BOLLYWOOD SURKHIYAN

Strategy Lessons From Apollo 13

Here are three lessons from the Apollo 13 mission that you can use to improve your strategic plan.

If you’ve seen the movie Apollo 13, you might remember that early in the crisis, Gene Kranz, the flight director, gives assignments to his engineers. He cautions them to rely on data, telling everyone to “work the problem,” and not make things worse by guessing.

Throughout the crisis, the astronauts and the team in Houston study the data, perform calculations, conduct simulations, observe the results and then calculate again. They never guess when they don’t have to – they obsess over data to ensure they understand the whole problem and the entire range of possible solutions.

Creating a great business strategy requires the same obsessive attention to data. You have to base your solutions on statistically valid and comprehensive information about your company, your customers, your competitors and your industry.

Whenever you start a strategic planning process, every member of the planning team brings his own paradigms to the discussion. People make assumptions based on their experience, anecdotes and “corporate urban legends” that exist in every company.

Generally, we’ve found that 80% of these assumptions are relatively accurate, but the rest are not. That sounds like a good success ratio until you realize that if every executive is 20% wrong in her assumptions, then the team is seriously misaligned in their views of the current business situation.

There’s just no substitute for good data. It level-sets the team and equips them to make decisions with facts instead of hunches.

Another great lesson from Apollo 13 is how the engineers dove into the details to develop and implement solutions. One of my favorite examples is when they realize that they need a round air filter to fit into a square filter box. They don’t waste time discussing it theoretically – they simply gather up everything that they know is available to the astronauts in the spacecraft, and they build a prototype solution. They hand-write detailed instructions about how to use a sock and some duct tape to solve the problem. Then they radio the instructions to the astronauts who implement the solution.

This situation models the second characteristic of a great strategy – your plans must be detailed enough so that everyone knows exactly what to do. Getting very specific is challenging for a visionary executive team that’s used to operating in the stratosphere. Some strategic plans fail at implementation because the strategy team doesn’t agree on who will do what by when – and with which resources

The movie “Apollo 13” depicts one last extremely important strategy lesson. The flight director knows his team faces huge risks and that the outcome is uncertain, but he refuses to water down the goal. He doesn’t say, “Wouldn’t it be great if we could save the astronauts?” or, “Let’s try to save two out of three.” He says from the start that failure is not an option, and he deals with every situation assuming his team can overcome every obstacle. He won’t allow anyone to think otherwise.

At one point, a White House representative asks the head of the Apollo program what he should tell the president. The NASA chief gives a dismal assessment, saying, “This could be the worst disaster we’ve ever faced.”

Flight Director Kranz overhears the comment, faces the two men and says, “With all due respect, I believe this will be our finest hour.” Let me ask you: If the flight director didn’t send this strong message to his team, if he showed any signs of doubt, do you think his team might have believed just a little less that they could save the astronauts? Do you think the outcome could have been different?

A great strategy is bold, clear and uncompromising; it energizes your whole company around significant and vital goals. And remember, your people want to be on a winning team – your strategy must convey that you are serious about beating the competition.

So there you have it – three lessons from the Apollo 13 mission that will improve your strategic plan. Remember to base your strategy on data, develop detailed action plans, and set goals that build excitement and conviction across your company.

Thanks for reading this article. Good luck in planning your success – and succeeding because you plan.

Benefits Of Enterprise Resource Planning (ERP) Systems

Business owners demand instant and low-cost solutions that are easy to upkeep and maximize return on their investment. Enterprise resource planning – ERP systems fit the bill perfectly and hence have become popular with many businesses, especially in implementing the the resource efficiency lessons learned during recent recessionary periods. In fact, now not only multi-million dollar businesses that deploy such systems, but also small-sized units and even start-ups.

So how will your business benefit from an Enterprise resource planning software system? Here are the lures that have prompted business owners to walk the ERP road:

Reduction in Operational Costs: Deploying an ERP software system holds benefits for all three process streams of an organization-strategic planning, production control, and management control. Such a system integrates varied business processes across the myriad of departments in an organization into a single and comprehensive information repository. This integration makes communication smooth in-between departments and this improved communication, in turn, imparts a degree of efficiency in the production, planning, and decision making processes. This efficiency is manifested in various ways-lower production costs, less marketing expenses incurred, and less need for securing help desk support.

Facilitating Inventory Management: Businesses these days are located in various geographical regions. Administrative units, warehouses, and back-end support offices are spread all over the world and this leads to complexities in managing the inventory in these locations. An Enterprise Resource Planning (ERP) software system lets you maintain detailed inventory records, keep a track of materials and lot, thus simplifying your inventory transactions. With an ERP system empowering you, you can keep inventory volumes at optimum levels.

Streamlining Day-to-Day Management: An Enterprise Resource Planning (ERP) system streamlines the process involved in carrying out the day-to-day tasks of managing a business. This is primarily because an ERP software system facilitates the creation of a backbone data warehousing system. This makes it easy for the employees of an organization to easily gain access to updated business-related data. This ready access to data eases the process of decision-making and exerting managerial control over key factors of production.

