Strategic Planning for success
“If you don’t know where your going you might wind up someplace else”…..Yogi Berra
Mature companies have a distinct culture which transcends the four walls of the business and leads to their reputation in the marketplace. Culture can be transformative and lead to incredible change which allows the business to “re-invent” itself. Culture can also be paralyzing. Re-invention is the key to sustained growth where communication, collaboration, accountability, talent recruitment, idea generation and process improvement dominate the culture of the business. The impact of new talent and new ideas fuel the re-invention process of the business while responding to new market opportunities quickly and liberating employees to give their best and investors to finance the “future state” of the company. A culture which values re-invention offers both great challenges and great opportunities where business strategy becomes a key and critical management component.
Webster says the definition of strategy is “the art of devising or employing plans or stratagems toward a goal that serves, or appears to serve an important function in achieving evolutionary success.” The word strategy has its origins in the military. The Art of War written by a Chinese philosopher named Sun Tzu is a classic text on military strategy still used today. Sun Tzu defined five rules for military strategy including: measurement, assessment, calculation, comparison and victory. These five disciplines provide a parallel to business success, and at a macro level reflect the work of Deming (plan-do-check-act) in business.
The development of successful strategic planning must begin with the end in mind. You don’t enter into a battle to lose, and the pursuit of strategy encompasses the resources, mind and spirit of the organization. Management can easily become re-active in the operation of the business, but through the development and execution of strategy the environment can become pro-active. Companies caught in the “founders trap” who are at risk can divorce themselves from their predecessor’s long obsolete agenda through a comprehensive strategic planning process. This planning allows the organization to examine brutal facts through self-examination and the voice of the customer, putting a spotlight on what is key and critical for the business, moving forward. This process is intended to identify constraints and eliminate them through collaboration while focusing on future possibilities. A CEO might have a Truman “buck stops here” attitude and ignore the need for a broader plan reflecting a sure sign of the “founders trap or early death” of the business. This dis-jointed approach to execution of the business process fails to align the actions of the management with the strategic needs of the company.
Are you operational or strategic? Individual managers are normally operational in nature, driven by goals or milestones. Goals are re-cast frequently and take into account the immediate needs of the company. Milestones may be short-term activities executed to react to an immediate need or opportunity. Does it even matter? A study conducted by the Wall Street Journal of corporate human resources and leadership development executives identified the top 5 executive skills sought by organizations:
1. Strategic thinking
2. Ability to work across functions
3. Ability to drive results
4. General leadership
5. Core financial understanding
Research by authors Carroll and Mui underscored the importance of strategic thinking at the organizational level as well. The authors studied 750 bankruptcies of companies withat least $500 million in assets in the last quarter before bankruptcy from 1981 – 2005. Analysis revealed that the #1 cause of bankruptcy in nearly 50% of the cases was bad strategy. In most instances, the avoidable situations resulted from poor initial strategies and not incompetent execution. If the leaders at the various levels of your organization can’t think strategically today, you may not have a business tomorrow.
The ability to think strategically is essential for individuals and organizations. Strategies need time and shouldn’t be easily abandoned. Execution of strategic objectives(strategies) is normally a multi-year activity. Most companies would agree that strategic planning is highly valuable. So why don’t more companies engage in a rigorous planning process? The answer is simple. They aren’t good at because they don’t do it routinely.
Whether you are an athlete, musician or ___________ (fill in the blank), practice and repetition elevate your performance. It took a decade to land a man on the moon. The real question is how can we continually hone our strategic thinking skills in order to thrive in today’s turbulent economic times?
The fact is most managers are now required to be more successful with fewer resources. All managers have resources (time, talent and capital) to varying degrees within their organizations. So, technically, all managers are strategists. The reality, however, is that not all managers are good strategists. Herein lies the pearl of great opportunity: the deeper you can dive into the business and resurface with strategic insights, the morevaluable you’ll become to your organization. Effective resource allocation drives profitability (more resources invested in the right activities) and productivity (fewer resources invested in the wrong activities). The result is a high-performance organization in which all levels of management are encouraged and equipped to shape its strategic direction.
