Posts Tagged ‘assumptions’

Development and Execution – The 2 Halves of Strategy

Tuesday, May 14th, 2013

Assumptions are extremely frustrating things.Mistakenly assuming everyone understands the definitions of strategy development and strategy execution results in extreme frustration.

We deal with them on a regular basis. We frequently advise business owners how to avoid the dangers related to making assumptions.

And yet I still fall into the trap of making bad ones myself. Let me give you an example.

Sara and I had a working lunch one day last week. We were discussing an aspect of ProfitPATH’s business plan for our next fiscal year (yes, we do take our own advice) which begins on July 1, 2013.

I was talking about our strategy development and strategy execution workshops when something Sara said stopped me short. I had assumed we had been operating on the same understanding about the workshops but, clearly, we hadn’t.

Why is this important?

Because now I wonder if I’ve been making the similar assumptions with other people.

Strategy development is all about developing an effective way for a business owner to achieve his or her longer-term (let’s say 5 years) goals.

There are a number of well-established ways to develop a strategy. The academics, and large consulting companies like Monitor and McKinsey, call them “models”.

They usually involve things like a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats), identifying strategic alternatives and selecting one. They may include identifying the company’s Values, and they should include developing Vision (a picture of the company in 5 years’ time) and Mission (how to get there) statements.

Strategy development models or workshops should also include what I call a 2-way communication plan. They get input from employees, customers, suppliers and industry associations. The output is rolled out to everyone in the company so that they can understand the part they have to play in it.

Strategy execution is about turning the strategy into results or reality. With the exception of the Balanced Scorecard, which has its merits but which I don’t think is ideal, there are no well-established ways or models for executing strategy.

My view is that the annual planning cycle is at the core of strategy execution. It translates the strategy into a series of prioritized action plans which are specific, measurable and time-related. Each action plan has a Champion who is accountable for its successful completion. These action plans are the output from the annual kick-off meeting and form the agenda for quarterly review meetings.

The action plans underpin, even form the basis for, the annual sales, expense and profit forecasts. They identify manpower requirements, and investments in other resources such as plant and equipment, offices and facilities and IT infrastructure. And they can be linked to bonuses and other rewards.

We’ve built our development and execution workshops around those ‘definitions’. Thought I’d just make sure there were no assumptions out there to the contrary.

 

If you enjoyed this post you’ll also enjoy I’m Not Alone………

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Strategy And Magic

Tuesday, August 2nd, 2011

One of my mantras is “strategic planning is based on assumptions”. It has to be because it’s about predicting what will happen in the future – and no one has been able to do that accurately yet.

To make assumptions you have to collect data and then think about it. This type of thinking is different from solving day-to-day problems. So we use various techniques to help participants in strategy sessions “think differently”.

But the other day a friend of mine made me realize that magic can also teach us some lessons about how we think and the biases that affect us all.

1. Differences in interpretation.

Different people interpret the same data in different ways. And who’s to say which way is “wrong”.

For example my magician friend, Dan Trommater (who is doing exciting things using magic for leadership training) does a trick in which a member of the audience signs their name on a $20 bill which he then makes disappear.

Later, they open a box that has been in full view the entire time and inside the box is a lime. When Dan cuts the lime open, the signed dollar bill is inside it. When Dan asks the audience for their theories about how he could have done it, he gets several different answers.

Everyone saw the same thing (or received the same data visually) – a signed $20 bill disappeared and then reappeared in the centre of a piece of fruit. But different people interpret the “data” in different ways – and arrive at different conclusions.

Again who’s to say which conclusion is right and which is wrong? (Dan says he’s used at least 10 different ways to get the bill into the lime.)

2. Differences in perception.

We also see data through the lens of our own perspective.

In another part of his act, Dan illustrates the power of perspective by bringing a volunteer on stage. He or she sees Dan cut pieces from a length of rope and then restore it “by magic”.

Meanwhile, out of the volunteer’s sight, Dan shows the rest of the audience how the “trick” works by showing concealed bits of rope which are cut in place of the long piece.

So the audience sees the “trick” while the volunteer experiences the “magic”. And they have different perceptions of reality because of what they see.

3. How do you deal with these differences?

These are examples of only 2 of the many factors that allow 2 people to take the same piece of information or data and perceive it or interpret it in different ways.

We have to accept that they exist and that their effects can’t be prevented.

