Posts Tagged ‘Forecasting’

4 More Reasons Why Strategy Isn’t Dead In The Water

Tuesday, February 10th, 2015

Saying strategy is dead is a sweeping generalization.4 more reasons why strategy isn't dead

I don’t buy the argument that strategy is a complete waste of time for every company, regardless of size or industry.

There’s no question that the world has changed dramatically and we have to change how we approach strategy.

But to say that we should stop doing strategy completely is throwing out the baby with the bathwater.

Two articles which appeared recently, one in the Globe and Mail and an earlier article in Forbes magazine, laid out 7 reasons why strategy is, or may be, dead.

Last week I commented on the first 3 reasons, here are my thoughts on the other 4.

4.  Competitive lines have dissolved. Strategy, it is argued, has long been based on well-defined market sectors, containing established competitors. Now a competitor is likely to come from an entirely different sector.

But is this a new phenomenon? Didn’t IBM, under Lou Gerstner, become an IT solutions provider?

5.  Information has gone from scarcity to abundancy. It is argued that the value of strategic planners and consultants lay in the proprietary, or scarce, information they possessed. Today, information is easily accessed via the web.

Commenting on this point one of the authors of the 2 articles said “It’s …….how you translate that information into actionable activities that is critical”. Isn’t that what strategy execution was – and still is – all about?

6.  It is very difficult to forecast (option values). Before opening a new factory, expected costs were compared to forecast revenues to see if it was a good investment. But, it’s argued, the outcomes of investments in, for example, the Internet of Things are wild guesses at best. Is this new? We’ve had to make educated (not wild) guesses about the unknown for years, e.g. the development of the Boeing 747, the world’s first jumbo jet.

7.  Large scale execution is trumped by rapid transactional learning. In the past, organizations could roll out improvement programs in a deliberate, staged fashion over a number of years. These days, it’s a whirlwind, and you must be learning all the time.

Recently I wrote about Rita McGrath’s book ‘The End Of Competitive Advantage’, which profiles 10 large, publicly-traded corporations that have found ways to combine internal stability with tremendous external flexibility and achieved remarkable results.

Have they abandoned strategy? No.

If whales can do it, so can minnows.

 

If you enjoyed this post you’ll also enjoy The Difference Between A Strategy And A Plan

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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

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Top Ten In 2014……

Monday, December 29th, 2014

The results are in!

Our top 10 blog posts in 2014 were:

1.   Adaptive Strategy – A Way To Profits In The New Normal? looks at an alternative strategy that is built on the 3 R’s (Responsiveness, Resilience, Readiness) required in a changing environment.

2.   6 Ways A Business Owner Can Influence Culture looks at the ways a business owner can develop a culture which will help increase operating profits and build shareholder value.

3.   6 Challenges Fast Growing Companies Face discusses the 6 challenges of execution which, if not dealt with, could prove fatal.

4.   3 Times When You May Need To Change Your Strategy explains when a company should review its strategy and what makes that review and any subsequent actions necessary.

5.   The Difference Between A Strategy And A Plan talks about the difference between strategy and planning and why it’s important to understand what these terms mean.

6.   6 Things We Can All Learn From Family-Owned Business puts forward 6 simple things business owners can implement to achieve better long-term financial performances.

7.  Use These 3 Tips To Make Your Next Critical Decision offers 3 things Ram Charan, co-author of “Execution”, says business leaders do when faced with a critical decision.

8.  5 Traits Effective Business Owners Share outlines some of the traits effective entrepreneurs have in common that contribute to the growth of their businesses.

9.  3 Reasons Why Consulting Assignments Fail and 3 Reasons Why Consulting Assignments Fail – Part 2 addresses the most common reasons why things can go wrong between consultants and their clients.

10. Strategic Planning – 3 Things That Are Wrong With It outlines how business owners make 3 mistakes that could destroy their company when they confuse strategy and strategic planning.

If you missed any of them, here’s another opportunity!

Successful? Your Company Still Has To Change

Tuesday, April 1st, 2014

Two statements that we often hear are:Change your attitude to the future for successful growth

• “Why change? We’re successful and what we’ve been doing has got us to here.”

• “What got us here won’t get us to where we want to go.”

Business owners who make them have two things in common. Their companies have been profitable and throwing off cash for a number of years. And they’re successful – in their own, and everyone else’s, eyes.

But their attitude to the future is completely different.

Who is right and who is wrong?

Getting an answer means either waiting for several years to see how things turn out, or trying to make an informed guess about what will happen.