Management professor Russell Ackoff said, “most companies planning is like a ritual rain dance. It has no effect on the weather that follows but makes those who engage in it feel that they are in control.” An executive at a company was preparing the company’s annual strategic planning meeting. When asked what preparation he made he responded. “I basically take last year’s slide, dust them off and update the most relevant slides.” This comment supports the opinion that strategic planning in large companies in bureaucratic and lacks clear defined process. Management tends to focus on short term financial planning (budgeting) rather than strategy. Strategic planning should focus on where and how to compete, long term.
Strategic thinking is defined as the generation and application of business insights on a continual basis to achieve competitive advantage. Strategic thinking is different than strategic planning. Strategic planning is the channeling of business insights into an action plan to achieve goals and objectives. A key distinction between strategic thinking and strategic planning is that the former occurs on a regular basis, as part of our daily activities, while the latter occurs periodically (annually, bi-annually). Unlike the additional work that is created by the process of strategic planning, we can understand strategic thinking as using a new lens to view the business. It’s not about adding more work. It’s about enhancing the view of the work and improving one’s ability to perform it.
You’ve likely noticed during your daily encounters with bosses, colleagues, direct reports, customers, suppliers, and other individuals that strategic thinking comes invarying degrees, ranging from brilliant to nonexistent. To focus on one’s ability to think strategically I have reviewed the results of research conducted among senior managers from 154 companies which identified four types of strategic thinkers. These will help you better understand how to think strategically and will give you insight into individuals in our organization. Two criteria to consider as you evaluate an individual’s ability to provide strategic insight are the “Impact of Insights” and the “Frequency of Insights.”
Using the analogy of underwater diving, there are four types of strategic thinkers. The first type is the Beach Bums. Like a beach bum, this manager mentally lounges around and doesn’t really contribute any insights to the business. The second type of strategic thinker is the Snorkeler. This type of manager skims the surface of issues. They’re the first one to wave their hand in the air and say, “We have a problem” but don’t offer any potential solutions. The third type of strategic thinker is the Scuba Diver. Like a scuba diver, when these managers are equipped with the right tools and instruction, they can come up with strategic insights. The final type of strategic thinker is the Free Diver. A Free Diver can dive underwater to depths of 800 feet on a single breath. These managers generate new and impactful ideas for the business on a regular basis. The research shows only three out of every ten managers are highly strategic, or at the Free Diver level. The reality is most people can’t hold their breath for more than one minute. But, the world record for a Free Diver holding his breadth is 11 minutes and 35 seconds! So why is there such a big difference? Free divers have learned and practiced the key breathing techniques. They’ve learned how to use their resource, oxygen, more effectively than the rest of us. In business, resources consist of time, people and money. Strategic thinking is how effectively you use these resources relative to the competition.
It would appear that the only things standing in a manager’s way of becoming a Free Diver are adequate knowledge and tools to think strategically on a regular basis. While these do account for a large portion of the cases; a subtler reason also exists. Strategic thinking, and the actions taken to follow through on it, requires an appetite for risk.
Strategy calls for focus and the trade-offs that inherently follow, but many managers decide they would rather play it safe. In most organizations, taking a risk and failing are punished much more harshly than sins of omission—not taking a risk and missing out on a great opportunity. With both political (your reputation within the company) and career (not wanting to jeopardize your next promotion) ramifications to consider, manymanagers consciously opt-out of strategic thinking. And that’s a shame. As Roberto Goizueta, the successful former CEO of Coca- Cola, points out: “If you take risks, you may still fail. If you do not take risks, you will surely fail. The greatest risk of all is to do nothing”.
