March 8th, 2012
Organizations find a cadence for planning and execution. For some, planning their business is rhythmic and routine, and for others more ad-hoc and choppy.
The discipline required to be successful at strategic planning is not innate in the human condition. It requires creating methods, habits and norms that perpetuate a desired process, and that takes energy and patience only employed by the best CEO’s. Such habits will rarely occur without the complete buy-in of senior management.
The only way to establish such discipline is to have a repeatable process. Best-in-class organizations typically have multiple strategy events per year. For some, perhaps it is an annual retreat and quarterly follow-ups. For others, it is a semi-annual retreat followed by monthly check-ins that focus on execution. It is not as important what system you use for strategic thinking, as it is that you have a system you can commit to.
Once such a methodology is understood, certain norms begin to take form. Mid-management can rationalize their contribution to the greater good and develop their own methods for applying the strategy to their organizations. For many companies, strategic planning includes:
- Gathering research about the market and operating environment
- Gathering input from front line staff
- Gathering additional information about their current state
- Formulating the mission, values, vision, goals and strategic initiatives
- Conveying the mission, values, vision, goals and initiatives to their employees
- Establishing departmental goals and infrastructure requirements necessary to implement the strategy
- Creating a performance management system that is in alignment with the company’s core competencies
- Measuring the effectiveness of execution in real time
Many organizations have such a cascading routine for budgeting, and the same thinking applies to the formation and execution of strategy. Often the strategy discussion precedes the budgetary process and the timing of the two are linked. It is for this reason that one cannot think of planning as a single event (such as an “off-site”) but as a cycle. As such, your plan is never really complete—it is a working document that must continue to change as new market conditions present new threats and opportunities.
Organizations also need to change things up to foster new thinking. Some meetings can be structured and organized and others need to be free-flowing brainstorming sessions.
Whatever your process, provide an environment that will guarantee that your team continues to think about the broader picture and how you can maintain your strategic advantage.
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Posted by Marc Emmer - President - Optimize Inc.
March 30th, 2011
Being Opportunistic in a Volatile World
Last week my post drew considerable attention, perhaps because of its shock value at a time when the news was truly shocking. While the tsunami was a natural disaster, the response on the part of the Tokyo Electric Company was a human calamity. Lack of preparation will invariably lead to unintended consequences, if you are managing a nuclear power plant or any other business.
The reverse is also true. The entrepreneur capable of understanding seemingly unrelated external forces, and weaving them into a thoughtful strategy, will clearly realize strategic advantage. How might the strategist consider social, technological, economic, ecological and political factors to gain insight on how to take advantage of ever changing market conditions?
Scenario planning is a methodology whereby the entrepreneur considers converging factors that (in combination) creates a tipping point. Consider some of the following predictions, based on facts already in evidence today.
In the next decade, we are likely to see:
Predicative Modeling-Cloud computing enables the migration and cross-referencing of large institutional databases. For example, actuaries, using sophisticated algorithms are able to model ailments based on lifestyle choices monitored in real time. They are able to calculate your risk of a heart attack based on which smoothie you tend to order at Jamba Juice, your frequency of exercise, prescriptions you use, etc. Offered as a benefit of a health care plan, the member is offered incentives to opt-in and receive preferential rates. Such tools slow down rampant health care inflation.
A Cashless Society-The majority of transactions amongst big banks are managed by exchanges where no money actually changes hands. Coins of small denomination are nearing extinction. Today, you can download an iPhone app that serves as a debit card, and can be swiped within Starbucks locations. For most transactions, cash is already irrelevant.
Smart Infrastructure- Automobiles come preinstalled with all of the features of an iPad (the 2011 Hyundai Equus will come with one) and all the benefits of the internet. Smart grids control the flow of traffic, directing drivers to particular lanes at a given speed to optimize drive time and reduce accidents. Traffic signals are regulated based on traffic volume. Sensors predict bridge and rail failures.
Of course, rapid change will occur in every industry, and the strategist must weigh various opportunities based on an organization’s ability to take advantage of them. As a general rule, organizations should seek to achieve scale and reach within its core (at least 30% market share) before expanding into new endeavors. As Jim Collins points out in his sequel to Good to Great (How the Mighty Fall), many companies fail because of an “Undisciplined Pursuit of More”. In their zeal for diversification they often leap too far from their core competency.
Each opportunity must be assessed within the context of the organization’s resources, bandwidth, and human capital. For every opportunity there is a cost, and an opportunity cost. To pursue any new opportunity an organization must leverage resources which dilutes focus on the core business. Choose your opportunities carefully.
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Posted by Marc Emmer - President - Optimize Inc.