So, when business owners ask teams of their people to think about important matters – e.g. when they’re involved in strategic planning or annual business planning – here are a couple of “must do’s”.
• Get the very best data available with which to fuel their thinking.
• Suspend judgement when someone says something that seems “out in left field”.
• Take the time to understand how they came to their conclusion.
• Challenge your own interpretations, perceptions and other biases.

By the way, if you have the opportunity to see Dan perform, watch the rope trick carefully because there’s a sting in the tail.

Don’t Let The Summer Heat Cause A Winter Chill

Thursday, July 21st, 2011

It’s almost the end of July, it’s hot and it’s vacation season. The heat saps your energy and getting ready for; switching off during; and scrambling to catch up after vacations takes most of your attention.

Together they make it easy for business owners to lose sight of fact that it’s the end of the second quarter and planning, budgeting, whatever you call it, for 2012 will be starting soon.

So what, you ask? Here’s what – your annual business planning/ budgeting/ whatever you call it process is the engine that drives your growth. If you don’t approach it with that in mind you’re setting yourself up to underachieve in 2012.

Based on mistakes we’ve seen made repeatedly in 10 years of strategy consulting there are several things you need to think about now. Here are a couple to get you started……

1. Don’t postpone the second quarter/mid-year review. Hold it ASAP.

Quarterly reviews are a reality check. What’s really happening in the industry, to our customers and with our competitors? How does that compare to our assumptions and how has it affected our forecasts? What can we do to leverage this reality in the next 2 quarters?

How many of the programs we planned have we actually put in place? Are they yielding the results we wanted? What has worked well that can be we build on? Which programs are behind time and how do we adjust for that?

The answers to these questions and others like them, asked in the quarterly review, will allow you to put form around what the situation will be at year end and give you a jumping off point for forecasting sales and bottom line in 2012 and beyond.

If you haven’t been doing quarterly reviews, or have let them slip, this is the time to start or re-start them.

Don’t let vacations be an excuse for postponing them.

2. Waiting until the week before the annual business planning session to start thinking about next year isn’t nearly good enough.

You’re going to make as accurate a guess about what the future holds as possible. To do that you’re going to have to make assumptions which will underpin your financial forecasts, priorities and action plans.

On what information will you base the assumptions? Something you read in an economic outlook from a bank or industry association or in articles about your industry or competitors on the web?

Or are you going to get out and talk to your customers and suppliers about what is happening in their world and what that will mean for you? Why not put a simple but systematic process in place to ask the same, key questions from several sources?

But that will take time; it can’t be done in the week or two before the planning session. Who is going to see whom and ask them what has to be decided soon – using output from the second quarter review. And the meetings will have to be arranged – and everyone has a full, busy schedule.

If information is power – or at least confers power – why settle for anything less than the best information available? Decide what you need and how to get it now – then start collecting the information soon.

3. Quick tip.

Dealing with the summer heat and vacations, doing the things that are urgent, can take the focus off preparation for the thing – the annual business planning process – that is important. If that happens and business catches a chill next year, it will not be this summer’s heat that’s to blame.

More in future posts, but today is the hottest day so far this year – so I’m off to get a Frappuccino. Staying cool is hard work!

Too Early To Tell If It Will Be A Good Year? Think Again!

Saturday, February 26th, 2011

Do you think mid-February – only mid-way through the first quarter (Q1) of the 2011– is too early to tell if you’ll have a good year? Keep reading and in the next 3 minutes you may have an answer.

The first 2 warning signs are based on the answers to questions we asked in our November 2010 survey. Do they apply to your business?

1. A surprising warning sign. 

Feeling confident because you have a planning process in place and you completed it early enough to get your forecasts and budgets finalized and distributed?

When 50% of the respondents to the survey said they would miss their goals and expectations for last year, 2010, we were tempted to think that it was a result of poor planning. But a sample of individual responses revealed that many of them said they had a structured planning process and finished their planning before the start of each new fiscal year.

This raises some questions about the effectiveness of their process;
• How well did they know what their customers were thinking?
• Were the assumptions underpinning their goals/forecasts too optimistic?
• How well did they actually execute on their plans – by turning intentions into actions?

Clearly, you can’t assume that because you follow a planning process you’ll get the results you want.