To maximize your resources and profitably grow the business on a consistent basis, there are three disciplines of strategic thinking you can develop to continually ground your business in solid strategy:
1. Acumen: generating key business insights.
2. Allocation: focusing resources through trade-offs.
3. Action: executing strategy to achieve goals.
Discipline #1: Acumen
One of the interesting paradoxes of strategy is that in order to elevate one’s thinking to see “the big picture,” one must first dive below the surface of the issues to uncover insight. A strategic insight is a new idea that combines two or more pieces of information to affect the overall success of the business and lead to competitive advantage. An iceberg illustrates a universal phenomenon when it comes to insights. If the iceberg represents the body of insights for a particular market, all too often companies battle one another using the insights represented by the tip of the iceberg. Above the surface of the water and in plain sight for everyone, these insights require no extra effort to acquire, and offer the path of least resistance to those too lazy to do any real thinking. Since they are readily available to the entire market, they quickly lose value when it comes todeveloping a strategy steeped in the differentiation required to gain competitive advantage.
Hidden below the surface are insights represented by the largest portion of the iceberg. The large size of the underwater portion doesn’t indicate a large number of insights. Instead, this larger portion indicates the greater effect of these insights on the business if they are unleashed.
Acumen Question: What is the key insight driving this initiative, project or activity?
Discipline #2: Allocation
While it’s one thing to have a neatly written strategy on paper, the truth is the actual or realized strategy of an organization is a result of the resource allocation decisions made by managers each day. Therefore, it is critical to have a firm understanding of resource allocation and how to maximize its potential for your organization. Multi-billion dollar companies with an abundance of resources have gone through bankruptcy. In today’s market, having the most resources guarantees nothing. It’s how you allocate resources that truly matters. Once the insights have been generated through the Acumen discipline, one has the key ingredient in making resource allocation decisions. The definition of strategy begins with “The intelligent allocation of limited resources...”.
Resource allocation is at the core of strategy. Discussions of strategy boil down to how to allocate limited resources to maximize business potential.
Allocation Question: What trade-offs will you make to focus resources?
Discipline #3: Action
It’s often assumed that once a sound strategy has been formulated, the execution of that strategy will take care of itself. Research seems to indicate otherwise. A survey of more than 400 companies published in Training & Development Magazine showed 49 percent of business leaders report a gap between their organization’s ability to articulate a strategic vision and their effectiveness in executing that vision. Additionally, 64 percentof executives did not believe their organization had the ability to close that gap. The effective action or execution of strategy involves the discipline to focus on the important issues, not the urgent ones filling up our email In Box.
Action Question: What actions can you take to achieve advantage?
As you build these three disciplines of strategic thinking into your mindset and behavior, there are three common traps to avoid:
Trap #1: Anchors
In making decisions, the mind tends to give initial information or impressions a disproportionate amount of weight. This tendency is referred to as an “anchor”. The anchor jades the decision- making process because it starts the process at an artificially high or low point. Numerous studies have shown when an anchor is used at the beginning of the decision-making process, people do not sufficiently adjust from that initial anchor value to a more accurate one. A study of real estate appraisers and the effects of anchoring showed that by changing only one piece of information (the listing price) in a ten-page package of materials, the researchers were able to shift the real estate appraisal by more than $10,000. Most commonly, anchors take the form of last year’s strategic plan or this year’s budget. By using the assumptions that went into last year’s plan, strategy becomes fatally flawed. Strategic thinking demands that all assumptions, beliefs and information are looked at from a fresh perspective on a continual basis. Simply tweaking last year’s plan is a major disservice to one’s business because it suffocates any chance of discovering new insights that may dramatically alter the strategic direction.
Anchor’s Away: To avoid the danger of anchors in strategic thinking, consider the following:
• Create an open mind by actively considering the range of starting points available, not just the anchor point (i.e., budget numbers).
• Identify anchors as soon as they appear and call them out mentally and physically (on paper/flipchart) so everyone is aware of their presence.
Trap #2: Groupthink
As strategic thinking and strategic planning are often done in a group setting, it’s important to recognize the influence of “groupthink”. Groupthink occurs when there is a homogenous group of people with little influence from outside sources and a high levelof pressure to conformity. Groupthink tends to directly and indirectly reduce the level of objective thinking, remove “devil’s advocate” thinking and punish those who attempt to do either. Irving Janis describes eight symptoms of groupthink. As you participate in your group’s next strategic thinking or planning session, try to observe if any of these symptoms are present:
1. Illusion of invulnerability that leads to over-optimism and excessive risk-taking.
2. Efforts to rationalize or discount warning signs.
3. No challenges to collective thinking.
4. Stereotyped views of competitors as inconsequential.
5. Pressure on group members that disagree with the majority.
6. Shared illusion of unanimity.
7. Self-correction when thinking of diverting from group consensus.
8. Seek information that supports group consensus and unwillingness to look for or consider information that is contrarian (also known as the “confirming evidence bias”).
