, but equally in other facets of business.

The reason for this is twofold: first, speed assures that there is a tighter feedback loop between planning and execution (think shooting the rapids vs. drifting lazily down a river). Second, speed reduces the "t" component in time value of money calculations - and since those express value as (1+r) raised to the power of t, you get a geometric payback!

I've been using this recently by tightening up the timing of my marketing cycle for our Simplified Strategic Planning seminars...we used to begin advertising analysis nearly two years from the date of the program, and we are constantly looking to shave days off of the cycle. Web marketing is one of the best "fast cycle: marketing approaches you can use - because you can usually assess a campaign in a matter of days rather than weeks.

New Strategic Planning Exercise - Refining Your Strategic Competencies

2007-02-15T04:42:00.000-08:00

One of the most exciting strategic planning concepts developed in the past ten years is strategic competency. While this term is probably over-used and mis-used, it is a very powerful tool when used properly. Remember that a strategic competency is a combination of skills, processes and knowledge that creates significant value for your customers and differentiates you from your competition. I have yet to see an example of a company that has been wildly successful using more than one strategic competency. That's right, you only get one, so choose wisely.

Some decent, well-known examples of strategic competencies are Disney (family entertainment), Honda (small engines) and Starbucks (high-end coffee experience). If you'd like to hear more about this concept, please refer to Simplified Strategic Planning or comment here, and I'll post more.

A client I've worked with for some time wanted to create a more focused strategic competency than the one they have been using for two years.

Rising to this challenge, I asked the team to think of 3 different types of customers:

1. A customer who loves us and would never leave for a competitor
2. A customer who has left us for a competitor and come back
3. A customer we would be better off losing to a competitor

I then asked : Why do the customers in 1 and 2 love us? What is their main reason for preferring us? What to they tell us about ourselves?

Following this, I also asked the team to think about what customer 3 was really looking for that doesn't mesh with who we are.

I expected answers to be all over the map. I was astonished at how consistently the answers reflected the value of the personal relationships that customers have with this client.
If you have already figured out a strategic competency but are uncomfortable with it for any reason, I strongly recommend you add this exercise to your strategic planning - you may find that it really helps refine the competency to something much more unique and valuable!

I'd love to hear from anyone who is using strategic competency as a central part of their strategic planning process also - both failures and successes are grist for the mill of learning, so please share!

strategic+planning strategic+planning+process management business

Strategic Planning: The Easy Way to Innovate is - the Hard Way!

2007-02-14T07:17:00.000-08:00

People, quite naturally, prefer to do easy things. Easy things are — well, easy. It often seems, when we look at our businesses, that the more things we can make easy, the more profitable the company will be. To a point, this is true. If you are putting more effort than you need to into creating your product or service, the time and effort involved may well be coming right out of your bottom line. Recognizing this, most managers will put plenty of effort into taking effort out of your processes.

But wait — there's a catch. Management is not just about minimizing cost — it's also about maximizing value. Some of the effort involved in your business creates tremendous value for your customers, and chances are you aren't even sure where the greatest value lies.

When companies set out to innovate strategically, they often rush off in the same direction as everyone else. In many industries — especially high-tech industries — this causes markets to mature very quickly as unique specialty items that took tremendous R&D investment become "me-too" commodities. If the innovation is a compelling one that creates real, preferred value for the customer, this commoditization is almost inevitable. The only place this is unlikely to occur is when your competitors — for whatever reason — do not copy your valuable idea.