2. A not so surprising warning sign.

Almost 38% of the respondents told us that they only finished their planning for the year during the first month or later. So, if we assume that they finish planning before they begin executing, when do they actually start taking action? It must be well into Q1.

If companies that have a structured process and plan well in advance of a new fiscal year still miss their goals – what chance do those who only finish in January have?

3. A related warning sign.

Tibor Shanto, who trains sales managers and their teams, quotes some research in his latest newsletter which suggests that how a sales team executes in Q1 will determine whether or not they will make their year. It concludes that a sales manager should know by the end of Q1 whether she/he will make their year or not.

4. What does this all mean for you?

Over 50% of our respondents expected their profits will be higher in 2011 than in 2010. We believe some of them are going to be disappointed.

Will you be amongst them?

You should know by now if your Action Plans are being implemented on schedule. Comparing your actual results/progress against them may tell you if they’re going to work. But that still leaves the question of whether they are the right ones.

By the way, if you want a quick, inexpensive objective opinion of your planning process and Action Plans, our Tune Up delivers exactly that.

5 Reasons Why I Love Execution

Thursday, November 25th, 2010

I think I may be in love.

I’m reading Larry Bossidy and Ram Charan’s book “Execution – The Discipline of Getting Things Done”. Although I’m only one third of the way through it, I believe it’s the most rational, practical book about strategy that I’ve read in years.

Why do I think that? Well, for a start I buy into their fundamental premises. Here are 5 that I think are particularly important:

1. The difference between a company and its competitors is often the ability to execute.

All business owners have access to the same business books, webinars, training programs, coaches and consultants etc. Why then do 2 companies in the same industry, operating in the same markets and with similar strategies, produce different results?

The only remaining variable is execution. Which doesn’t mean the market leader is executing well – they’re just executing better than the other players. As an old friend used to say – “In the kingdom of the blind the one-eyed man is king”.

Some of you may argue that we haven’t considered culture or leadership. In that case, read on.

2. Execution is the biggest issue facing business today – and nobody has explained it satisfactorily.

Bossidy and Charan make several great points. Over the years, a great deal of thought has been given to strategy development – the result of which has been thousands of books and articles. You can hire a strategy consulting firm (including mine) who will guide you through the various “models”. The same is true – or rapidly becoming true – of leadership development and culture.

But how much thought has been given to how to execute? Not much. (Although, I have to say, our firm has always emphasised it). Perhaps execution has been neglected because it’s traditionally been confused with tactics. But it’s not – execution is integral to strategy.

You could argue that the field of project management is concerned with execution. But is it? Or is it concerned with how to manage the projects that someone else decided have to be executed?

3. Execution is the major job of the business leader. The leader who executes puts in place a culture and processes for executing.

If execution is the biggest issue in business today it had better be the #1 job of every business owner. But there are a couple of bear traps here.

Entrepreneurs have to avoid the temptation to execute or do everything by themselves. They also have to avoid micro-managing or being too hands-on. If the owners don’t do that they lose sight of the forest and only see trees. They stop being strategic and get lost in tactics.

The authors say the most effective approach is “active involvement”. That means getting things done through people. But having such a detailed knowledge of how the business makes money that an owner can constantly probe and ask the right questions – leading people to develop the right solutions.

The owner/leader has to find the correct balance if she is to lead by example and make execution part of the culture.

4. Execution is a discipline, a specific set of behaviours and techniques that, if mastered, will give you a competitive advantage.

The “easy” parts of the statement are that there are specific techniques, they can be mastered and, if you pull that off, you will gain competitive advantage.

The more difficult part is that there are a specific set of behaviours to be mastered also. Human nature being what it is, changing behaviour – even our own – usually takes far more effort than learning a technique. But perhaps that’s where the discipline is required.

5. Execution includes mechanisms for changing assumptions as the environment changes.

This is my personal favourite. Many of the owners and management teams we work with get the intellectual concept of “no fault, no blame” when following up on plans and finding they haven’t worked quite as intended.

But even they find it hard to put guilt and value judgements aside when targets are missed because assumptions were “wrong”. The authors’ stress need for “realism” in running a business. Realistically then, has anyone ever been able to accurately predict the future? Let’s put the fault, guilt, and blame away for good.

In case you hadn’t noticed, I’m excited. There is just so much common sense in this book I’m looking forward to reading the rest of it. I should have read it years ago………but there goes the guilt thing again!