Group Think Therapy: To avoid the danger of groupthink in strategic thinking, consider the following:
• Utilize an external resource to facilitate the strategy session to ensure objectivity and divergent opinions.
• Bring in people from other functional areas (R&D, IT, HR) to offer different perspectives.
Trap #3: Status Quo
Popular adages such as “if it ain’t broke, don’t fix it”, “don’t rock the boat,” and “let sleeping dogs lie” all feed into the natural tendency to prefer the status quo. Time and again, research has proven when individuals have the option of doing something new or staying with the status quo, they overwhelmingly stay with the status quo. Feeding into the danger of always leaning toward the status quo is that fact that human beings are generally risk-averse. Research in the field of decision-making by Amos Tversky and Daniel Kahneman has shown the threat of a loss has a greater effect on a decision than the possibility of an equivalent gain. The response to loss is more extreme than the response to gain. Consequently, many strategy decisions place too much weight on the potential negative outcomes or threats. This principle of human nature has a strong effect on strategy decisions and must be taken into account to avoid always acting in a risk-averse manner when the probability of success is actually greater.
Turning the Status Quo into Dough: To avoid the danger of the status quo in strategic thinking, consider the following:
• Focus on the outcome desired and use that as a measurement between the status quo and other alternatives.
• Examine the actual changes that would need to be made to abandon the status quo, as the reality is often less painful than imagined.
Most books and training programs only address the first three levels of strategy: corporate, business unit and functional group. In reality, these are all subsets of the most important level of strategy: YOU. The individual level is where strategy is actually created. Unfortunately, 90% of directors and vice presidents have never had any learning and development opportunities on strategic thinking. The good news is that by developing the three disciplines of strategic thinking, you can elevate yourself from operational to strategic. The better news is that in doing so, not only will you become more valuable to your organization, you’ll separate yourself and your business from the competition.
In summary, defining successful strategies should spotlight elements necessary for growth in the next 3-5 years. Firms must constantly manage the current environment and adapt to immediate, short term challenges These operational activities are generally more explicit, conscious and purposeful than strategies. Strategies should answer:
1. What is the future state of the company and market? What do we need achieve for growth?
2. Where will we compete? (products, markets)
3. What can we do to create a competitive advantage?
4. What capabilities must be in place for the future?
5. What new management systems or resources are needed to implement the new strategy (strategic objectives)?
The influence of managing the current environment or daily operations of the business presents a challenge for management who seek to implement a strategic planning process. Participants can often be swayed by the “last thing they saw” (anchors) from the competition or the last “cool rumor”. Recognizing that effective strategy development and execution is a process, it’s important to define the process for your organization over a period of time. This keeps it “alive’ and improves the quality of the content. Effective strategy development consists of:
1. Assessment of the organization
2. Evaluation of current performance
3. Future state of the business
4. Defining the business DNA
5. Prioritization
6. Documentation, follow up and action plans
Click on “Contact Me” to learn more about the proven process for Strategic Planning.
Mission or Vision: Start with WHY
Some companies have a legacy of innovation, influence and profitability. The most successful companies define strategies and activities guided by a culture. What guides culture?
A business owner was asked to share his company strategy. He said “we are going to come to work every day, and work really hard”. Is this a strategy? Does this define culture? Have you ever met a business leader who said “we don’t work very hard, we are just lucky!” Probably not. There is the old saying that the “harder I work the luckier I am”, but luck and spending time “working hard” have little to do with success in business.