Let's look at an example of this. For the past several years, AMD and Intel have been slugging it out over the microprocessor market. Intel, with deep pockets and first-mover advantage, decided to define the game in terms of core microprocessor clock speed. This is why, when you buy a computer, you are told that a 2.8 Ghz CPU is better than a 1.5 Ghz CPU. Superficially, this is absolutely true — the faster clock speed on the CPU makes it process program instructions faster. For some time, AMD made the mistake of playing the game as defined by their competitor (almost always a bad move). Recently, however, AMD has departed from classifying their products by clock speed (which is what Intel still does). AMD now wants users to evaluate their products by effective speed rather than clock speed — and, of course, they have helped to create the means for customers to measure effective speed. This is an interesting twist in the history of CPU innovation, because today, AMD chips with slower clock speeds are being pitched against Intel chips based upon testing that is purported to depict the real-life speed of a computer using that chip. There is tremendous debate about the testing of system speeds in the technical press today, which means — to some extent — AMD has moved the game of innovation into the realm of measured effectiveness for the customer, and away from CPU clock speed. Customers, of course, will benefit from this move towards real-world comparisons and away from slavish pursuit of the gigahertz — and AMD is hoping that it has the know-how to keep up with Intel in the redefined race. For us, the most interesting part of this is that we are seeing two excellent competitors investing heavily in markedly different paths of innovation for the very same product.

The concept that competitors might not copy something that is strategically valuable seems absurd on its face. After all, why wouldn't you copy a product that enables a competitor to gain valuable market share, often at higher margins? There are three main reasons why competitors do not copy innovations:

They are unable to copy the innovation
They choose not to copy the innovation
They are prevented from copying the innovation

There is one other situation that occurs frequently, and that is:

The competitor copies the innovation weakly because they fail to focus

If your company is seeking ways to innovate, each of these reasons may offer ways to avoid competition and earn a substantial return on your innovations. By understanding each of these, you may be able to identify useful types of innovation that will give you a leg up in the marketplace.

First — and this is one of the best — competitors sometimes are simply unable to copy a new product or service. The reason this is a very good situation should be clear — if you do something valuable for your customers that your competition cannot copy, you have created something that looks an awful lot like a strategic competency, which we all know is practically a license to print money. Unfortunately, this situation is less common than we would like to think. Additionally, we may embark upon a project expecting that our competitors will be unable to copy us only to find out, much to our disappointment, that this is not true. The worst thing about such a disappointment is that it is likely to turn up only after we have spent strategically significant amounts of time and money. However, if you want to avoid this disappointment, there is a key choice you must tend towards in your strategic decision-making: you need to focus your efforts on the hard stuff. The reason that difficulty becomes strategically attractive here is that it increases the likelihood that our competitors, in fact, cannot copy our innovations.

What are the things that will make a competitor completely unable to copy an innovation? In general, these will be technical issues — issues of know-how and capability, quite distinct from intellectual property issues, which are properly dealt with below. Let's take a look at issues that will completely prevent competitors from pursuing an innovation:

The competitor does not understand the innovation
The competitor does not have the correct equipment or people
The competitor cannot afford the investment
There is a trick to the innovation that the competitor cannot copy

The first three of these can be related to the others, and — to some extent — they all boil down to resources. With deep pockets, most deficiencies in capability can be eliminated. This is not always the case with the first issue, however — if you don't understand the innovation, you may end up investing in equipment and people that are inappropriate for success with the innovation. It is possible, however, for an intelligent competitor to invest in (1) — understanding, so this is not insurmountable. It is also possible for a competitor to correct (2), by spending to get the right people and the right equipment. The last two issues may be insurmountable. If investment is required, and a competitor cannot get the required capital, that competitor is, for most purposes, shut out of the market.

The fourth issue — the clever trick — is the dream of most entrepreneurs. If there is a clever trick involved, you can maintain a monopoly on the innovation almost indefinitely, or at least until your competitors figure out a way to steal the secret from you. A good example of this was the formula for gunpowder, which was a closely guarded secret for the first decade or so of its use in Europe. Everyone could tell that charcoal and sulfur were involved, but the use of saltpeter, and its proportion in the mix was a secret that took years to leak out, effectively giving the monks who discovered it a monopoly on its manufacture. Thus, while Roger Bacon is credited with the European innovation in the 13th century, the first European use of guns in warfare was not noted until nearly 100 years later.

The second reason why competitors may not copy us is that they choose not to copy. Why would this happen? Basically, competitors are likely to decide against copying good ideas when they think that either (1) the cost is too high, (2) the payoff is too small or (3) they just don't like the idea. Historically, many companies have used high cost as a barrier to entry, and this can work very well if you have deep pockets and your competitors do not. Small perceived payoffs can be just as good a barrier to entry, but it requires that you know something that your competitors don't. And dislike for an idea can also be a powerful barrier to entry. Let's examine how a competitor might reach the conclusion that they should not copy an idea.