Let’s start with the fact that a company doesn’t exist in a vacuum.

Are there things that affect results that a company can’t control? Yes, and a couple of easy examples are the economy and the firm’s competitors.

What are the odds – the probability – that those things will behave differently in the future than they did in the past?

Will, for example, the recession continue to ease or get worse again; or a competitor introduce a new technology, change their pricing, promotion or distribution strategies?

Does it really seem likely that these external influences will behave in exactly the same way in the next 5 years as they did in the past?

What about things the company can influence? For example:

  1. Will the people who held key positions during the growth continue to be as effective as the company gets bigger?
  2. Will the company’s existing processes and technology be able to handle increased volume? Can either be changed without disrupting operations?
  3. Does the company have the financial resources to fund continued growth? Or will it need to take on debt or find an investor?

Here’s my point.

Growth is the result of the complex interaction of many factors. Most of them are constantly changing, some at a faster pace than ever before. The timing and extent of the change is often beyond the control of owners and managers.

Is it reasonable to assume that by holding constant the factors which can be influenced – even if that’s possible – the net outcome will be the same?

I don’t think so. I’m firmly in the “what got us here won’t get us to where we want to go” camp.

 

If you enjoyed this post you’ll also enjoy 5 Tips for Fast Growth in a Slow Economy

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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

Strategic Planning – 3 Things That Are Wrong With It

Tuesday, February 18th, 2014

We all know that picking a strategy means making choices.3 things wrong with strategic planning

But that means making guesses about that great unknown, the future. What happens then if we make the wrong choice? Could we destroy a company?

That’s why, according to Roger Martin¹, we turn choosing a strategy into a problem that can be solved using tools we are comfortable with.

And we call that strategic planning.

But, Martin says, companies make 3 mistakes when they confuse strategy and strategic planning.

1.  Putting the cart before the horse:

All strategic plans have 3 parts:

•  A vision or mission statement,
•  A list of initiatives required to achieve it,
•  The results of those initiatives expressed as financial statements.

These financials typically project 3 – 5 years into the future, making them “strategic” (although management typically focuses on only the first year’s numbers).

But the dominant logic in these plans, says Martin, is affordability; the plan consists of whichever initiatives fit the company’s resources. And that’s putting the cart before the horse.

2.  Relying on cost-based thinking:

The company is in control of its costs – it can, for example, decide how much office space it needs and how to promote its products.

And costs are known, or can be calculated, so fit easily into planning.

This thinking is extended to revenue forecasting and companies build detailed, internal forecasts by, for example, salesperson or product.

But these projections gloss over the fact that customers control revenue and that they decide how much a company gets.

3.  Basing strategy on what the company can control:

A number of well-known models are used for strategic planning. But they can be misused. Take Mintzberg’s concept of emergent strategy.

Martin believes it was intended to make business owners comfortable making adjustments to their deliberate strategy in response to changes emerging in the environment.

However, because waiting, and following what others are doing, is much safer than making hard choices and taking risks, emergent strategy has been hijacked to justify not making any strategic choices in the face of unpredictability.

But following competitors’ choices will never produce a unique or valuable advantage.

What do I think?

I like Martin’s views but the crux still lies in linking planning to execution, turning desire into results.

__________________________________
“The Big Lie of Strategic Planning”, Harvard Business Review, January 2014,
http://hbr.org/2014/01/the-big-lie-of-strategic-planning/ar/pr

 

If you enjoyed this post you’ll also enjoy Bad Strategy – How To Spot It

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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

6 Thoughts For Your Planning/Budgeting Process

Tuesday, August 21st, 2012

Can you believe that it’s almost the end of August?

I’ve hardly noticed the summer slipping past – perhaps I dozed more than I intended because of the heat!

It’ll be Labour Day in 2 weeks.

Then kids will be back in school which, for many business owners and executives, will mean that vacations are over for another year and it’s back to work. If your company has a calendar fiscal year, 2012 will be beginning to take shape.

The results from the first two quarters should be firmed up. Orders already in-house and the sales pipeline will provide an indication of whether you will make, or beat, your top line targets or whether there will be a shortfall. Year to date margins and expenses will give you a feel for what, if anything, has to be done to protect bottom line profit.

And, of course, annual planning and budgeting for 2013 will begin soon – if it hasn’t already started.

So here are some thoughts (I’d hesitate to call them pearls of anything, let alone wisdom) from posts I’ve written at around this time of year in the past.

