Posts Tagged ‘strategic’

6 Tips For A Better Planning Meeting

Tuesday, November 5th, 2013

We’re well into the fourth quarter, and many business owners are either arranging, or already holding, their annual planning meetings.For better planning meetings, implement these 6 tips

The web is buzzing with blog posts and articles offering timely advice.

One post has a list of questions that simply must be asked. Another talks about ways to make strategic planning relevant. And a third offers tips for better strategic planning.

Who has time to read them all?

So let me summarize what I think are some useful, practical points.

1.  Ask your team 2 questions:

o  First ask why your customers choose to do business with you. Listen to the answers. Are they all the same? If not, what does that suggest?

o  Then ask how you differ from your top 3 competitors. Follow up by asking if you are recognized for it. If yes, how? If no, why not?

2.  Initiate creative discontent. Even when things are going well – particularly when things are going well – you should create discomfort with the status quo. Ask questions that shake up the existing order. For example, what will we do if we lose 3 key employees tomorrow?

3.  Challenge orthodoxies – the things we’ve always believed to be true. If Howard Schultz hadn’t challenged the conventional wisdom that consumers wouldn’t pay more than $2 for a cup of coffee, Starbucks wouldn’t exist.

4.  Use controlled tests to validate assumptions. Most assumptions are based on things we’ve read or heard. At best they’re an informed guess. So, rather than bet the farm on that, appoint someone to run a limited scale field test to check the assumption out in the real world.

5.  Ban fuzzy language. Here are some examples of “planning speak”. Phrases like “Leverage our World Class Operating Capabilities” or “Reshape Our Pricing Strategy to Effectively Drive Demand” are completely meaningless.  As are words like “leverage”, “synergy” and “robust”. Ban them all.

6.  Ask other provocative questions. The point of a planning session is to get different points of view out in the open so that they can be vigorously discussed. So ask, for example, “What are the top 2 or 3 things that must go right for this strategy to work?” and “If we pursue this strategy, what are we deciding not to do?”

A final thought. If you intend to really challenge your team you have to listen carefully to what is being said and respond quickly. You can’t do that while worrying about the next step in the process; whether or not you’re running on time; and if all of the participants are engaged and participating.

Use a trained facilitator to do that for you. It’s what we do.

You can find the full posts from which I extracted these points here, here and here.

 

If you enjoyed this post you’ll also enjoy It’s THAT Time of Year Again…….

Click here and automatically receive our latest blog posts.

Share

Where Do The People Fit?

Wednesday, February 15th, 2012

A friend asked me a really great question last week.

I was talking to him about the strategy development and execution processes. And he asked……………

“What about the people, where are the people in all of this?”

So I told him about the 5P’s. Of course – being the wit that he is – he immediately thought I was talking about my weak bladder. But I put him straight.

All of the companies that I’ve worked with, which are consistently Profitable, seem to have a focus on the same 4 things. Several years ago we began referring to them as People, Planning, Process and Performance. In the diagram they overlap because they are all in  action at the same time – and they intersect because they interact with each other and form a continuous loop.

Performance

I always start with Performance which provides both clear direction for the company and the benchmark against which success is measured.

It spans having Vision, Values and Mission statements, through setting and communicating clear goals, to making sure every employee understands his/her role in achieving them. And it includes comparing actual results against the goals regularly, giving feedback and adapting where necessary.

Planning

Then I usually talk about the huge difference between Planning – which is a process – and a Plan or Plans– which are outputs.

There are very few occasions when it’s necessary to write a Business Plan, the most common one being when a company is looking for funding.

But Planning is ingrained in the culture in high performing companies. An effective Strategic Planning process will produce a strategy that will work. The Annual Business Planning process is the key to executing that strategy and turning it into results.

Process

I told my friend that we focus on 3 types of Process.

Functional processes keep each area of the company – e.g. Sales, Marketing, HR and Operations areas –operating efficiently. Control processes monitor the key performance indicators – e.g. sales pipeline, product quality and lead times – and give the owner early warning of potential problems.Financial processes produce accurate and timely reports on the financial health of the company.

People

I always save People for last.

After spending 20 some years in corporations and over 12 years working with business owners there is no doubt in my mind that People is the single most important element in success.

The essence of leadership is finding, motivating and engaging the right People and creating an environment (culture) in which they can contribute fully.