Support to Resource Planning: Resource planning forms an integral component of the strategic planning process that is carried out in an organization. Enterprise Resource Planning (ERP) systems are therefore designed to take on the tasks involved in planning resources effectively and efficiently, and over the years, this functionality has improved in leaps and bounds.

So where can you obtain an Enterprise Resource planning (ERP) software system that will provide you with all these strategic benefits? ABAS Software Partner has ERP software solutions that will take care of the varied resource planning needs of your business.

The Best Laid Strategic Plans

The goal of long – term planning is not to strategize but; to prepare key minds to make sound decisions.

Background.

Most companies invest a significant amount of time and effort in a formal annual strategic planning process but, many executives see little benefit from the investment. One manager told us, “our planning process is like a primitive tribal ritual; there is a lot of dancing, waving of feathers and beating of drums. No one is exactly sure why we do it but, there is an almost mystical hope that something good will come out of it.” Another said, “it’s like the old communist system. We pretend to make strategy and they

pretend to follow it.”

Management thinker Henry Mintzberg has gone so far as to label the phrase Strategic Planning an oxymoron. He notes that real strategy is made informally, in hallway conversations, in working groups and in quiet moments of reflection on long plane flights, even on the golf course but, rarely in the panelled conference rooms where formal planning meetings are held.

Our research on strategic planning supports Mr. Mintzberg’s observation. We found that few truly strategic decisions are made in the context of a formal process. We also found that when approached with the right

goal in mind, formal planning need not be a waste of time and can in fact, be a real source of competitive advantage. Companies that achieved success used strategic planning not to generate strategic plans but as a learning tool to create “prepared minds” within their management teams.

A former senior executive at GE Capital explained the logic of such thinking. Business is often unpredictable. Two competitors merge, another develops a new technology, the government issues new regulations and market demand swings in a different direction. It is often during these real time developments that a company’s most important strategic decisions are made. Too often however, companies react poorly under the pressure because they are not well prepared for these unpredictable events. Discussions among top managers are often based more on opinion than fact, and the subsequent decisions end up being based on gut instinct rather than thoughtful analysis. GE Capital however, believes it gains a competitive advantage by following a disciplined strategy process that focuses on preparing it for the uncertainties ahead.

As our analysis makes clear, real strategy is made in real time. It follows then the goal of a formal strategic planning process is to make sure that key decision makers have a solid understanding of the business, share a common fact base and agree on important assumptions. These elements of the prepared mind serve as a foundation upon which good strategic decisions can be made throughout the year. One of the most important ways of building that foundation is by getting the central elements of the process right.

How to create prepared minds?

Most strategic planning processes are built around a set of annual or other time period meetings in which the chief executive officer and senior corporate team review the strategies of the company’s business units or divisions. The chief executive and top team typically meet separately to discuss corporate strategy as well.

We found the key to transforming these review meetings from “dog and pony” shows into effective vehicles for learning was to view them not as reviews by the chief executive but as conversations. The difference is that a conversation is a two way street in which participants learn from and challenge on another. The goal is for everyone to leave the room much better informed than when they went in. Achieving that outcome requires a lot of preparation by all the participants.

Who should attend reviews?

At the E.D. Smith Company in Canada, they believe real conversations take place in groups of three to ten people, no more. E.D. Smith simply do not believe that effective results will be achieved in large groups for both logistical and political reasons. Llewellyn Smith, the former President and Chairman of the E.D. Smith board believes that once the group grows, it is difficult to ensure that everyone can participate meaningfully so hierarchical forces are more likely to come into play. Rather than frank discussion, in larger groups one is more likely to see posturing and politicking. Some companies in our study tempted by the values of inclusion, brought in groups of thirty or more to their strategy reviews. These discussions were inhibited and people came away feeling the exercise had been more of a show than a real dialogue about critical business issues.

In reality, there are only two essential participants in a business unit strategy review; the chief executive officer and the business unit leader. Everyone else is discretionary and should be included only if he or she is truly a decision maker. The number of decision makers varies from company to company but typically includes the corporate chief financial officer, the group executive that the business unit reports to, the head of human resources, one or two senior corporate executives and two to three senior members of the business unit team. The corporate head of strategy also usually attends as the person responsible for making sure the conversation is effective. Thus, the total number of participants can be kept to between five and ten, with twelve as the maximum. People will fight to be included in these meetings but, other forums can be set up to keep them informed and get their buy in.

How long should reviews be?

It’s not possible to have an in depth strategy discussion about a significant business in less than a day. There are simply too many topics to cover such as customers, competitors, technology, regulation, risks, investments, market segmentation, resources and more. Spending less time in these areas prevents the careful poking and prodding of issues required to get the full benefit from the effort. It may sound like a lot to commit a full day to each major business unit, but most chief executives we interviewed said they wanted to spend about a third of their time on strategy.

