Posted by Martin Harshberger on Thu, Jul 15, 2010 @ 09:27 AM
I’ve done a lot of research into the subject of strategic planning. There are many theories about what is the best way to develop a plan. There is the “basic” method, scenario planning, organic planning, and bottom up planning, among others. There are even software programs to “self develop” your strategic plan.
So what is the best practice?
After studying the subject and developing literally hundreds of plans both for my businesses and client organizations I think I can say it doesn’t matter what method you use as long as you follow a basic roadmap and think it through.
As I said in my writings you need to start at the end. You need to agree upon a vision for the organization. Any journey begins with an end in mind. You simply have to determine where it is you want to go in the next three to five years. This is a key first step that many if not most organizations don’t do. I’ve heard things like if we decide on a specific direction we might miss opportunities in another direction.
My response to that is if you don’t decide on a general vision, you waste time, energy and capital resources chasing tempting diversions that may of may not fit. Scenario planning mentioned above can be used as a supplement to a plan, but overall you need to decide what your organization will look like in the future. You may plan for various market or competitive influences but only to the degree of how they may impact your overall vision.
After deciding where it is you’re going you need to clearly understand where you are now. A thorough S.L.O.T. analysis looking at internal strengths and limitations as well as external threats and opportunities is essential for step three. You wouldn’t begin a road trip without knowing where you want to go and then developing a solid beginning point, why is a roadmap for your organization any different?
Step three is clear, crisp, timed, goals designed to get you from where you are to attainment of your vision.
Having a clear vision makes decision making, investment, management incentives all easier. You simply ask your self does this decision, investment or program move me closer to or further away form attainment of my vision?
The most difficult portion of any planning process is establishing and agreeing upon a vision. It’s difficult to put a stake in the ground for the future of your organization with so many fast occurring variables in today’s marketplace. But my view is you can decide your future or have it decided for you. Like the old saying goes, “which would you rather be the wind or the weather vane”?
Whatever method fits your organization I have just a few hard suggestions:
- Begin with the end in mind
- Document the plan
- Communicate the vision and the plan
- Implement the plan (studies show over 90% of organizations don’t)
- Review progress to the plan on a regular basis
- Align people, processes and incentives with the vision in mind
- If you can’t be objective about internal and external analysis get outside help
You can sit back and react to circumstances or you can invent your organization’s future.
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Posted by Martin Harshberger on Mon, Jun 21, 2010 @ 02:00 PM
Strategic planning has gotten a bad rap, and probably deservedly so. If you believe the research more than 50% of organizations don’t have a documented strategic plan. My view is, of those that do the majority aren’t worth the paper they are printed on.
Why? Because most organizations simply don’t know how to plan.
There is usually a mission statement developed to please all stakeholders and to ultimately be placed on the company website and brochures for marketing purposes. After that there is usually some futuristic stuff based on revenue and sales forecasts that talk about growth. No real direction and not much talk about how the sales forecasts will be accomplished.
A strategic plan for the real world has to be better than that. It has to have clarity, goals and be used to drive accountability. Think of it as planning a vacation road trip. First decide where you want to go, determine where you are now, and then write down what it will take to get you from point A to point B.
Start with a clear vision, what will your business look like in five years? How many people and locations will you have? What markets will you be in? What will be your unique selling proposition? Take all of that and boil it down to a few sentences that you can keep in front of all stakeholders all the time.
Acme manufacturing will double sales from $10MM to $20MM in the coming 5 years and will be a world-class manufacturer of rubber ducks is not a vision statement. It’s more of a wish statement.
Acme manufacturing will develop a seamless sales and distribution network that will facilitate sales growth by at least 100%. We will be known as the highest quality on-time manufacturer of rubber ducks and other complementary bath leisure products in our industry.
Now this is somewhat better. It speaks about what you want to be, and what you need to provide to get there.
After developing the vision statement, you do an in-depth S.W.O.T analysis to determine where you are now and what’s keeping you from being the world’s top selling supplier of rubber ducks.
You boil the S.W.O.T analysis down into 5 or 6 critical goal categories, and develop clear crisp timed goals to be accomplished over the next twelve to eighteen months to get you on the road to your vision.
You meet on a regular basis and review progress to goals. Are they on track, if now what needs to happen to get them on track? Are the assumptions still valid? Does everyone understand the vision and buy into it? Regular review and reinforcement is paramount to execution.
When the goals are met in 12 to 18 months sit down and review the plan, you should be well on your way to achieving your vision. You are a perhaps a third of the way down your chosen path, is it still valid? Did your market assumptions for rubber duck sales hold true? What other products or services will be a good fit?
Do the S.W.O.T. analysis based on the updated information and start the goals process again.
Effective strategic planning is a process not a one-time exercise. Understanding that change may be necessary and leadership and accountability are needed to drive execution are key first steps to effective strategy.