6 Tips for Getting Better Results in 2011.

Monday, November 8th, 2010

In a recent blog posting I wrote that business planning has started/is starting/should have started for 2011. Then the other day I came across these 6 tips which I pulled together at the end of 2008.

At that time, you may remember, there was a deluge of bad news pouring from the newspapers, Internet and TV all day, every day. Some forecasters were saying the economy would rally in late 2009, others were saying it would take years before we saw an improvement.

I made the point then that, when so much of what is going on around you seems out of control, it’s easy to stop focussing on the things that are under your control. So, since uncertainty is still with us, I thought it was worth freshening up the Tips.

Tip #1 – Remember that we have always had to deal with uncertainty when developing plans and strategies. It may be true that there is more uncertainty now than in the past. However, don’t forget that no one has ever been able to accurately predict the future with any degree of consistency.

Three ways to deal with uncertainty are – keep digging until you find the best information available before firming up assumptions; put flexibility into plans and strategies; and think through contingency plans (e.g. plan for the best, worst, and most likely outcomes and be ready to deal with all of them). A fourth technique is to review, and adjust, goals more frequently.

Tip #2 – Make sure that you actually implement your plans and strategies. According to an Ernst & Young survey, 66% of corporate strategy is never executed.

In our experience implementation is handled just as poorly in owner managed companies – which generally have fewer employees (who are often located in the same premises) and which have fewer departments and layers. All of which should make communication and coordination easier.

There are a number of reasons why strategy implementation fails and the remaining tips will help you avoid them.

Tip #3 – Develop detailed Action Plans for execution. Involve key people when figuring out your goals for 2011 – and they’ll buy into what has to be done.

Compare the goals with the current situation and gaps will appear. Then ask them what – specifically – has to be done to close the gaps, by whom and by when. The answers to those questions will form the basis of your Action Plans for 2011.

Tip #4 – Avoid attempting too much, for 2 reasons. Firstly, there may be a long list of things to be done to close the gaps and no company has the resources to attack them all. So, prioritize the things which have the most impact on your goals and focus on them. You can go back and tackle the others later.

Secondly, you want to stay flexible enough to respond to whatever happens.

Tip #5 – Commit enough resources to completing the priorities. Business owners are inclined to tackle too much at once. They also try to do everything in the minimum amount of time – while spending as little money as possible.

Think about the priorities this way. You’ve invested time identifying reasonable goals and figuring out what has to be done to reach them. That effort will be wasted unless you commit the resources required to complete those action plans.

Even if you are allocating too many resources, you’ll complete the job ahead of schedule. Who doesn’t feel good when that happens?

Tip #6 – Follow up regularly and in a structured way. There are also 2 reasons for doing this. First, because no one can accurately predict the future you have to make time to compare what you thought would happen with what has happened and adjust for reality.

Second, what could be more important than making sure you complete the action plans that will lead to achieving your goals? Not dealing with the day-to-day problems, which always seem to be “urgent”. Prevent them getting in the way of the “important” priorities by making time to review progress toward your goals once a quarter.

The odds are that you’ve heard each one of these tips before. But the reality is that a gap exists between hearing – even knowing – the right thing to do and actually doing it. That’s why 66% of the companies surveyed wasted their time.

Winners eliminate the gap.

It’s THAT Time of Year Again

Tuesday, October 26th, 2010

The last quarter of the year can be very frustrating. In addition to the “normal” workload, there’s all the seasonal stuff to be done – what should our Holiday card say, what will we give people this year etc.? (O.K. so I am a Grinch.)

Second, the results for 2010 begin to take shape. Hopefully you’ll have a great year, possibly even so good that you’re not keeping up with demand. A less attractive, but still acceptable, alternative is that you’ll make your targets (if only just). The outcome that no one wants is that you’ll fall short of some or all of your goals.

Then, of course, strategic or business planning has started/is starting/should have started for next year. And what is happening in 2010 will affect the “mood” and possibly the approach, to that exercise.

By the way does anyone really enjoy strategic planning? And does it achieve anything in this age of constant change and heightened uncertainty? I saw 2 blog postings over the weekend that argued we can no longer do strategic planning as we’ve always done it.

The first, Time to Retire Strategic Planning and Adopt Innovation Strategy by Kamal Hassan, said that that strategic planning has become too formulaic and we’ve come to rely too much on what has worked in the past. But isn’t that argument rooted in the application of the process rather than the process itself?

