Posts Tagged ‘strategic plan’

The Difference Between A Strategy And A Plan

Tuesday, March 26th, 2013

Hang on a second, don’t tune out yet!

I’m not going to write a scholarly piece which will bore you to death.

I want to talk briefly about what I think is one of the worst mistakes – confusing strategy and planning. Roger Martin wrote a post for the HBR last month in which he dealt with this very topic.

I frequently hear business owners talk about the need to do “strategic planning” in order to create a “strategic plan”. Some talk – every year – about holding a “strategic planning meeting”.

But if you really are reinventing your strategy every year, isn’t that a bit of an indictment of both the strategy and the way it was developed?

Coming back to the meeting, the expectation is that the output from it will be a document, a plan. And that will contain a long list of initiatives (often referred to as strategies) with time frames for their completion.

Martin wonders how (and if) this “strategic plan” differs from a budget. I think that’s a great question. But I have a different one.

Isn’t this so called strategic planning meeting really an annual (business) planning meeting? That doesn’t make it any less important – because it still plays a key role in the execution of the company’s strategy.

And if that’s the case, shouldn’t we stop calling the output a “strategic” plan. And start calling it what it really is – the initiatives, which if completed in the next 12 months, will propel the company toward the achievement of its strategy.

Each initiative is accompanied by the Action Plans required to complete it. Each action plan has a champion who is accountable for it’s completion. The action plans have resources allocated to them. And they support, or even drive, the sales and margin forecast and expense budget.

Now let’s go back and talk about the company’s strategy for a moment.

Roger Martin puts it really well –

• “…we need to break free of this obsession with planning. Strategy is not planning…”

and then

• “…strategy is a singular thing; there is one strategy for a given business — not a set of strategies. It is one integrated set of choices….”

Choices about, for example, where and how a company will compete.

The strategy sets the context for the annual planning meeting. It should make it easy for the owner and her/his management team to decide which initiatives are relevant. (Assuming, of course, that they have already developed an effective strategy.)

I think the first step toward developing and executing business strategies that actually yield results is to stop misusing words.

If we call things by their real names we’ll stand a far better chance of understanding what they really are – or vice versa.

You can read Roger Martin blog post in full here.

 

If you enjoyed this post you’ll also enjoy Strategy – Don’t Think It, Experience It

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Do You Have a Job or a Business?

Tuesday, February 19th, 2013

I don’t know who first asked that question, or when.Business owner's strategy determines job or business

I do know that there are lots of business owners who either have never heard it or who have heard it but choose not to think about it.

How do I know? Because we meet them and, if you think about it, so do you. In fact you may even be one.

How do you recognize them? They fit one of 2 groups.

The first is the “solopreneur”. A solopreneur is someone who starts a business but never grows it beyond the point of having only 1 employee – themselves. (If I seem a little nervous it’s because, a few years ago, I came uncomfortably close to being one.)

Some people do it deliberately. They’ve often had successful careers in large corporations with large teams reporting to them. They reach a point where they’ve had enough of managing people and playing politics and want to get back to just doing the work they love.

Others do it by omission. They want the rewards of building a larger company but either won’t take the financial risks or they share some of the characteristics of people I’ll talk about next.

The second group is people who can’t get out of their own way. Their companies have grown, but nothing can happen in the business without them. For example, only they;

• Know the key contacts in every customer and supplier.
• Can fix things if a customer is unhappy.
• Understand how products are produced/services delivered.
• Can conduct interviews “properly” and offer jobs to new hires.

As a result they work as close to 24 hours a day, 7 days a week as is humanly possible – for years.

And, despite what they tell you, they are not happy.

The irony is that, even when they collapse because of exhaustion, no one will buy their company because without them it doesn’t exist.

Andy Bailey, who is a reformed member of the second group, recently wrote an article about it. He describes the 4 steps he believes make the difference between building a business and having a job.

1. Define the company’s purpose (tip – begin with why the business was started) and hire people who buy into it. That will build a strong culture.
2. Replace the people with all the knowledge in their heads with systems and processes. This is what Michael Gerber talks about in “The E Myth”.
3. Create demand instead of always chasing sales. Consistently deliver quality products/services on time and build a reputation for the brand.
4. Create a strategic plan which produces results via prioritized action plans involving everyone.

These 4 steps are a neat précis of the advice in books like “Built To Sell” by John Warrilow. And they separate the owner from the company and a job from a business.

Why is that important? Because you can’t sell a job when you’re finished with it. But you can sell a company.

So which do you have – a job or a business?

 

If you enjoyed this post you’ll also enjoy 8 Things That Hinder Growth.

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It’s the Strategic Plan, Stupid

Tuesday, October 9th, 2012

With a title like “The beating heart of the enterprise, it’s the strategic plan, stupid” there was no way I wasn’t going to read the article.

As an added incentive it was a Q&A with a Harvard professor published in the top magazine for entrepreneurs and business owners. (Call me odd but I think that combination just has to be fascinating.)

