March 2023 - Page 13 of 13 - BOLLYWOOD SURKHIYAN

Stragetic Planning for Family and Private Business

First of all it is beneficial to briefly summaries strategy and strategic planning.

Strategy is the longterm direction of the business that:

achieves a competitive advantage for the business in its chosen market

positions the business in the market in relation to its competitors

defines the scope of the businesses functions, capabilities and capacity

matches the businesses resources and activities to the business environment

Strategic planning is the process (and thinking) that underpins the development and analysis of the options available to the business when choosing its strategy.

For the purposes of this article the focus will be on the higher level strategic planning, or corporate planning, as this is where the company’s direction is set and what drives its operational performance that delivers shareholder value. In addition, it defines the company’s business model, the corporate culture and its reputation from a corporate, social responsibility perspective regardless of its size or structure.

Broadly speaking there are only four types of corporate strategies being:

Growth or market penetration – Same products / services into same market

Market development – Same product / service into a new market

Product / service development – New product / service into the same market

Diversification – New product / service into a new market

Once we accept this then the planning process can be followed to develop a robust and valuable strategic plan for the business.

We apply a rigorous structured process to strategic planning that incorporates a range of activities and analysis designed to achieve the clear direction for the business, its structure, its employees and all business activities.

The first part of the process includes:

Core values of the owners – These are critical as they make up the philosophy and ethics of the business and the people

Goals of the individuals and for the business these are critical as it focuses everyone of the type of strategic direction of the business.

Core competencies of the business – These may be based on the technical expertise of the owners however it is best to think about what competencies the business will leverage to develop the business model it will adopt

Development of the businesses VISION and MISSION – These provide the focus for all future activities. A Mission statement should not be any more than two sentences of between 8 and 10 words otherwise they lack focus and are of little value to the business

Your VISION is an internal statement that drives its direction and performance

Your MISSION is a statement to internal and external stakeholders of how you conduct your business

The second part of the planning process is where the real power of strategic planning is developed as it consists of a series of analysis – Four in fact, which are all designed to provoke a breath and depth of thought that will have a major impact on the structure and operational performance of the business.

Environmental analysis – this is the business environment you operate in and it includes six elements:

Political

Economic

Social

Technical

Environmental

Legal

Industry analysis – this analyses the industry environment you are operating in and competing with and is based on Porter’s Five Forces:

Power of buyers (the buyers of your products / services)

Power of suppliers (those that supply your business)

Threat of new entrants into the market (is it easy for another like business to establish)

Threat of competitive rivalry – How competitive is the market and how do / will competitors react to your business

Threat of substitutes – What is substituting your product / service in the market

Resource analysis – this is the compartmentalization of your resources and is the critical link between the businesses mission / core values, structure and operational strategies / performance. It includes:

Physical – Your location and physical assets

Reputation – The reputation of your business at all levels

Organisational – Goes to the heart of the operational structures and includes what type of human resources is required for the business

Financial – The financial requirements for the business now and into the future

Information – This ranges from your operational information i.e. SOP, policies, T&C of Trade etc to IP that you want to protect / hold separate to the day to day operations of the business

Technical – The technology utilised within the business and the future technology requirements of the business be it systems or software or the use of media

The good old swot analysis – The strengths, weaknesses (or constraints), opportunities and threats (challenges). The swot analysis is infinitely more valuable to the process after the above three analysis have been completed because the business owner will have a greater understanding of their business and will be able to conduct this analysis with clarity and purpose.

Phase three of the process is the development of the businesses strategies. This pulls together everything done to date and results setting a clear direction for the business. We have a three step process for the development of these higher level strategies, which includes

Matrix for offensive and defensive strategies through the matching of:

Strengths and Opportunities – Offensive

Strengths and Challenges (threats) – Offensive

Opportunities and Constraints (weaknesses) – Defensive

Constraints (weaknesses) and Challenges (threats) – Defensive

Prioritising the strategies by filtering then through a specific framework to assess their:

Feasibility (do you have the capacity and capability to implement the strategy)

Suitability (does the strategy suit the current circumstances of the owners and business environment)

Acceptability (this is the risk / return assessment, which includes the possible reaction of stakeholders i.e. employees, your financier, suppliers, customers and competitors)

Strategic choice – Based on the above select the most appropriate direction for your business.

While this process appears involved, complex and time consuming it can be tailored to suit the business. However it is important to have a clear focus on the end game, which is to be a strategically focussed business that has a clear direction and purpose that can be measured.

The Five Components of a Business Strategy

Can you define exactly what makes up a business strategy? Some people say no, but we think you can.

In fact, we believe a valid business strategy has five components:

Your company’s current or desired core competencies
A description of how you will differentiate vs. competitors
The industry or industries in which you intend to compete
The initiatives you plan to implement in the areas of marketing, operations, information technology, finance and organizational development
A financial forecast that shows how your plans will meet stakeholder requirements over the next 3 to 5 years

Let’s look at each of these components.

The first component of a valid business strategy is a clear description of your company’s current or desired core competencies.

You may be thinking, “Great, but what’s a ‘core competency?'” While there are many definitions, here’s a good one from Wikipedia:

“ACore competency is something that a firm can do well and that meets the following three conditions:

It provides consumer benefits
It is not easy for competitors to imitate
It can be leveraged widely to many products and markets.

A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication.”