Kamal went on to say that we currently study the past to plan the future but that history is no longer the best teacher. However, as someone (I think it was Winston Churchill) said, “If we don’t learn from history then we are doomed to repeat it”.

This posting closed with the comment that inventing the future is better than predicting it. To invent the future we have, amongst other things, to replace historical data with subjective data (customer surveys, competitor strategy, trends, gaps, etc.). But haven’t been doing these things for some time now? I know the companies we work with do.

While saying that attempting to define the business over a 3 or 5 year horizon is probably foolhardy at best, the second post Strategic Planning and Innovation by Jeffrey Phillips, did acknowledge that it is very important to define strategic milestones or goals and determine how the firm arrives at those goals.

Jeffrey thinks that these are more “tactical” activities than pure strategic planning. At the risk of splitting hairs, I’d say they’re more about execution of the strategy.

In closing Jeffrey says that he doubts we’ll ever see the end of “strategic planning” but that what we will see over time is the realization that innovation and trend management is the actionable part of the strategic planning process. And I tend to agree with that.

I was talking to a colleague today who articulated the point I want to make really well. The strategic planning process will always be with us but it must develop, as most things do, with time. However we must adapt the process rather than declare it hopelessly broken and throw every part of it away.

Forecasting several different scenarios, building assumptions on thorough, comprehensive research (formal and informal) and thinking through contingency plans are just some of the things we can – and must – do in this age of fast, unrelenting change. Looking at, and adjusting, our goals more frequently is also, I believe, simply good sense.

So, I think strategic planning is as relevant in this age of constant change and heightened uncertainty as it has always been. And I think it can accomplish as much, or as little, as we allow the links between strategy development and execution to achieve.

But as for enjoying it, well……….

4 Laws of Effective Implementation

Tuesday, April 27th, 2010

When we want something – for example more revenue, bigger profits, a new home, or a dream vacation we’re told that we have to do 3 things. They are set a goal; make a plan to reach the goal and implement the plan. But which is the most important – the goal, the plan or the execution?

There’s no doubt in my mind that the third thing – implementation or execution – is the most important of the 3. Many years ago someone told me that “A weak plan strongly executed is better than a strong plan weakly executed”. Just last week someone told me about a promotional piece that had been written for them some time ago. They didn’t think it was great but, having spent time and money on it, they decided to use it and much to their surprise it worked. Not perfectly, but sales did go up and they did attract new customers.

So, how do we make sure we tackle this key activity – implementation – effectively? Here are 4 aspects of execution that are so important that they could be laws. Follow them and dramatically increase the odds of achieving your goals.

Law # 1. The first law of implementation is that 80% of something is better than 100% of nothing. Don’t wait for the perfect opportunity, try to develop the perfect product, try to find a “breakthrough” strategy or write the perfect plan. You must take what you have and make a start – now, today. Because if you don’t then there will also be some reason not to start tomorrow and before you know it the month or the quarter or the year have gone – and you’ll have accomplished nothing.

Law # 2. Persist. There’s an old adage about 10 salesmen who hear about the same deal. In the early stages, it’s hard to get an appointment, the prospect is demanding but slow to return calls, and 4 of the salespeople become so frustrated they just give up. Four more drop out when the prospect begins to bring up objections and does price/benefit comparisons and asks for references. The moral is that the 2 salesmen who stay at it improve their odds of getting the deal from 1 in 10 to 1 in 2 – simply by persisting.

Law # 3. Be prepared to adapt. There has never been a plan developed that worked precisely as conceived and exactly on time. All plans are based on assumptions which, even if they are logical and include the most detailed information available at the time, are just that – assumptions. Effective owners and managers review their plans regularly, for example quarterly, and compare what actually happened to their assumptions. Then they adapt their strategy and action plans for the rest of the year.

Law # 4 is all about commitment. Once you’ve decided to implement a plan then support it by allocating sufficient resources to it. No half-hearted measures – buy high quality raw materials, train everyone thoroughly, make the right equipment available and put enough people on the job. Because anything less than total commitment will jeopardize the goal.

The odds are that none of the 4 laws are a revelation. But in the face of day to day pressures we all lose sight of lessons that we’ve learned, things that are common sense. Remember these 4 laws and you’ll achieve more.

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