Given two hundred and forty working days in a year, that leaves eighty days to devote to strategy. In that context, it seems reasonable to expect the chief executive to spend ten to thirty days in intensive, well – prepared strategy discussions. As one Emerson Electric executive told us, “At first I resented the Emerson process because it was such a large commitment of time, but then after a few cycles I realized it was making me and my team better managers. The process of preparing for it and the meetings themselves made us realize things about our business we wouldn’t have found out in any other way.” Former chief executive Charles F. Knight said that “more than half my time each year is blocked out strictly for planning,” a commitment to strategy that has been carried on by his successor, David Farr.

Where should planning meetings be held?

It is best to hold planning meetings off site. Holding the meetings off site will minimise the distractions of day – to – day business at corporate headquarters, allow participants to focus on the task at hand and allow for free time for participants to caucus in an environment free of the daily challenges.

What should be discussed?

Many companies combine their strategy reviews with a discussion of budgets and financial targets. That is a big mistake. When the two are combined, the discussion is dominated by a focus on the numbers and short-term issues; long term strategy questions receive only cursory attention. Likewise, if there is no other forum in which to discuss the financials, they will inevitably come up in the strategy meetings. Ideally, companies should have two clearly demarcated meetings: one full day on business – unit strategy and another meeting at a different time of the year to set financial targets. The two should then be linked with a common, rolling three to five year financial plan that ties together strategic initiatives with budgets and financial targets. Such strategic linking is crucial.

Focus on long term trends, opportunities, challenges and decisions are crucial. In businesses where decisions have a long lifetime and are difficult to reverse, such as aerospace or telecommunications, long term might mean five to ten years. In those where commitments have a shorter life, such as software or consumer goods, it might mean two to four years.

The discussion should focus on questions over the appropriate time horizon such as: What are our aspirations? What are the critical trends regarding customers, competitors, technology and regulation? How is our business model performing and how will it likely evolve? What are the key challenges and opportunities we face? What capabilities do we need to build for the future? What are the key risks and uncertainties we face? What can we do to ensure our adaptability, flexibility and profitability?

How should the conversation be conducted?

The main purpose of the discussions is to challenge the strategy by testing assumptions about the market, checking that a full range of strategic choices is considered, exploring potential opportunities and risks, and forcing an honest assessment of the business’s strengths and weaknesses.

An organizations culture will dictate the tone of the discussions, and there is no one right culture for planning. Good strategic planning can emerge from the in – your – face culture of Emerson Electric or the more genteel culture of Hewlett – Packard. There are however, certainly some wrong ways to conduct strategic planning conversations. Sometimes business – unit heads, resentful of what they see as “interference from corporate,” try to reveal as little information as possible; on the other side, senior corporate leaders at times turn the meetings into a game of “gotcha,” seeking all the skeletons in the business unit’s closets.

Exploring the strategy’s boundaries and pushing the business team to explore worst case scenarios.

The conversations can be hardnosed, but it is important to create an environment that does not become an “us verses them.” In a firm such as Emerson, where staff are able to challenge one another, it is done by exploring the boundaries of the strategy – pushing the business team to explore worst – case scenarios and understand what might make them come true. Testing to see if aspirations could be ratcheted upward; or investigating the competitive implications of a radical cost reduction or product performance improvement are a given.

It is also fine to create an collegial atmosphere, as long as it does not devolve to the point where uncomfortable issues are glossed over or buried. One company we studied never made an effective strategic plan because it was so consensus oriented. Tough issues simply were postponed until another meeting because the members of the management team were not able to confront one another and an empathetic management relationship evolved.

How much preparation is necessary for these meetings?

Preparation by the principals is the key to making a full day strategy discussion pay off. The tasks should not be outsourced to staff people. A document detailing the strategy should be sent out at least a week before the meeting, allowing participants the time they will need to study it. That will prevent people from having to take the time to read and understand the slides for the first time. Instead, participants will come ready to ask questions and debate the issues.

The corporation should provide the business units with a template that serves as a guideline for analysis. Templates should define the company’s current position in terms of customers, products or services and market segments; assess the future direction of industry, including customer trends, competitor actions, technology changes and globalization; and determine major opportunities and threats facing the business. It is also helpful to share with units the best plan of the previous year to create a gold standard of what is expected.

Each unit should be given a lot of latitude. Every business unit is different, and one size does not fit all because, in some cases templates can obscure more than they reveal. Also, strategy reviews are a great way for a chief executive to check out the quality of the company’s managers. If there is too much corporate guidance, it becomes harder to tell the real strategists from those who are merely good at filling out templates.

What follow – up is needed?

Disciplined follow up is essential. Long term strategic goals should be tied to shorter-term budgets, financial targets, operating plans and human resource strategies. In companies that had a good process, the chief executive personally took detailed notes; wrote a three to four page memo to the business unit of division management summarizing the main themes, implications and commitments; and used the notes as a starting point for the next review. The goals should also be incorporated into the compensation plans of the unit management team. Follow – up assures the strategic plans do not lie ignored on the executive bookshelf. Rather, they are living documents that drive actions and performance.

Prepared minds in action.

