Posts Tagged ‘business planning’

Strategy, Motherhood, The Dog and Its Tail

Tuesday, November 4th, 2014

Do you remember that old expression “The tail’s wagging the dog”?The tail's wagging the dog or, the process is more important than the result

It was used to describe situations in which, for example, a process for doing something takes on more importance than the result it produces.

Why did I think of that now?

Simply, for many companies, this is the time of year in which they begin their strategic or business planning.

This process is often viewed as unproductive, frustrating, even pointless or a waste of time. So it may not be welcomed with enthusiasm.

Why is that?

After 13 years of working with business owners and their teams, I have a few ideas:

1.  Strategy development is a difficult, creative, iterative activity. But in many organizations the ‘planning’ process has to be completed in a predetermined period of time, in the same month or quarter, every year. That’s the tail wagging the dog.

2.  We use terms like strategic planning, business planning, and even budgeting, interchangeably as if they all refer to the same thing. They don’t.

  • Strategy development involves making well thought out choices about the future.
  • Business planning is about the activities that have to be completed in the next 12 months to execute the strategy.
  • Budgeting is estimating the financial outcomes of the activities in the annual business plan.

3.  If we’re not clear about what we’re setting out to do, everyone will expect a different outcome and no one will end up getting the result they wanted.

4.  Worse, the results we do get may not be useful. By trying to do more than one thing at a time, we end up doing none of them well. The result is a breathtaking series of ‘motherhood’ statements that are neither a strategy nor focused action plans.

5.  We begin the process with a budget, the financial targets the owner wants to achieve, and make the ‘strategy’ fit those. That, to use another metaphor, is putting the cart before the horse.

6.  Even if the results are useful, we don’t follow up. We are so busy dealing with day-to-day challenges there is simply no time. In reality, we lack discipline – not time.

Is it surprising that many business owners, executives, managers and employees are cynical about ‘planning’?

 

If you enjoyed this post you’ll also enjoy Strategy and Planning – How Business Owners Think

Click here and automatically receive our latest blog posts.

 

Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Share

Knowing and Doing – The Difference Affects Results

Tuesday, October 14th, 2014

There are advantages to getting older.Knowing the right thing to do and doing it to get results

Knowing the right thing to do.

One is you realize that to be successful, you only have to apply a few simple principles, most of which contain an element of common sense.

Another is that you learn that applying those principles is surprisingly difficult to do.

This last pearl of hard-earned wisdom helps when I read articles and posts about ways to improve business results, that we’ve known about for years.

It prevents me from becoming cynical – even when the authors package them as a new breakthrough that only they were capable of making.

Why is that?

It’s because I know that we – owners, executives, and even consultants – are constantly blind-sided by the day-to-day pressures of running a business. And that makes us lose sight of these fundamentally simple, common sense concepts.

So there’s a real benefit to having them repeated.

Doing the right thing.

Someone much smarter than I am once said “Knowing the right thing to do isn’t difficult. Doing the right thing is what’s difficult.”

I know that’s true.

We work every day with business owners and their teams who often know what to do to be successful (they have a good strategy) but who have difficulty actually doing those things (executing their strategy).

We’re no smarter than they are.

But we have the benefit of being able to focus on linking their strategy to action, helping them get buy-in throughout their organization and then holding them accountable for doing what they said they would.

No distractions for us.

Staying focused on a manageable number of activities which will have a high impact on the future and produce a high return on the resources invested in them, produces good business results.

No surprises there, right?

I could have used a bunch of big words to make the same point.

Or I could have proclaimed this was a new technique that would guarantee results.

But it’s not. It’s wisdom that’s been well proven over time.

Something, however, that bears repeating by a third party that, because of their perspective, can see woods without being blinded by the trees.

It’s worth thinking about as many of us head into annual business planning season.

 

If you enjoyed this post you’ll also enjoy A Lesson in Strategy Execution from a Successful Business Owner

Click here and automatically receive our latest blog posts.

 

Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

7 Ways to Hold Consultants Accountable Now

Tuesday, September 23rd, 2014

7 ways to hold consultants accountable nowMy wife will tell you I like giving other people advice.

That’s probably why I’m a management consultant.