A weak strategy in the hands of the right People will trump the right strategy in the hands of weak People – every time.

And that, I told my friend, is where people fit in………….

If you enjoyed this post you’ll like 6 Ways A Business Owner Can Influence Culture

Click here and automatically receive our latest blog posts

I’m Not Alone………

Thursday, December 15th, 2011

It started last year.

It continued to bother me this year but I didn’t say anything to anyone. I couldn’t, I wasn’t sure how to put it.

Then I found out that someone else felt the same way. He has a much higher, more public profile than me. And he wasn’t afraid to speak out.

That tipped me over the edge.

Just as I took my first couple of tentative steps, I discovered there’s someone else, also with a higher profile than mine, who is talking about it too.

I feel so much better. So I’ll say it out loud……..

The words strategy and strategic are being overused and misused. And it’s wrong because it’s causing confusion and doing harm.

It first became clear to me………….

…..when I read Richard Rumelt’s book “Good Strategy: Bad Strategy, The Difference and Why It Matters”.  I believe 3 of Rumelt’s 4 major hallmarks of bad strategy involve misuse of the words strategy or strategic.

He describes “Fluff” as a superficial restatement of the obvious combined with a generous sprinkling of buzzwords.

Rumelt’s example of fluff is a major bank stating “Our fundamental strategy is one of customer-centric intermediation.” Intermediation, accepting deposits and lending them to others, is what all banks do. And this one’s processes didn’t make it any more customer friendly than its competitors. The statement is fluff not strategy.

Then there’s “Mistaking goals for strategy”. For example he talks about a document labeled “Our Key Strategies” which was no more than a list of goals with no reference to a key strength the company could leverage to achieve the goals.

The third one is “Bad strategic objectives”. Rumelt talks about “dog’s dinner objectives”, a list of things to do with the label strategies or objectives, where 1 of the “to do’s” is to create a strategic plan. There are also “blue sky objectives”, which are simply a restatement of the desired state of affairs.

And now there’s someone else……………….

…..who is making a similar point. This week Harvard Business Review published a blog post by Joan Magretta called “5 Common Strategy Mistakes”. I think 3 of them also involve confusing strategy with something else.
First is confusing marketing with strategy. Doing that, she argues, means overlooking the point that a strategy not only requires a value proposition, it also requires a unique configuration of (companywide) activities that best delivers the value.

Next is confusing competitive advantage with what you’re good at. Companies often look inward, see a strength – and overestimate it. But to form the basis for a strategy a strength has to be something the company does better than its rivals. And that judgment can only be made by the market.

Finally there’s thinking that growth or reaching a revenue goal is a strategy. Sound familiar? Mistaking goals for strategy is on Rumelt’s list too. It’s not the goal (e.g., reach $50 million in revenue), nor is it a specific action (e.g., launch a new product, enter a new market, make acquisitions). Strategy is the set of integrated choices that define how you will achieve the goal; the actions are the path you take to execute or realize the strategy.

Now that I feel better, that I’m not alone…………

…..I’m going to continue speaking about it.

Because it will only get better if we get it into the open, get people, business owners, talking about it.

We have to stop overusing and misusing strategy and strategic. It’s causing confusion and doing harm to the most important part of a company – its business strategy.

By the way, you can see my first couple of tentative steps here and here

So Tell Me, What Is Strategy?

Thursday, November 17th, 2011

Look anywhere and you’ll see tweets, posts and articles containing the word strategy. Marketing strategy, social media strategy, sales strategy, financial strategy, meeting strategy – in fact every kind of strategy you can think of.

Strategy – and strategic – are becoming greatly over used words. And in some cases they’re being imbued with mystique and complexity in order to create a need for “expertise”.

Why should we care? I can think of 2 reasons.

1. Strategy should be simple.

A strategy shouldn’t be an ethereal concept or a complex by design – in fact quite the opposite. Look at the Wikipedia definition – “a plan of action designed to achieve a particular goal.”

What could be more straightforward? A strategy has 2 parts. Part 1 – designing the plan and part 2 – translating it into action which achieves a specific goal.

It sounds simple – but the mystique and complexity can start with the words and phrases that are used to describe the design part of business strategy. I’m thinking of environmental scans, key competencies, scenario planning, strategic options etc.