So how do you develop your culture? How about a mission statement? Management consultants always come into organizations and look for their mission statement. Management will spend hours trying to carefully craft their mission statement. Once completed, they proudly print it, frame it and hang it on the wall of the corporate boardroom. Time passes and it is replaced by their favorite artwork. When asked if they have a mission statement, they will answer yes. A frantic search commences to find the file or drawer that contains these cherished words. Mission statements seldom have life. They seldom get used. They seldom drive action in an organization. Why not?
They are too long. They are aspirational but the rank and file, the people who have to execute against them can’t relate to them.
Case in point: During a strategic planning session for a large medical practice the group was asked f they had a mission statement. They proudly answered yes! When asked what it said, not a single one of these brilliant doctors could tell me what it said. A few hours later they were able to locate it. Mission statements don’t get used.
Simon Sinek’s book IT STARTS WITH WHY highlights what influences behavior, what influences organizations and commands loyalty, from employees to customers. Communicating consistently and constantly in the same way is the key and it starts with WHY.
As Sinek says “any organization can explain what it does but very few can articulate WHY”. Why does your organization exist? Why do you do the things you do? Why are people loyal to some companies and some leaders but not others? Test this. Ask a friend about their company and you will hear a litany of WHAT they do, not WHY they do it. They become walking spec sheets for their company. What you do is easy to identify, but it’s difficult to build a culture around WHAT you do. WHAT drives activities but not action that represents the values of the organization.
WHY do you exist? This defines, for your staff and customers, your purpose, cause or belief. It defines why you get out of bed every morning. It tells others why they should care.
Apple is one of the largest companies in the world today, but this wasn’t always the case. Apple made the first desktop personal computer but floundered for years and was by-passed by IBM and the “PC”. After replacing Steve Jobs, the company continued to struggle. Once Jobs returned, Apple re-invented themselves by defining why they exist. Their mantra was to “Think Different”. This defined the company, their products and their people. These simple words were much more powerful than any mission statement. Think Different drove behavior: for their employees and for their customers. It gave their employees the courage to act on this belief. It defined their culture.
Let’s go back to the medical practice. After discarding the mission statement, the group set out to define their work. Why do they exist and what should their legacy be? After considerable discussion and debate, they arrived at “we treat our patients like family”. This is / was WHY they existed. This WHY defined them and was effective because it transcended the entire medical practice. From answering the phone, to billing, patient appointments and after-care, every employee and member of this business could answer a simple question or relate to a simple standard, “is this how I would treat my family?” The WHY guided behavior. The WHY helped create the culture. The WHY was simple and not a slogan on the wall. The WHY was easy to understand and created a standard of care felt by both the employees and the patients.
If you define your WHY you can “test your performance” against this. For example, the medical practice could test it by:
• The Janitor: was he cleaning to his mother’s standard?
• Billing and Accounting: Would my mother understand this bill?
• The Physician: Sitting at home and getting a call from a patient. Is he treating the call like a call from his mother who needs urgent attention….or care?
WHY drives culture. Culture drives behavior on a daily basis.
Take away points:
· Define your culture by starting with WHY you exist.
· Share broadly with employees and customers.
· Live your WHY.
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Competency Assessment
Conducting an assessment of your competencies can be very valuable to you. Applying the results can help guide your professional development. Use this to identify areas of strength. Apply a “keep doing” philosophy to these.
To conduct the assessment, you need to engage your direct reports for constructive feedback. Using a third party such as your HR Manager, send the assessment to your direct reports for an anonymous response. The HR Manager should compile the answers and score the results. You should rate yourself in each competency. Your response should be compared to the group’s response.
Example:
• Communication
Your Score: 5
Direct Reports Average: 2.5
Manage the Gaps
By summarizing the results, you will discover competencies where you have rated yourself higher than your direct reports. If this “gap” exists, it should be a focus area for improvement. Self-coaching, finding a mentor or a professional coaching consultant should be explored.
When conducting an assessment, be critical of yourself. Be real and acknowledge problems and mistakes you have made in the past. Create the plan for improvement.
In your assessment, you may find competencies where your direct reports rate you much higher than you rate yourself.
For example:
• Task Management
Your Score: 3
Direct Reports Average: 4.5
This is a strength. Learn from this and keep doing what your staff sees as successful.