But even consultants have to take some of their own advice – and change in order to grow.

For example, we must find a process for linking our compensation to our results in a meaningful way.

There’s no doubt this is hard to do. But that’s no excuse for refusing to try.

However, at the risk of making a huge understatement, it’s going to take time.

So, while we’re waiting, what can a business owner do to make sure the consultants they hire actually deliver results?

1. I talked about our own solution to linking compensation to results last year in a post called “Let’s Hold Consultants Responsible For Results”. It isn’t perfect, but it’s better than the traditional model.

2. Four years ago I suggested how owners can keep control when they work with consultants.

3. Around the same time I highlighted 3 reasons why consulting engagements fail. It’s really not difficult to avoid making them.

4. Look for consultants who have had practical, “hands on” experience operating a company. They have 2 clear advantages over consultants who have spent their entire career in consulting roles, as I pointed out in 2011.

5. There are also clues that you can listen for. Consultants who are effective tend to say certain things.

Here are 2 more things that I thought about this week.

6. Yesterday I was talking to a business owner who had been referred by an existing client. He asked if I would go out and meet him. I agreed immediately because that’s the only way to determine if there’s any chemistry between us.

Some people might consider the idea of “chemistry” to be foolish. But I can tell you from experience, that without it, the risk of a project failing increases dramatically.

7. Ask what success will look like. It’s more than just a description of what the consultant’s going to do and the services they’ll deliver. It’s about knowing how, when and what they will do to help you get the results you want.

Success, they say, comes not from doing one big thing well, but from doing many little things well. Perhaps change is like that too.

We at ProfitPATH, and lots of other consultants, are chipping away, doing the necessary things that will bring change to our business.

Click here and automatically receive our latest blog posts.

Jim StewartJim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

3 Ways Human Nature Sabotages Strategy

Tuesday, February 4th, 2014

Human nature is a wonderful thing.3 ways human nature sabotages strategy

Ask 10 people how long it will take them to complete a task and I’d guess 7 or 8 of them will underestimate the time required.

That proportion might increase if the 10 are all type A personalities – i.e. business owners or entrepreneurs.

We see this when we take teams through our strategy and business planning processes.

For example, at a specific point, we prioritize the things they need to do to close the gap between their company’s current state and where they want it in 3 years’ time.

Typically the teams want to tackle more items than is humanly possible given their resources.

There’s no ideal number of items – the complexity of each item is only 1 of the variables – but we’ve seen time and again that completing a few key tasks produces better results than taking on too many.

One point teams overlook is that the items that didn’t make the cut aren’t going anywhere. They’ll still be on the list when the top priorities have been dealt with, and can be tackled later in the year.

People don’t believe us when we tell them this. Why, because in our hectic world there are so many distractions that it’s becoming unheard of to finish a project that takes more than 10 minutes to complete.

So, we tell people to block off time in their schedule 2 or 3 days a week to work on the priorities. And we tell them to allow nothing – not voice mail; not email, not their colleagues, not even their boss – to distract them during that time.

A company’s culture can be an incredibly powerful, positive force. But it can also multiply the negative impact of human nature.

This dark side prevails when, for example, carrying a superhuman workload is considered to be the only way to prove your commitment to the company.

A negative culture is often unwittingly fostered, and maintained, by the business owner or management team. So we work on them by, amongst other things, reminding them that Michael Porter said, “the essence of strategy is choosing what not to do”.

Does that work? Do people change?

The smart ones do and, strangely enough, there appears to be a direct correlation between leaders who change and companies being successful.

 

If you enjoyed this post you’ll also enjoy The Single Biggest Thing A Business Needs To Grow

Click here and automatically receive our latest blog posts.

 

Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

Being Told What To Do Isn’t Good For Business

Tuesday, March 19th, 2013

I do not believe that it’s a consultant’s place to tell a client what to do.Business owners must ultimately make their own decisions

I do believe that it’s our responsibility to give the business owners we work with the best possible advice we can.

And when I say give, I don’t mean that we just hand the advice to them by saying “Here’s what I think you should do….” or “Here’s what I would do…”

I believe one of the most effective ways to ‘provide’ advice is by using questions to help owners realize that there are, for example, possibilities they may not have considered; opportunities they may not have seen; and alternatives that may not be obvious.