How does one judge the success or failure of the strategic planning process? Not by whether the written plans are good, or whether everyone felt good afterward, or even whether any big decisions were made during the meetings. The ultimate criterion is whether all the participants came out of the process better prepared for the real job of strategic decision making. In our research, we saw many examples in which the right process led to that result.

Consider how rigorous planning helped a multi – business industrial goods firms expand internationally. Unexpectedly, its automotive parts division faced the opportunity to acquire two large businesses in Germany, where it had not been a significant player. Because the company was new to the market and would need to commit significant resources in order to succeed in it, the decision was risky.

Fortunately, the chief executive, the corporate team and business unit team members had engaged in extensive strategy discussions and therefore already had a point of view on the German market and the strategic fit presented by the opportunity. As well, a thorough understanding of the economics of the product area in question was solidified. The company was able to make a decision quite quickly and out negotiate a slower rival that was not as well prepared. The acquisitions were critical to the success of the company’s growth strategy.

Similarly, Stryker Canada a medical device company used its strategic planning efforts to focus on a new growth area. The strategy review revealed the divisions core business, while enjoying a large market share and excellent profitability, was slowly becoming commoditized. Looking at demographic factors, company executives realized orthopaedics applications would be increasingly important. More weekend athlete Baby Boomers were blowing out their knees and hips. Over the course of a few years, the company engaged in various activities as a result of that insight. It generated material breakthroughs in the lab that suggested innovative ways of creating orthopaedics devices, acquired a business that could be a home for further sports -medicine activities, and pursued licensing opportunities to extend the product offering. The management team was bale to put the pieces of the puzzle together because it was clear on the scope of the growth opportunity and the need to act in the face of potential declines in its existing business.

Diligence is key to prepared minds in action.

The reverse of the two above scenarios are clearly illustrated in the E.D. Smith, Canada acquisition of GEM, Mississippi. Senior management officials at E.D. Smith were told by reliable food industry sources that they had to expand to the United States in order to stay abreast with customers as they expanded their market and became more global in their strategic challenges. Llewellyn Smith, then President and Chairman of the Board for E.D. Smith left the task to one man to make all decisions as it related to expansion. Not well prepared for the task (through no fault of his own), the person committed E. D. Smith to purchase GEM Industries in Byhalia, Mississippi from a Toronto business man.

Few, if any business unit team members were engaged in strategy discussions. Strategic acquisition analysis was none existent and a thorough understanding of the economics of products, technology, market for labour resources and geographic cultural was not evaluated. As a result, after spending approximately ten million dollars and various corporate resources in a two year period, E.D. Smith sold all of its interest in the company and went back to Canada.

Although E. D. Smith did solidify the WalMart, Sams Choice and HEB. jam business for the Southern United States, Llewellyn Smith later stated that this could have been accomplished by using the Canadian resources at the existing plant in Winona. The company eventually recovered and managed to return to profitability but, at a significant cost.

Prepared minds can also help companies reject moves that do not make sense. A company with a large aerospace and defence division invested a lot of time in its strategy reviews to ensure top managers understood the economic implications of consolidation in its industry. Instead of accepting the standard line from the industry press and pundits, the participants looked in detail at what it meant for their specific subsectors of the industry and their own future economics.

They were not gullible when their investment bankers came to town arguing that the company needed greater economies of scale to survive and proposing a specific acquisition target that would soon be for sale. Armed with an appreciation of the business and aware of the strengths and weaknesses of competitors, top management chose not to do the deal – which in hindsight proved to be the right decision. Their preparation enabled them to sort out sensible deals from foolish ones and avoid a potentially costly and distracting mistake.

Contrast that outcome with events at an agrochemical firm where poorly prepared leaders were required to respond to market challenges. Growth in the company’s industry had come primarily from the development and sale of genetically modified seeds (GMS).

At one point, the company’s seed division held a brainstorming session to talk about new growth opportunities. European colleagues raised the possibility of a backlash in their home countries against food grown from GMS but, a corporate senior executive who had joined the discussion was unhappy with this negative view of the business and took the topic off the table.

Later, European consumers did indeed object to GMS foods and the company was blindsided by the rapid decline of its European seed business. That outcome might have been avoided if the company had a formal process for fact based, open minded discussions of business unit risks among senior corporate and business unit leaders. In the absence of such a process, the whim of one senior executive overrode the concerns of the business unit.

Summary.

As these examples suggest, there is no reason strategic planning should be the butt of cynical jokes. It is one of the most important tasks for corporate and business unit executives.

Companies whose processes look more like tribal rituals waste valuable executive time at a minimum and more seriously, they may leave corporate leaders unprepared to respond properly when the inevitable moments of truth arise. When repositioned as a learning process, formal strategic planning can help managers make solidly grounded strategic decisions in a world of turbulence and uncertainty.

Strategic Planning Using Strategic Filters and Wildly Important Goals

Abstract

The strategic planning process can take many paths. It can require months of preparatory analysis or simply use the collective knowledge of the management team. Either method requires that the company make decisions on its future course. In this paper we will show how to use Strategic Filters as a way to sift through the data and make the best decisions. Then, we will focus these decisions into a few Wildly Important Goals (WIGs) that will be resourced and completed.