For example, we could say that Southwest Airlines is a reliable airline that offers low fares. But in order to provide those benefits, it has to have certain “core competencies,” important capabilities that enable it to have low fares and to be reliable. We believe that Southwest Airlines has four core competencies that it executes so well that it regularly beats all other US airlines in terms of profitability.

These core competencies are:

The lowest operating costs per plane
An economical point-to-point airport network
A fanatical culture focused on customer service and cost savings
An ability to keep planes in the air more of the time than its competitors.

Southwest airlines couldn’t offer the benefits of low prices and reliable service if it didn’t master these core competencies. What key benefits do you want to offer your customers? What core competencies do you need to master to provide them?

The second component of a valid business strategy is a description of how you differentiate vs. competitors.

In our experience, differentiation is about being the best at something. This should be encapsulated in your mission statement – what are your company’s aspirations and how are you going to beat the competition? We just talked about how Southwest Airlines differentiates — what are you going to offer customers that will make them choose your products or services so that you can grow your business?

It takes a lot of hard work to come up with a great answer to this question and even more work to make that differentiation real. It’s easy for us to say that Southwest is the best low-cost airline in the US, but it’s extraordinarily difficult for them to pull it off.

The third component of a valid business strategy is a description of the industry or industries in which you intend to compete.

You need to be able to define just what kind of company you are – are you a furniture manufacturer? A gift card retailer? A consulting firm, a bearings distributor, a toy importer, etc.? This step sounds easy but we find that companies are often so concerned about getting too narrow in their focus that they fail to become really clear about what they want to do. A company with a good business strategy will have thought through these issues and made the hard decisions necessary to clarify its identity. If it has, it can easily pass the litmus test of identifying the industry or industries in which it operates.

The fourth component of a business strategy is the set of initiatives you plan to implement in the areas of marketing, operations, information technology, finance and organizational development.

These are the plans that guide your company’s focus and resource allocation over the next several years. If your business strategy is specific enough to be relevant, you will have detailed plans in all of these areas.

The fifth component of a business strategy is a financial plan that forecasts the results you expect to get from your plans and illustrates how they will meet stakeholder requirements over the next 3 to 5 years.

Your strategic planning process cannot be separated from your annual budget process. In the vast majority of companies, if it’s not in the budget, it doesn’t exist. That’s why you have to have a very senior financial person on your strategic planning team, preferably the CFO. During the planning process, your team must compile a financial plan that estimates the results of implementing your strategy. This plan needs to earn the approval of your company’s management and board and should be reviewed on a regular basis to track results and make refinements.

So – those are the five components of a valid business strategy. Good luck planning your success. And succeeding because you plan.

What Is a Strategy? Fundamentals of Successful Strategic Planning

Have you ever noticed how the question of “What is a strategy?” rarely comes up in the context of strategic planning? The word strategy is frequently used with the assumption that anyone involved in developing strategies knows exactly what a strategy is. It has been my experience that such an assumption is often wrong. Far too often, those charged with the task of strategic planning for their organization do not know or understand the definition of strategy. The result is that what they end up calling a strategy is not really a strategy. With this consequence in mind, I’ll start by discussing what a strategy is not.

Before I begin, please keep in mind that the goal of this discussion is not to get caught up in semantics. The goal is for you and your planning team to have a unified basis for evaluating ideas so that you can begin the process of deliberately converting ideas into actionable strategies.

Strategy versus Tactic

As a strategic planning expert for more than fifteen years, it has been the case most often that I am given a series of tactics when I ask a potential client what is their current strategy for achieving their objective. Most people think they have a strategy when all they really have are tactics. This confusion is common and can undermine the entire strategic planning process. It will serve your strategic planning efforts well to understand and be able to distinguish strategies versus tactics.

Tactics are specific actions that promote achievement of a strategy. The hierarchical order goes like this:

A tactic supports achievement of a strategy.

A strategy supports achievement of an objective.

An objective supports achievement of a mission.

A mission supports achievement of a vision.

Achievement of a vision fulfills purpose.

Only having tactics without actionable and integrated strategies is a primary reason why so many business owners and executives are frustrated and simply spinning their wheels. In other words, they are busier than ever before and investing significant resources, but not experiencing significant progress on their objectives or anything close to the expected return on their investment.

Please do not think for a moment that tactics play a less valuable role in the success of an objective. The right tactics are just as important as the right strategy. Ineffective tactical support can render an otherwise effective strategy useless in (and sometimes destructive to) achieving an objective.

What is a Strategy?

In its simplest form, a strategy is a clear decision and statement about a chosen course of action for obtaining a specific goal or result. While this definition is succinct and suffices for a general discussion, this definition and those like it have no practical value for organizational strategic planning efforts. Why? It provides no basis for evaluating whether a strategy is actionable. Actionable strategies are the only kind that matter in business.

What is an Actionable Strategy?

From the perspective of successful strategic planning, there are two kinds of strategies: actionable strategies and all other strategies. My definition of an actionable strategy states:

An actionable strategy is a comprehensively scrutinized decision about the most effective and efficient use of specific resources for systematically increasing competitive advantage and profits over a specific period of time.

Side note: If increasing competitive advantage and profits over a specific period of time is not the goal of your current strategic planning efforts, then just substitute your goal in this definition to make it specific to your needs.

Actionable strategies are a fundamental part of the Actionable Strategic Planning® process as they support business growth in multiple ways and enhance your chances of success if the right minds are engaged in consistently monitoring, evaluating and integrating new information and adapting the strategy as necessary.