1. To make as accurate a guess as possible about what the future holds you’re going to have to make assumptions. On what information will you base them? Something you read – 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?  (See Don’t Let The Summer Heat Cause A Winter Chill)

2. When so much of what is going on around you seems out of control, it’s easy to stop focusing on the things that are under your control – i.e. whether or not you actually execute your plan. Badly done or completely neglected by many companies, execution is what turns plans into results. (From 6 Tips for Getting Better Results Next Year)

3. In this age of fast, unrelenting change it makes sense to forecast several different scenarios, build assumptions on thorough, comprehensive research (formal and informal) and think through contingency plans. (See It’s THAT Time of Year Again)

4. A sample of responses to a survey sent to our database showed that many companies who said they would miss their targets also said they had completed a structured planning process before the start of the fiscal year. That raises some questions. (See them at Give Yourself A Chance in 2011)

5. The owner must be the champion of the planning process. If, for example, the accounting department are perceived to be driving the process it will be seen as only a number crunching exercise, to be completed as quickly as possible. (See More Heat Less Chill)

6. Think you’re going to miss those top and bottom line targets I mentioned earlier? Then consider changing or modifying your strategy and business planning process. Why? Because if you use the same tools, in the same way, and expect a different outcome you may be in for a surprise. (See Don’t Fool Yourself……… )

Let me know what you think.

And good luck with your planning/budgeting meetings.

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Profit In Process

Thursday, April 28th, 2011

This week’s guest post is by Tibor Shanto – Principal of Renbor Sales Solutions Inc., – a recognized speaker, author of the award winning book Shift!: Harness The Trigger Events That Turn Prospects Into Customers, and sought after trainer.

Most sales people are taught that companies go under due to lack of sales. We all know that the reality is that companies fail due to a lack of profits.  But this disconnect is one reason sales people see discounting as an alternative to selling. Reps fail to realize that the 5% discount they give on a deal could be half, or more, of the margin in the sale (why worry, they still get  their commission).

One way to address this is to ensure that you have a detailed, clearly defined and suitable sales process.  This needs to include defined stages that align with the buying process, and clear workflows.

The sales process also needs to align with other processes in the company. While sales does drive orders,  if it is not synchronized with the rest of the organization, there is a real risk to productivity and profits. One example is the waste that results in working at cross purposes, typified by the often found disconnect between sales and marketing.  I recently saw the results of a survey that suggested that 75% of marketing managers do not know what the sales team’s quota is. 

Once the sales process is aligned with other processes in the organization, they can be harmonized and leveraged for further advantage. A good example can be found in environments where production and related resources are directly tied to orders.  Having a logical process that helps sales execute and at the same time delivers predictable and reliable forecasts to production is a definite competitive advantage. 

For example, one of our clients publishes a series of trade magazines. One challenge they face is maximizing revenue from each issue.  Specifically, the more ads sold the larger the issue, but this impacts editorial, layout and other areas of production.  Add to this the fact that the issue has to be locked down many days before publication.

There was a constant to-and-fro between sales and production with sales trying to get one last advertiser in to an issue after the deadline or ads that sales had guaranteed would come in evaporating. Both situations caused havoc for production.

We worked with both groups, analyzing how different ad sales unfolded, the time from start to finish of the process, critical points along the way (go/no-go points), confirmation points and elapsed times from those points to close. This allowed sales to quantify aspects of the sale and establish reasonable probabilities to close from specific events during the sales.

Armed with these facts, we sat down with the production team with two goals in mind. First, was to help them understand in an objective way how a typical sale unfolds,  including critical turning points. Second was to establish a rule and workflow with respect to objectively agreeing which opportunities were to be included by production, based on where they were in the process at a specific point in time prior to publication date.

This allowed production to better plan a given issue, and sales to be more confident in communicating and adhering to deadlines with advertisers.  While there are still instances where sales try to bring in one more ad, production has built in a bit of wiggle to their timelines.

This same approach can be implemented by aligning the sales process with other areas of the company.  It goes without saying, that the same efficiencies can be realised in other environments – JIT or otherwise.  The key is to have a sales process to begin with, one that suits the needs and the type of sale on which the entire organization needs to execute. 

This removes the emotion and subjectivity when it comes to sales predictability, forecasting and driving both revenue and other key objectives of the organization.

Tibor can be reached at info@SellBetter.ca, or + 1-416-822-7781. You can read his blog, The Pipeline and follow him on Twitter @Renbor.

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