Strategic Planning: Strategic Filters & Wildly Important Goals

Driving Force Filter – The Competitive Advantage you can Prove
Emerging Trend Filter
Customer Filter
Wildly Important Goals
Strategy Map

Driving Force Filter

The driving force is the key differentiator or competitive advantage of the company. The most important element of the driving force is the proof. If you want your employees and your customers to believe it, then you must find the data that backs up your claim.

Here is a list of things that are NOT acceptable examples of driving force:

Knowledgeable employees
Customer Service
Quality
Trust
Responsiveness
Reputation
Innovation
Etc.

The reason these are not good examples is that any company can claim these and everyone is saying it. If everyone is saying it, then no one will believe it.

Here are some driving force examples that the marketplace can believe are real differentiators:

Innovation / Experience – We invented surgical-adhesive to replace sutures. The use of surgical-adhesive reduces surgical time by 20 – 90% with lower risk of infection.
Speed – We will produce any custom product in 2 weeks or less versus our competitors who are at 6 weeks or more.
Rugged – We produce the most rugged portable power generation equipment for military use. Our mean-time-between-failure is 10,000 + hours.
Customer Service / Training – We trained 1580 customer-mechanics in service/repair techniques last year and have two mechanics dedicated to assisting customer-mechanics over the phone.
Product Leadership – We are the only Consulting Firm in the Midwest with experience applying quantitative process improvement tools to streamline sales and marketing; reducing costs and growing sales.

Once you know and agree on the Driving Force for your company, you can use this to understand:

What you did to be the best
The core competencies that support your Driving Force
How you stay the best

Emerging Trend Filter

Emerging trends are outside forces that you cannot control and may impact your business. These may include:

Economic/monetary trends
Political/regulatory trends
Social/demographic trends
Market conditions
Customer attributes/habits
Competitor profiles/mix
Technology evolution
Manufacturing capabilities
Product design/content
Sales & marketing methods
Distribution methods/systems
Resources – natural/human/financial

We want these to be a strategic filter because they may require you to change your business model beyond internal competencies and customer requirements. They will impact how you:

Sell
Distribute
Purchase
Plan acquisitions
Develop new products and services

We have lived during a time of great external disruption. Books and newspapers are a great example. Amazon changed book buying by making almost every book ever published available, either new through its warehouses or used via used-book partners. Instead of buying just what is in the bookstore you can buy whatever you want, get recommendations for new books based on what you previously bought and read comments from other consumers before you buy.

Then Amazon changed again by offering the Kindle E-reader linked to its online bookstore. Now you can have thousands of books 1 minute after you, buy delivered wirelessly over cell networks. Newspapers and magazines are delivered to your Kindle every night at 3 AM. No ink, no printing, no late or missing delivery service, no problem when you travel. Instead, you get perfect service.

Now we now have the iPad from Apple, which promises to embed graphics and videos within books, magazines and newspapers. This will incorporate the e-delivery features of the Kindle and make the reading experience completely different.

Printers and Publishers needed to see these trends coming, to survive and thrive. These developments can shut down huge companies and make others clear winners.

Other trends of note are environmental/clean-tech, monetary/interest rates and global markets/supply chains.

Customer Filter

Understanding your customers completes the filter-puzzle and will allow you to make the best decisions on your strategic plan. A significant time is spent understanding who are your best customers. We recommend a quantitative approach of choosing the key measureable characteristics that are important to your organization and then using Pareto Analysis to sort your customers from best to worst based on these measures.

Once you know who your best customers are you can determine the characteristics that they share. Communicating through the sales force or directly with these customers you need to ask two critical questions:

Why do they buy from you?
What pain do they have?

At the end of the Customer-Filter session you will know:

Who your best customer are
The characteristics of the best (what differentiates them from everyone else)
Why customers buy from you
What pain customers have that you may be able to solve (with special emphasis put on the best customers

Wildly Important Goals (WIGs)

With all the preparatory work complete you can now create your strategic plan. The best companies always focus on achieving a few wildly important goals. Everyone in your organization is working on the important things every day. Serving customers, delivering product, coaching employees, buying, etc. are all important and need to happen every day, week and month. Strategic Planning looks out on a longer time horizon. Therefore we need to go above the important and focus on a few (3 or less) Wildly Important Goals that will take longer but will create breakthrough results for your organization.

This focus gives the plan a sense of reality. Lots of organizations try to do too many things and end up either not getting most done or doing an average job. You want to be great!

These WIGs can include:

Acquisitions or divestitures
Major capital expenditures
Product development
Geographic expansions
Entire new businesses or brands
Marketing campaigns
Globalize the supply chain
Internal process improvement efforts (Lean Six Sigma)
Implementing new information technology systems
And endless other ideas

Strategy Map

The last step is too align the organization with the Wildly Important Goals. A Strategy Map is a simple tool to visually show how each department is going to support each WIG.