To be fair there are some companies and clients with whom it is essential to use these buzz words in order to be considered credible.

But for everyone else – particularly for companies which haven’t worked with consultants before – the strategy design process should be kept clear and simple.

Another thing I’ve never been comfortable with is the point of view that a strategy must be perfect, a thing of great beauty. Making things of great beauty is the job of artists and plastic surgeons. Business people need to be pragmatic.

Anyway, many strategies which were judged imperfect or impossible – e.g. Steve Job’s strategy for Apple in 1987 and Herb Kelleher or Richard Branson’s entry to the airline industry – resulted in great successes.

And if a strategy isn’t made to work, to deliver results, what does it matter how nice it looks or sounds – which brings me to the second reason we should care.

2. The focus should be on the translating into action, achieving the goal part.

Research has shown, fairly consistently, that the majority (around 70% by some estimates) of strategies aren’t implemented or they fail.

Assuming that at least some of them were practical and simple, and yet still were never turned into action, what chance do complex strategies stand?

And here’s something that has always struck me as ironic.

Some of the reasons for designing a new strategy or changing/adapting an existing one are outside the control of the business owner and his/her team – e.g. competitive action, changes in the industry.

But all aspects of translating a strategy into action are totally under their control.

Makes you think, doesn’t it?

3. Final thoughts.

A business strategy is the means by which owners achieve their vision for their company. To do that it can’t be shrouded in mystique or only be a thing of ethereal beauty. And it can’t be complicated.

A good strategy informs all parts of the company about what they must do and how they must work together. It translates into the specific actions that must be completed to achieve clear goals which lead to the realization of the vision.

It turns the vision into results.

And don’t forget – a weak strategy implemented strongly will always beat a strong strategy implemented weakly.

 If you enjoyed this you’ll also enjoy 3 Things Which Shape A Good Strategy and 6 Tips For Getting Better Results in 2011 and Why You Want A Consultant With Hands-On Experience

The Future Of Your Business: Succession or Exit?

Thursday, May 5th, 2011

Our guest this week is Jim Pullen of Concert Partners. His career has included cross-border mergers and acquisitions of international technology companies. He is a senior advisor to Tequity, a specialist M&A firm in the technology sector.

Succession or exit – it’s a stark choice, but since we are all mortal, one of these is going to happen!

A recent study of Canadian businesses showed that while 70% recognized that a transition or exit will have to take place, only 7% had a plan! And incidentally, selling at the best price at the right time doesn’t constitute a plan!

I worked for an international mergers and acquisitions company in both London (UK) and Boston (USA). While I was there we carried out a study of 250 M&A transactions we were involved in, over a span of 8 years.  The transactions took place in Europe, US, and Canada. 

We wanted to find the key areas that buyers looked for in a transaction.  Based on the study, we developed a framework for ranking and assessing a company on the factors that were proven to drive a valuation.

The main areas of value enhancement that emerged are described below.

1. Financial

This category includes basic financial metrics such as profitability and revenue growth.  Companies with high profit margins and high rates of revenue growth obviously command a higher valuation. 

Other aspects include the type of revenues a company generates.  Recurring revenues can add to a valuation as it makes the company’s cash flow more predictable. So, for example, a company that sells big ticket one-off products could look to build up more of an offering around maintenance and post-sales services for their product – where they can sign their clients into multi-year maintenance contracts. 

Companies with strong cash generation are also more attractive to buyers.  They are able to take on more debt that can be used to finance growth.  It also makes a leveraged buy-out possible.

2.   Market & barriers to entry

In this category the factors include the strength of customer relationships and degree of uniqueness the company enjoys in its market.  Companies that have a direct and strong relationship with the end users/purchasers of their product will get a higher valuation.

Brand, which clearly has to be part of a long-term strategy, plays a large role in the value a buyer places on a company.  We found that a strong brand can make up to 70% of the value in a company.

In terms of barriers to entry, companies should use many mechanisms to defend their position. Examples are legal protection though patents and trademarks, exclusive relationships with key suppliers, and building internal expertise through strategic hiring.  Anything a company can do to make it harder for competitors to enter their space will help command a premium on valuation. 

3. Human resources

In this category, the framework looks at both technical skills and management skills.  As companies grow, it is important to distribute the key skill sets deeply across the organization.  Often after an exit, the founders will want to leave, either because they have a large financial gain or they prefer to be entrepreneurs over working in a large corporation.  A buyer will place a premium on a deep management team so the company can continue to innovate and execute even with the loss of the founders.