Then we have to allow the owners to decide for themselves what to do with the ‘advice’.

Those of you who follow my posts know that I hold another belief to be very important. That is that rules are for the guidance of wise people and the blind obedience of fools.

So when, with respect to giving ‘advice’, do I break my own rule?

There are 3 situations which spring to mind.

First, if I see an owner, or his or her management team, about to do something that is likely to end in disaster.

I’ve accumulated almost as many grey hairs as I have experiences. I think it’s called ‘grey haired equity’. Some of mine has come from making brilliant moves but most of it has come from my own, or other people’s, mistakes and hard knocks.

It would be irresponsible to allow someone to repeat a move that is certain not to work.

Second, if a business owner asks directly for my opinion, or what I would do if I were in their shoes.

Even then I always ask “Are you sure you want my input?” before volunteering it. That’s because the owners we work with often already know what has to be done but don’t want to do it. So they’re hoping I’ll tell them to do something else, something that will, for example, not hurt people.

The third and final situation occurs when I lose my concentration and forget my own rule.

That happens most often when we’re facilitating – for example either a strategy development or business planning meeting. Particularly toward the end of the day when we’ve been juggling process, timing, making sure everyone is engaged and that no input is overlooked.

To avoid the third situation we have to be well prepared for every encounter with a client.

We have to think carefully about the objective, format and content of each interaction or activity we do with, or on behalf of, the companies we work with. That takes time.

I believe it’s time well spent because the alternative is that the owners we work with become used to us telling them what to do. That’s a form of dependency.

And we don’t do dependency. But that’s a topic for another post…

 

If you enjoyed this post you’ll also enjoy Why You Need A Consultant With Hands-On Experience

Click here and automatically receive our latest blog posts.

Don’t Fool Yourself……

Tuesday, January 3rd, 2012

Your strategy for growth is in place; your business planning is finalized; you’re all set for 2012 and it’s only 2 Jan.

Sounds good…….

A question if I may. Did you achieve or exceed your targets for 2011?

Who’s first?

You are and yes you did achieve your 2011 targets. Excellent, congratulations.

So how many years in a row is that?                                                             

Only one, eh? Hmm.

Well yes it is important because it means that in the last 2 years you missed your goals at least as many times as you made them. And if that’s a repeating pattern you’re not getting steady growth are you?

Who’s next? No you didn’t make your targets? OK.

Oh, you almost did? Well, actually “almost” isn’t good enough. What would have happened if Apollo 11 had almost got to the moon? Or if they had almost got the Apollo 13 astronauts back alive? See what I mean?

Almost doing something is not the same as doing it.

So here’s my point. Oh, you were wondering when I was going to get to the point.

OK well here it is now………Just one more, quick question first.

Have you developed a new strategy for this year or did you change your business planning process?

Why do I ask that?

Because if you missed your targets in 2011 – or haven’t made them for more than one year in a row – and you haven’t changed or modified your strategy and business planning process, what makes you think you’ll achieve or exceed your targets in 2012?

Why would using the same tools, in the same way, result in a different outcome?

The point is, you could be sitting there full of confidence for 2012 because you completed your strategic and business planning processes.

But the seeds of more missed targets are already planted and growing – because those processes aren’t delivering results.

Well, yes, you can do something about it now. You don’t want to wait until the end of the first quarter when a chunk of the year has already gone.

Get someone impartial to look at your strategy and business planning process for you.

Who?

We can. Give us a call and ask about our Tune Up. It’s quick and inexpensive. We’ll tell you what needs to be adjusted – if anything.

And you can go back to feeling confident about 2012.

Any questions?

If you enjoyed this you will also enjoy So Tell Me, What Is Strategy? and 4 Things Every Business Owner Must Think About.

Click here and automatically receive our latest blog posts

3 Things That Shape A Good Strategy

Wednesday, September 14th, 2011

It’s the time of year when many business owners and their teams are doing their business planning for 2012.

So in my last 2 posts we talked about the 4 hallmarks of bad strategy and the 2 reasons why there is so much bad strategy.1 

Now I want to focus on the underlying structure of a good strategy and Rumelt’s views on the 3 components of that.