To view an example of a Strategy Map go to http://supplyvelocity.com/whitepapers.asp.

The example you will see is of a medical technology company whose Wildly Important Goals was to dramatically ramp-up new product development. The map shows how Marketing, Research, Development/Engineering and Manufacturing all support this strategy.

Creative Use of KPI-SWOT Strategic Planning

A key performance indicator SWOT is an assessment tool of crucial outcomes of the performance of a particular company or an essential indicator of exact health status of an institution. Key performance indicators are procedures that stakeholders and managers use to determine their firm’s achievements. SWOT analysis an approach to planning which involves the checking and measuring of performance against expectations. This type of strategic planning is known as performance-driven planning. Strategic planning key objective is to instigate and agree on effective strategic planning processes.

This article focuses on how the SWOT analysis creates, classifies and prioritizes key performance indicators and identifies internal potential and weaknesses and external opportunities by conducting an environmental assessment. The swot analysis strategy is a tool used to conducts brainstorming to come up with ways to improve the performance of an institution and minimize the weaknesses and threats and augmenting strengths. There are several procedure involved in strategic planning engine: the performance of kip SWOT-idea cross impact analysis, formulating of plans, objectives, missions and goals.

After selecting the proposed plan, strategic planning engine performs a cross-impact analysis to establish the impact of the proposed plan on the firm’s ability to accomplish its kip-SWOT. It is also the role of strategic planning to finalize and implement, monitor and evaluate plans and their influence on strategies and goals of the institutional kip-SWOT. For an institution to come up with an effective working set of kip’s SWOT, the organizing committee must create a scheme of prioritizing the company’s activities and events. The main aim is to develop a feasible plan that represents the long-term survival and development plan of the organization.

It is advisable for the company to formulate a number of prospective plans so as to be in a position of trying out some of them to come up with the best and most effective plan that is compatible with the company’s objectives and goals. For a performance driven plan to be effective, valuable measures must be implemented and its value ascertained. Identification of SWOTs is crucial because successive steps in the course of planning for accomplishments of the chosen objective may result from the SWOTs. First, the committee members must make certain whether the objective is achievable, given the SWOTs. If it is not attainable, the organization must come up with different objectives and the process should be repeated again.

Once an appropriate SWOT has been established, the strategies should be sufficiently defined and correctly categorized. As they plan this data, organizers should also create a kpi update calendar that shows each data cycle and knows when new numbers will be there, who will gather the data, who will be in charge of the reports, calculations and giving out the outcome. All members of the company should agree upon a certain plan and should work together to ensure that their business achieves its long-term objectives and becomes successful. SWOT analysis is an effectual development tool that companies should use to assess their performance and identify various situations that will assist them to attain their objective goals.

Strategy Execution and Executability

When I ask audience members at my seminars and speeches “What is your biggest strategic planning problem right now?”, I inevitably hear the response “Implementation”. Without question, this is on of the biggest issues for any company trying to accomplish anything at a strategic level – execution seems to inevitably fall short of our stated intentions. As one CEO put it, “We say we will do something, and get excited about it, but a month later, it’s forgotten as we move on to the next thing”. This is perhaps true even when attempting to implement non-strategic objectives – but it’s far worse with the strategic ones. Why? Because nothing is more postponable than a strategic objective – until it’s too late to even think strategically. In addition, strategic objectives are much more likely to introduce powerful changes in your organization, and so they meet with far greater resistance than more operationally oriented objectives.

You can enhance your effectiveness at strategy implementation by the things you choose to do in your strategic planning process. There are three key areas where you can do this:

1. Implementation Planning,

2. Resource Allocation and

3. Implementation Monitoring.

The approach we take to these three areas is quite different from the norm in strategic planning, and it yields superior results. According to Robert Half Associates, most companies achieve about 30% of the objectives they set for themselves in a process like strategic planning. Using Simplified Strategic Planning, you should be able to achieve an average that is closer to 80%. It is the unusual way we handle the three key implementation management steps that makes the difference.

First, in implementation planning, it is important to set objectives well. This means using the SMART approach – objective must be specific, measurable, achievable, results stated in a timely way. In addition, you should make sure you set a reasonable number of objectives. We find many companies improve their execution effectiveness simply by limited the objectives they set in strategic planning. Secondly, you need to write a good, clear action plan that is useful for directing and tracking the implementation of your objectives. The approach illustrated in the Simplified Strategic Planning seminar and book is a robust way to assure this.

In resource allocation, we find that most organizations already pay a great deal of attention to the money required for effective implementation. This is the first resource you should look at. Money is important, but it is usually less important in strategy implementation that time. Ironically, few companies devote even half as much attention to time as they devote to money.

Finally, monitoring of strategy implementation is vital, even if it is sometimes difficult. This implies two important things. First, you must write your action plans to be monitorable – which means the steps should be stated as clear, finite actions which are clearly completed at some point, and also that each step needs a clearly stated start and completion date.

Assure that your team follows the recommendations in all three of these areas and you will find your execution will improve dramatically.