First, the cost being too high: naturally, the cost might actually be too high, but this is one we don't want to use, because it would hurt us, too. Much preferred would be that the competitor's perceived cost is too high, while our actual cost is not. There are two key ways to hit this mark: one, choose innovation projects that appear to be expensive at first — and turn out not to be, or two, choose projects where you have some actual cost advantage in the innovation process. Both of these options require that you know a great deal about your product, service or processes — companies that are just dabbling will not likely succeed in either. In addition, the case where there is a real cost barrier to entry can be quite powerful if you have deep pockets and your competitors do not.

The second reason a competitor might decide not to copy your strategic innovation is that they perceive the payoff as being too low. If the actual payoff is low, this is not a very good situation to get into. In some cases, however, the perceived payoff may be much lower than the actual payoff. Some industries are perceived as dull and unrewarding. If you can gain entry into such a business, the perception of low payoff will help you almost as much as if it was real.

You will also find some cases where the low payoff is a reality for the second player in a market. This is often true with simple innovations that create strong brand preference. For example, Domino's Pizza gained tremendous leverage from being the first nationwide pizza chain to advertise delivery. The players that followed them had all of the expense of building a delivery capability, but none of the brand preference that Domino's generated during the years when "Domino's Pizza Delivers" was a distinction.

The final reason a competitor may decide against copying you is one of my favorites. Sometimes, a competitor just doesn't like the direction you are going. The beauty of this is that your competitors effectively leave you with a monopoly by making this choice. This can come about because people have had bad experiences with some kinds of business, or simply because of a gut reaction. For example, after the collapse of the dot.com bubble in 2001, many people assumed that all internet business was inherently unprofitable. This has created an opening for innovators who have developed new models of profitability for internet companies who would have been crowded out during the boom years of heavy internet investing.

The third reason why competitors may not copy us is that they are prevented from copying by someone else. Usually, this is a legal situation (as in the case of a technology covered by patents), but it may be driven by other forces as well. While many companies rely on this tactic in support of their strategic dominance, it has one major flaw: the prevention that makes this tactic effective is outside of your control, and may only be temporary in nature. The very best use for this tactic is to give you a head start on the next innovation, since — at some point — it may be possible to get so far ahead of your competition that they effectively give up on the direction you have taken. Some of the more interesting examples of this kind of prevention lie outside of the classic cases, where there is legal protection of intellectual property. These often occur because of pressure — real or imagined — brought to bear by customers of your competitors. For example, you may sell your products through distributors who are adamantly opposed to direct sales by their suppliers. In such a case, an innovator who starts selling directly to customers ends up taking a risk that competing companies are unwilling to take — the risk of cutting off the distribution channel that makes up most of their sales. In this situation, it is the customer who is preventing the copying — but the results are nearly the same as if you had a patent on direct sales.

So, what can we do to take advantage of understanding the difficulties of copying innovations? Simply put, we must throw as many of these obstacles in the way of our competitors as we can. The chart below is a basic outline of ways to take advantage of these ideas.

Innovation is a great way to differentiate your company and attain higher than average profitability in your business. Too many companies get on an innovation treadmill by improving their offerings in predictable, copyable ways. With a little care, you can innovate strategically, and truly put your company in a position that yields long-term advantage in the marketplace.

Robert Bradford is President of Center for Simplified Strategic Planning, Inc. He can be reached via e-mail at rbradford@cssp.com.