1. Understanding the nature of the challenge

I may be making a “blinding statement of the obvious” when I say that it’s not possible to develop a strategy which will be successful, unless you understand the challenge.

But I’m also probably correct in saying that no strategy – even the ones that later proved unsuccessful – has been approved without the key players believing they did understand the challenge.

Typically the situations which create problems or challenges for companies are complex. A good “diagnosis”, to use Rumelt’s term, simplifies the complexity by identifying those aspects of the situation that are the critical ones. This makes failing to face the real problem impossible (see the first post in this series).

I think that really understanding the challenge requires business owners to:
• Refuse to replace thorough analysis with positive (or wishful) thinking.
• Commit time and resources to a completing that thorough analysis.
• Combine the product of trained analytical skills with their intuition.
• Remain objective in the face of other (opposing) ideas.

2. An integrated approach for dealing with the critical issues

Rumelt describes this as a guiding policy for overcoming the critical issues.

I believe that in order to develop this integrated approach, choices have to be made about which goals to pursue. This helps avoid one of the causes of bad strategy.

And immediately a company embarks on this route they take a giant step away from the template style of planning that Rumelt criticizes so much.

The approach we’ve used successfully for some years now requires conscious thought being given to the implications of the strategy for all functions in the company – not only marketing and sales but also operations, finance, HR and systems.

Our approach raises, and answers, questions like how will we finance growth; what skills and experience will we have to develop or hire to take us to the next level?

3. Coordinated actions that translate the integrated approach into results

Rumelt provides an interesting example of coordinated actions. He talks about Nvidia’s strategy for capturing leadership of the 3-D graphics chip industry.

The CEO realized that releasing a new, better chip in much less time than their competitors was the key to success. That became the company’s guiding principle.

The coordinated actions were – forming 3 development teams working on overlapping schedules; investing in infrastructure to prevent delays in fabricating chips and developing drivers; and regaining control of the development of drivers.

It’s easy to see how these 3 actions supported Nvidia’s guiding policy/integrated approach.

The strategy worked brilliantly for 10 years. But, as we know, no strategy, however brilliant, will remain unchallenged forever.

4. Wrapping up

Three apparently simple things underpin a good strategy. But, as I’ve said before, strategy is like all of those other things in life that seem simple but yet are not. Did I tell you about my golf swing……..

1 The posts summarised an article written by Richard Rumelt, published in the McKinsey Quarterly and based on his recent book “Good Strategy/Bad Strategy: The Difference and Why It Matters”

2 Things That Cause Bad Strategy

Wednesday, September 7th, 2011

Its business planning or budgeting time for many business owners and so in last week’s post I talked about the 4 hallmarks of bad strategy.

They’re featured in an article which was adapted by Richard Rumelt from his new book “Good Strategy/Bad Strategy: The Difference and Why It Matters”. The article appeared in the McKinsey Quarterly

I promised that, for those pressed for time I’d continue summarizing the article in this post and talk about why there is so much bad strategy.

1. Unwillingness or inability to choose

Rumelt argues that a good strategy requires focus. And focus means that business owners have to choose amongst business goals.

Do you remember Digital Equipment Corporation (DEC)? They led the mini-computer industry in the 60’s and 70’s but by the end of the 80’s they were losing ground quickly. There were doubts if the company could survive without making far-reaching changes to their strategy.

Three alternatives were considered – business as usual, become a solutions provider or focus on designing better technology. The CEO wanted consensus on the new strategy but the executive team was divided and unable to reach one.

The result was a compromise, “DEC is committed to providing high-quality products and services and being a leader in data processing.” Like most compromises, it contained a little bit of everything and focused on nothing.

DEC continued losing ground and the CEO was replaced in the early 90’s. His successor focused on technology, but by then it was too late. The losses could only be stopped for a while and the company was acquired by Compaq in the late 90’s.

Failure to choose results in weak strategy and weak strategy results in failure.

2. Confusing “positive thinking” and strategy

Motivational speakers – and their books and web sites – have given rise to the notion that charismatic leaders and positive thinking can achieve the impossible. In concept it’s done by developing a vision and inspiring people to follow it, while empowering them to accomplish it.