Four Reasons Why Small Business Fail To Plan and Why They Need To Think Again

It is so widely acknowledged that a robust business plan is one of the key ingredients in small business success, it seems remarkable that anyone serious about their business could considerable it optional. For example, Business Link say, “It is essential to have a realistic, working business plan when you’re starting up a business”. A recent survey showed that small businesses were twice as likely to be successful with a written business plan as compared with those without one. The Times in their annual round up of 100 up and coming UK businesses suggest that “poor business planning” is a key reason for failure. Indeed, it’s almost impossible to find an authority that would advocate the opposite idea, a clear signal that this idea is accepted wisdom. Despite this, a recent survey shows that two thirds of small business owners run their businesses on gut instinct alone.

I had a very interesting discussion about this a couple of days ago with a good friend of mine who has run several successful small businesses in which he posited the idea of a “planning gene”. He felt that the only possible explanation for the lack of proper planning in small business was genetic.

According to his theory, the majority of people are born without the “planning gene” and this explains why so many people don’t have any written business plan, despite the overwhelming evidence of a high correlation between a robust and vigorously implemented business plan and business success. The majority of us are simply not biologically and genetically wired to plan.

This is certainly one explanation, although I have to say I have a few reservations as to the validity of his theory. I talk with small business owners about planning every day. I’m part of a small business myself. I’ve owned several small businesses over the last ten years each with varying degrees of success. In all those conversations and all that experience, this was the first (semi) serious discussion I’d had about the planning gene.

If I was to aggregate the results of the conversations I have had with actual and prospective customers on this topic, four distinctive strands emerge explaining why small business owners fail to plan. Whilst I have heard a few other explanations for the lack of effective small business planning, I am treating these as outliers and focusing on the most significant.

I’m Too Busy To Plan – More often than not, the small business owners we talk to tell us that proper planning is a luxury that only big business can afford. For them, business planning, if done at all, was a one-time event that produced a document for a bank manager or investor which is now gathering dust in the furthest recesses of some rarely opened filing cabinet. There just aren’t enough hours in the day and if forced to choose, they would do the real, physical work and leave the mental work undone, which seems to be the poor relation at best, if it is even dignified with the status of work at all.

Traditional Planning Doesn’t Work – The “I’m too busy to plan” excuse is often supplemented with this one. I’ve heard the stories of the most legendary construction overrun of all time, The Sydney Opera House, originally estimated to be completed in 1963 for $7 million, and finally completed in 1973 for $102 million, more times than I can remember. Sometimes, this idea is backed up with some actual research, such as the fascinating study by several eminent psychologists of what has been called the “planning fallacy”. It seems that some small business owners genuinely believe that mental work and planning is a bit of a con with no traction on physical reality.

My Business Is Doing Fine Without Detailed Planning – A minority of small business owners we speak to are in the privileged position of being able to say they’ve done pretty well without a plan. Why should they invest time and resources into something they don’t appear to have missed?

Planning Is Futile In A Chaotic World – Every once in a while, we hear how deluded we are to believe that the world can be shaped by our hopes and actions. This philosophical objection to planning is perhaps my favourite. It takes ammunition from a serious debate about the fundamental nature of the universe and uses it to defend what almost always is either uncertainty about how to plan effectively or simple pessimism. This is different from the idea that planning doesn’t work as these business owners have never even tried to form a coherent plan, but have just decided to do the best they can and hope that they get lucky as they are knocked hither and thither like a steel ball in the pinball machine of life.

As with all of the most dangerous excuses, there is a kernel of truth in each of these ideas and I sympathise with those who have allowed themselves to be seduced into either abandoning or failing to adopt the habit of business planning. Most small business owners feel the same dread in relation to business planning as they do to visits to the dentist, so it’s unsurprising that so many simply don’t bother. However, by turning their backs completely on planning, they are in danger of throwing the baby out with the bathwater. Taking each idea outlined above in turn, I’ll attempt to show why business planning is critical, not just despite that reason but precisely because of that reason.

I’m Too Busy Not To Plan – Time is the scarcest resource we have and it is natural that we would want to spend it doing those things that we believe will have the greatest impact. Of course, we want to spend most of our time producing, but we should also invest at least some time into developing our productive capacity. As Stephen Covey pointed out in his seminal work, “The Seven Habits of Highly Effective People”, we should never be too busy sawing to sharpen a blunted saw. Planning is one of the highest leverage activities we can engage in, as when done effectively it enhances the productive capacity of small businesses, enabling them to do more with less. Nothing could be a bigger waste of precious time than to find out too late that we have been using blunt tools in pursuit of our business goals.

If we as small business owners weren’t so busy and time wasn’t so scarce, then we wouldn’t have to make choices about what we did with our time and resources. We could simply pursue every opportunity which presented itself. However, for the busy entrepreneur, the decision to do one thing always has the opportunity cost of not being able to do something else. How can we be certain that our business is going where we want it to go without pausing regularly, scanning the horizon and making sure not only that we are on track but also making sure that we still want to get to where we are heading? I believe more time is wasted in the single-minded pursuit of opportunities that are not right than is wasted by over thinking the opportunity of a lifetime.