Center for Simplified Strategic Planning has prepared a new book Elements of Innovation: How to Achieve Innovation in Mid-Sizeand Smaller Companies how to handle the issues of innovation. This is the perfect book for you if you want to:

Increase the "innovation quotient" of your management team
Stimulate creative thinking
Create a company culture that fosters innovation
Get more employees searching for new ways to create value
Get a measurable return on you innovation investment
Inject innovation in to your strategic planning
Establish an ongoing process for commercializing ideas

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strategic+planning business strategy innovation

Strategic Planning and IT

2007-02-12T21:17:00.000-08:00

In many companies, IT can be the wonder weapon of strategic superiority, enabling the forward-thinking company to leave its competitors bleeding in the dust. Just as often, however, IT can be far less than strategic in its impact, and, in the worst case, hamper the strategy of an otherwise well-oiled machine of a company. Mike Shaffner, in his "Beyond Blinking Lights" blog, looks at the problem of "being more strategic" from the IT manager's point of view.

I certainly recommend reading this, if you are in IT, or if your company uses IT as a strategic asset.

Tags:
strategic+planning management IT strategy business

If you are interested in Strategic Planning...

2007-02-12T20:33:00.000-08:00

You might check this blog out, also...
Strategic planning information and strategic planning resources at your fingertips.

Where customers come from...

2007-02-12T11:48:00.000-08:00

First, for anyone who has been reading my old strategic planning blog, welcome back. I intend to post to this blog a bit more often, usually with insights from my work as a strategic planning speaker and consultant. I welcome any comments or questions, especially those which might inspire me to write useful responses that will help you get better results from your strategic planning.

This week, I'd like you to think about the results from a market data analysis I did for a local business that had a store on Main Street in Ann Arbor. I think the data shows a LOT about how consumers think, in many many markets. We simply asked customers how they decided to come into the store. Here is a breakdown of the answers:

wWord of Mouth! 46%

wRepeat! 28%

wEmployees! 18%

wLocation: 14%

wAdvertising: 10%

And where do most of us spend our time and money? This particular business, like many, spent the most time and money on the bottom three items. Now...I would say that spending time and money on GOOD employees ALWAYS pays off in the long run, so I'm not going to quibble with that. But...how much thought have you put into how you generate word of mouth and repeat business lately?

For more strategic planning info, please be sure to visit my website!

When to plan? NOW

2007-01-08T13:02:00.000-08:00

Every year, it seems, I end up doing strategic planning with a company that I met years ago - sometimes five or ten years ago. The most disturbing part of this phenomenon is that most of these companies were quite excited about strategic planning when I met them, but never followed through on the process. When I see how much more successful my ongoing clients are - the ones who are using a disciplined approach to keep their strategies alive every year - it makes me sad to think that some companies don't get the benefit of this amazing process because they just never got around to doing it. I think, maybe, some people balk and the time and money involved, but rationally, those are pocket change compared to the revenue and profit growth these companies have failed to reach. So...are you in a cycle of strategic planning right NOW? If not...what's stopping you? If you need some advice about how to clear the roadblocks from a successful strategy, please get in touch - that's why I'm here!

Strategic Planning: Sophisticated or Simple?

2006-09-02T05:40:00.000-07:00

I've done so many strategic plans for different companies that I've lost count over the years. One of the questions that comes up sometimes in strategic planning is: should our strategic planning be more "sophisticated"? Usually, the person asking this question refers to some tool set which looks quite elegant at first, but ultimately takes a lot of time (and usually money for consultants).

Strategic Planning invites this kind of activity because it requires a lot of assumptions - educated guesses, really - in order to be done well. Spending time and money on those guesses may improve their quality a little bit, but in the vast majority of companies I've worked with, the resulting improvement in assumption quality is NOT worth the extra effort and delay. I have seen companies delay their entire planning process for two years waiting for data like this, and frankly, most companies would make the same improvement in their assumptions just by going through a year of well-structured planning and then paying attention to the accuracy of the previous year's assumptions.

If you would like to learn more about this, visit our website at
www.cssp.com

2006-02-20T07:34:00.000-08:00

There are a lot of people who want to do strategic planning, but very few who really focus on the topic. This is a bit ironic, since focus is one of the primary keys to success in strategy.

I'll be making comments on current events, projects underway at the Center for Simplified Strategic Planning, and some sneak peeks at material that I am writing for upcoming books and articles on strategic planning.

If you are looking for information about strategic planning, I certainly want to recommend our website at www.cssp.com. It has tools, articles, and links to other great information that will help you in your strategic planning process.