The concept was reduced to something of a formula and distilled into a template for strategic planning. But not everyone can be a charismatic leader. Nor can success be achieved simply by applying a formula and completing templates.

A vision has to be more than a statement that the company will be the best, or the leading, or the best known.

The mission has to be filled with more than high-sounding, politically correct statements about the purpose of the business.

And a company’s values can’t be noncontroversial platitudes about integrity, respect and excellence.

Rumelt’s point is that, if the vision, mission and values turn out that way then the strategy is going to be nothing more than aspirations, goals or statements of the obvious presented as decisive insights.

Lack of substance makes a very weak foundation on which to build a future.

3. So what does work?

I’ll save Rumelt’s views on the underlying structure of good strategy for my next post.

Bad Strategy – How To Spot It

Tuesday, August 30th, 2011

Many business owners are in the middle of their business planning or budgeting process for 2012.

So, for those pressed for time, I’ll summarize a timely article by Richard Rumelt, adapted from his new book “Good Strategy/Bad Strategy: The Difference and Why It Matters”, and published in the McKinsey Quarterly.

Here are Rumelt’s 4 hallmarks of bad strategy.

1.    Failure To Face The Problem

A strategy, according to Rumelt, is a response to a challenge. But if the challenge isn’t defined, it’s impossible to assess the quality of the strategy. And if you can’t do that you can’t reject it as bad or improve on it.

For example in 1979 International Harvester produced a Strategic Plan which was thorough and rich in detail. The overall direction was to increase share in each of their served markets while reducing costs.

Unfortunately the Plan didn’t address Harvester’s main problem – its inefficient work organization. This stemmed from grossly inefficient production facilities and the worst labour relations in US industry.

This problem could not be fixed by driving people to increase market share or by investing in new equipment. Harvester survived for a couple of years but began to collapse after a disastrous 6 month strike. The rest, as they say, is history.

2.    Mistaking Goals For Strategy

Rumelt describes a CEO who had a plan to grow revenues 20% a year with profit margins of 20% or more.When asked how this aggressive plan would be achieved, the CEO replied “With the drive to succeed – by picking stretch goals and pushing until we get there”.

The CEO then quoted Jack Welch who said “We have found that by reaching for what appears to be the impossible, we often actually do the impossible.” But he had forgotten that Welch also said “If you don’t have a competitive advantage, don’t compete.”

Rumelt argues that a company needs a unique internal strength or an opportunity created by a change in the industry for this type of growth. Stretch goals and motivation alone are not enough.

He illustrates the inadequacy of this “push until we get there” type of thinking, by referring to the great pushes in the 1914-18 war. The troops who were slaughtered didn’t suffer from a lack of motivation – they suffered from a lack of competent, strategic leadership.

3.    Bad Strategic Objectives

This can take the form of a long list of things to do – often labeled strategies or objectives. These lists result from planning sessions in which the focus is on doing a wide variety of things, not a few, key things.

Rumelt refers to the planning committee for a small city whose strategic plan contained 47 strategies and 178 action items. Action item number 122 was “create a strategic plan.”

Another type of weak strategic objective is one that is “blue sky”. It’s typically a restatement of the desired state of affairs or the challenge- and skips over the fact that no one knows how to get there.

Good strategy works by focusing energy and resources on a very few, pivotal objectives and builds a bridge between the critical challenge and action. Thus, the objectives a good strategy sets stand a good chance of being accomplished.

4.    Fluff

The final hallmark of bad strategy is a restatement of the obvious, combined with a generous sprinkling of buzzwords. Rumelt’s example is a retail bank which said “Our fundamental strategy is one of customer-centric intermediation.”

An intermediate is a company that accepts deposits and then lends the money – in other words, a bank. The buzz phrase “customer centric” could mean that they compete by offering better terms and service. But their policies didn’t reveal any distinction between it and other banks.

So “customer-centric intermediation” is pure fluff. Eliminate it and the bank’s fundamental strategy is being a bank.

5.    My final words

In my next post I’ll finish summarizing the article and talk about why there is so much bad strategy.

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!

Post History