In short, small business owners are extremely busy and their time is precious. So much so that to waste it doing the wrong things with the wrong tools would be tragic. Small business owners that cannot afford the luxury of making expensive mistakes simply must regularly sharpen the saw through continuous business planning.

Traditional Planning Doesn’t Work, So We Need a New Approach That Does – There are some fairly large question marks over the effectiveness of traditional business planning techniques. In an age where business models are becoming obsolete in months rather than years, a business plan projecting five years into the future cannot be viewed as gospel. Nobody has a crystal ball and if they did, they probably wouldn’t be writing business plans but using their remarkable predictive powers to some more profitable end.

Dwight D Eisenhower said “plans are useless, but planning is essential”. Whilst producing a document called a business plan is far from useless, the real value lies in the process by which the plan is created in the first place. If this process can be kept alive in a business then the dangers associated with traditional planning can be minimised or avoided all together. In an environment of continuous business planning, small businesses can be flexible and adaptive to the inevitable changes and challenges they will face. Rather than quickly becoming obsolete, their plan will simply evolve with the changing circumstances.

Accepting that the plan is a living thing that will evolve necessitates a change of approach to business planning. An effective business plan is the response to the repeated asking of the questions what, why, how, who and how much. It is not a 20 – 30 page form to fill in for the benefit of a bank manager or some venture capitalist, who will probably never fully read it. A business plan should help you, not hinder you, in doing business. If traditional business planning doesn’t work for you, it’s time to embrace the new paradigm of continuous business planning.

My Business Could Do Even Better With Effective Planning – If you are one of the lucky few whose business has thrived despite an absence of traditional business planning, then I say a sincere well done. I hope that you can say the same thing in five years time.

Business life expectancy in Britain and across Europe and indeed the world are in rapid decline. A study done at the end of the eighties and then again as we marched into the new Millennium showed that life expectancy had more than halved for British businesses in those ten years, from an average of 9.7 years to 4.1 years. Just because a company once enjoyed market leadership does not mean that its future is assured. Many high street institutions have fallen victim to the recent recession. Five years ago it was inconceivable that UK retail institutions like Clinton Cards, Game, Borders, Barratts, T J Hughes, Habitat, Focus DIY, Oddbins, Ethel Austin, Principles, Allied Carpets, Woolworths, MFI and Zavvi/Virgin Megastore would all be either out of business or teetering on the brink of oblivion in 2012. Yet that is exactly what has transpired.

Any business from the smallest to the greatest is not impervious to the winds of change. A new competitor, a technological breakthrough, new laws or simply changes in fashion and consumer preference can all re-write the future of a company regardless of how bright that future once seemed. It is precisely because these risks exist that business planning is critical. To survive in business is extremely hard, but failing to effectively plan for the future or adapt to current realities surely makes it impossible and failure inevitable.

Of course, it is not necessarily the absence of plans that did for these companies but the quality of their plans and most especially the quality of their implementation. Even a poor plan vigorously executed is preferable to the finest planning and research left to rot in a drawer. Continuous business planning is effective business planning because it emphasizes implementation and regular reviews of real results as part of what should be a continual process of improving company performance rather than simply attempting to predict the future and wringing our hands when our prophecy fails to come true. We believe, like Peter Drucker, that the best way to predict the future is to create it.

Planning Is Essential In A Chaotic World – We sometimes feel small and insignificant as we try against all odds to translate our dreams into business reality. It’s easy to feel all at sea when we consider some of the challenges we face. However, whilst it is true that we cannot control the direction of the wind, we can adjust our sails and change the direction of the rudder. Difficult and challenging circumstances may come in our lives, but we can control the outcome of these circumstances by choosing which path to take.

The truth is that we are fundamentally achievement orientated as human beings. When this is taken away, we lose much of the energy and motivation that propels us forward. There have been numerous studies carried out on life expectancy rates after retirement, which show that when clearly defined goals and daily action moving in the direction of those goals are removed from our lives, the result is literally fatal. The individuals studied who failed to replace their career goals with a new focus for their retirement simply shriveled up and died. The implications for small business owners are clear. Those business owners with clear goals who take action daily that propels them in the direction of their goals are far more likely to thrive and survive than those who take any old goal that comes along or move from day to day with no defined objective other than survival.

It seems to me that precisely because life is so chaotic and challenging that effective planning is essential. Without continuous business planning, our businesses and the small business owners that work in them may find that bit by bit they are atrophying and on their way to becoming another business failure statistic.

There undoubtedly exists an antipathy for business planning felt by many small business owners. Clearly, this cannot be fully explained by the lack of a “planning gene”, but it equally cannot be fully justified by the reasons most commonly put forward by small business owners to not engage in the business planning process. These reasons must be critically re-evaluated and a commitment made to a continual and never ending process of improving the condition of their small businesses. Without such a commitment, the future for small businesses in the UK is uncertain.

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.