So what were the pearls of wisdom? Here are 6 of them.

• Working with corporate types the Prof had always viewed strategy as a set of mechanical tools, a series of frameworks and analysis. But she quickly realized that entrepreneurs are emotionally invested in their strategies – which impact their employees and companies very directly. And business owners feel responsible because, compared to corporations, that impact is felt very quickly.

• Strategy is not only about making your company different – it’s about making it different in a way that matters to your customers. For example, becoming a “one stop shop” is only worthwhile if you know why one stop shopping is important to the people you expect to pay for it. Otherwise, no one will care.

• Entrepreneurs and business owners are more likely to create strategies that reflect their own character. For example, Michael O’Leary the CEO of Ryanair is apparently blunt and in your face. So their bare bones strategy has an aspect of bluntness bordering on rudeness – think of wanting to charge passengers to use the washroom – to it as well.

• Don’t make the mistake of getting into “strategy creep”. That’s Cynthia Montgomery, the Harvard Prof’s, term for businesses that add more services and more technology to reach more customers – and lose sight of what made them different in the first place.

• Business owners should treat their strategies as a living, breathing process that they think about on an ongoing basis. Not as something that is pulled out and dusted off once a year. Why, because what worked last year may not work 3 years from now. The difference a company makes has to be relevant to customers today – and every day.

• A major benefit of seeing strategy as being fluid and dynamic is that it can be adapted as competitors catch up or as customers’ needs change. Montgomery gives the example of Ikea’s constant search for new ways to do things and to save their customers money. She contrasts that with Gucci who lost touch and stopped responding to their market. That required a much more painful – and risky – change to their business model.

I like it when magazines targeted at entrepreneurs deal with topics like strategy. It reinforces the point that every company has to have a strategic plan and a process for keeping it relevant.

It can be formal or informal – I don’t care. But it must exist.

If you enjoyed this post you’ll also enjoy 3 Ways to Test Your Strategy.

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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.

A Vision – Is It Worth Investing The Time?

Thursday, February 3rd, 2011

1. Yes, and you don’t have to take my word for it.

We are regularly met with a lot of scepticism when we talk to business owners about the need for a vision. But developing one can yield a tremendous return for the time invested.

And you don’t have to believe me.

There’s an article called “Step Into The Future” in the current issue of Inc. magazine written by Ari Weinzweig, a co-founder of Zingerman’s Community of Businesses in Ann Arbor, Michigan.

2. Three reasons why a Vision is worth having.

The original business opened in 1982, almost 30 years ago. Zingerman’s Community of Businesses now has annual revenues of around $37 million, 500 employees and 17 managing partners. They are successful by several different standards of measurement.

“It’s safe to say that we wouldn’t be where we are without visioning” according to Weinzweig.  He’s asked regularly for business advice, often by people looking for the silver bullet. While that doesn’t exist Weinzweig says “There is one thing I wish I had understood more clearly from the get-go – the power of visioning”. And that is one very compelling reason for investing the time.

“When we do effective visioning, we’re moving toward the future we want……..” Weinzweig gives an example of a vision they wrote in 2005 for a new venture that had still to get off the ground. Three years later the successful business actually mirrored the vision in key respects.

Having a vision is fundamental to developing and executing an effective strategy. The vision lays out where the company is going; the strategic plan tells everyone how the company will get there. It also becomes easier to choose which opportunities to pursue when they arise. The first question is always “Will it help us achieve our vision?”

“A great vision is inspiring” and gives everyone a reason to come to work. Weinzweig uses a great analogy. He likens a vision to a cathedral, a lasting monument, the tangible evidence of a group’s dreams and hard work. (Fans of Ken Follett’s book “The Pillars of the Earth” should find it particularly easy to relate.)

3. Three ways to make effective use of the time.

Eight Steps to a Vision is the name Weinzweig gives his process. Three of the steps involve drafting and re-drafting with gathering data and assessing trends etc. saved for strategy development.  So it doesn’t require a lot of time to complete. 

His structure is similar to many others, including our own. Most are easier to use than business owners imagine.

Use questions to get things moving. Asking questions about specific aspects of the future make it more tangible. Weinzweig lists 14 questions covering topics you would expect – such as how to measure success – and some topics you wouldn’t – e.g. what the owner does all day.

In our process, we circulate a few questions to key participants in advance. It helps them feel prepared, which makes it easier for them to participate.

Don’t sweat the details. Inevitably, at some point, the discussion will move to the action steps required to achieve the vision. Save these for the planning session. They’re great input but not required during visioning – which is more about passion than detail.

4. Wrapping it up.

I think one reason for scepticism is that business owners confuse visioning – a process – with the vision – an output. 

And a few years ago developing a Vision was the fashionable thing to do, a fad, a silver bullet. As a result framed Vision Statements, many of them meaningless platitudes, littered reception areas.

But Weinzweig and Zingerman’s are evidence that visioning works and that the ROI on the time can be very satisfying.

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