4. Strategic fit

This factor relates to the degree that the company being acquired is a strategic fit for the buyer’s product portfolio.  We have seen cases where buyers are willing to pay a 50%-70% price premium for a company that fills out a missing piece of their product portfolio and gives them access to the markets and expertise. 

Partnerships are an excellent way to lay the foundation with a potential buyer.  A partnership is a low-commitment way for them to get deeper experience with a potential acquisition. If things work out well and strategic synergies start to develop then it is easy to take the step towards a deeper relationship.
 
5. Governance

The last factor involves good governance.  We have found that a strong board of directors can add a 25% premium to the value of a company.  This is due to the buyer having more assurance that the company has been well governed and there will be no unexpected surprises they need to deal with.

A Few Final Thoughts.

There are 3 main ways in which the succession issue can be handled: a younger generation of the family takes over; the executives buy out the owner via a management or leveraged buy-out (MBO/LBO); or there is a liquidity event (the shares are given some realizable value) by means of a trade sale or listing on a public market (Initial Public Offering or IPO).

Whichever route is taken, it is clearly in the shareholders’ interest to maximize the value of the business prior to that event.  The ideal time to begin that process is on day one, but it may not be too late; 2 years is a realistic timescale in which to groom a company for sale/transition.

Let me leave you with 2 thoughts. Begin thinking about it today. And get some help from people with experience.

Jim currently provides corporate development consulting services and mentors early stage businesses at the ventureLAB in Markham. You can contact him at jpullen@concert-partners.com

“You Can Achieve Any Result You Want To……”

Wednesday, September 29th, 2010

If you’ve read any of my earlier blog posts you’ll know that I play golf. I realize that not everyone shares my enthusiasm for the game so you will find absolutely no discussion of the technicalities of golf in the following paragraphs.

In fact, if you want, you can substitute any game you personally prefer and still get the benefit of the points I’m going to make.

At the beginning of the summer I decided that my golf really had to improve. As a result, I took some lessons from someone with the experience to help me improve my swing. He turned out to be a terrific teacher who not only helped me improve my practical skills but also gave me confidence in my ability to become a “decent” golfer.

At one point, when we were discussing my goals, he said to me “You can achieve any score you decide to.” These were words of great encouragement for me. When I thought about it later I realized that he was pointing out two things:
• I alone had control over how much of my potential I realized.
• My attitude would play a large part in determining how good I actually became.
Adrian also told me that I had to practice hard, 2 or 3 times every week.

I’m sure you can see where this is going.

After taking stock of my personal strengths and weaknesses as a golfer, he gave me the opportunity to develop a better swing by avoiding the threats of a bad grip, bad posture etc. (OK so I lied a little bit about golf technicalities.) This was the golfing equivalent of a business owner developing a strategy for growing her/his company.

But actually making an improvement in my game would depend on how well I executed that strategy – the consistency of each swing at the ball (a process); how often I practiced (implemented the action plan) and how I adapted to what happened on the course each time I played (regular reviews using feedback from actual results). Also similar to the things a business owner has to do when he/she is growing a business!

I don’t want to draw this metaphor out for too long so let me tell you what happened. For a number of weeks I practiced regularly, improved my swing and learned my lessons when things didn’t work out during a game. My scores steadily got better.

Then, just as happens so often in business, things began to get in the way. I had to go to the UK, then we had house guests arrive. Work was being crammed into early morning and late night sessions.

I stopped practicing regularly (lost focus on my action plan) because I “had” to deal with these other things. My performance on the course (that great golf marketplace) and my scores began to slide again. I did wake up before I’d fallen too far behind (that razor sharp analytical mind at work). And I have improved, but not to the extent that I might have done, could have done, should have done.

I fell into the classic trap that we face as business owners – the day-to-day, tactical stuff took more of my attention than the strategic stuff.

So, the lesson I’ve learned this summer is that I have the potential to achieve a “decent” score in golf. I was certainly able to develop a better strategy (swing) than I’ve ever had before. But my attitude to execution meant I didn’t get to reap the full benefit of my strategy.

But I am now keeping a keen eye on the execution of my business plan (see Physician Heal Thyself)!

Post History