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Posted by Martin Harshberger on Thu, May 20, 2010 @ 03:42 PM
I read an article in our local paper entitled Furniture Industry fights China Price”. Northeast Mississippi is a furniture manufacturing hub and is being hit hard by low cost imports. The article covered a workshop developed by the Mississippi State Franklin Furniture Institute and really provided few answers to the problem.
Having grown up in a steel mill town and seeing what happens to an industry that cannot compete with low cost competition I have some historical knowledge of what happens to a region when the key industry is decimated. My hometown has never recovered.
I’ve done some research on the subject of competing with low cost manufactures and competing on price simply doesn’t work. The average burdened labor rate in China in 2007 was between .70 cents and .92 cents per hour depending on where you get the data. The corresponding rate per hour in the United States for manufacturing jobs is about $25.27 fully burdened with benefits.
In addition the Chinese companies don’t have the regulations and environmental rules to follow and we can all agree it isn’t a level playing field.
But come companies are competing and doing well against low cost competition. Those companies are identifying and developing niches to operate within that take advantage of problems with Chinese production:
- Freight costs
- Increases inventory and safety stock necessitated by potential supply interruptions or poor quality
- Lost sales due to stock out and poor quality
- Poor logistics support within China
- Duties, fees and taxes.
The reality of the situation in furniture or in any industry if you allow the product to become a commodity, low price will win every time. In high volume production of the same product with no service or customization, low price is the only differentiator.
What are the companies doing that compete?
- Performance improvements alone such as automation or lean will not allow U.S. companies to compete on price. Certainly U.S. manufacturers must get lean and be as productive as possible, but they will never automate to .90 cent and hour.
- They take advantage of the close proximity to markets and stay close to their customers, quickly turning customer requirements into opportunities.
- They develop the capability to run low volume and high quality products based on customer orders, allowing retailers and distributors to save money on inventory levels. This can be accomplished through Lean Manufacturing.
- They market their competitive advantages such as some level of customization, build to order, or features based on regional preference.
- They provide excellent customer service and warranty policies that offset the Chinese manufacturers distance from the market.
- Identify and market to consumers that are looking for a higher quality, higher tolerance product that can’t be easily produced in China.
- Use logistics and information to develop a competitive advantage within the supply chain.
- Allow the consumer or end user to have some input to the design and selection of the final product.
There are numerous things that U.S. manufacturers can look at strategically to offset some of China’s weaknesses. Allowing a market to be driven by low price is allowing a market to become at risk and expendable, and once a product becomes a commodity it seldom returns, electronics is a great example.
Better strategic planning, better marketing, and better communications with the customer can all be used as a competitive advantage by U.S. Manufacturers, and directly exploit weaknesses of Chinese manufacturers. Allowing them to dictate the market in our regions and establish low prices as the only selling point is giving up on an industry. Government tariffs and tax credits will never be enough to bridge the gap in labor costs. We must find a different way to do business.
Back to northeast Mississippi the furniture industry seems to be more concerned about each other than trying to form a cohesive marketing strategy to change the market.
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Posted by Martin Harshberger on Tue, Mar 16, 2010 @ 03:52 PM
I know this sounds obvious, but I’m working with four clients at the present time that have flat or decreasing sales over the past three years. While there are great economic reasons to justify slow or no sales growth it doesn’t change the equation.
Fuel costs, utilities, health care costs, are all rising, if sales don’t rise in the form of price increases or increasing the top line the only thing left to do is reduce internal costs. This is not an infinite source of dollars however and sooner or later you hit critical mass and cost reductions are no longer an option.
The clients I’m working with have all done a great job of reducing internal costs and have thus far weathered the storm. Now it’s time to put the focus on using their recently developed efficiencies to drive sales.
In an expanding economy it’s much easier to increase sales, dollars are flowing and everyone’s buying. How do you increase sales in a slow economy?
Remember the equation above doesn’t care if the economy is slow or not, so when you reach the point where you can no longer cut costs you either increase sales or go out of business. What do you do if the economy isn’t optimum?
You have to get innovative. You need to offer more value for the price than your competitors. Customers today are more knowledgeable and better informed than ever. You need to use this fact to your advantage.
Your sales strategy must be an integral part of your overall strategy, it can’t sit out there on it’s own and be low price one week and high service level another.
Decide who your customer is, what niche you will serve and align your internal cost structure, your compensation, your human resources to best support that niche. Become the subject matter expert, the obvious choice for your goods or services.
You need to be able to answer the question “with all of the goods and services available to my customer, why would they buy from me?”
Better sales results start with better strategic planning and are supported by marketing and execution.
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Posted by Martin Harshberger on Mon, Mar 08, 2010 @ 11:57 AM
Maybe that question should be addressed to individualcompanies as “what’s the value of your strategic plan?
We’ve all read that the majority of small to mid-sizedcompanies don’t have a strategic plan. Of those that do have a documented planonly 10% execute them.
There must be a reason why strategic planning is such a lowpriority with the majority of businesses.
Since becoming a business coach I’ve had the opportunity to review numerous documents and work with many companies in developing their plans. The one common thread that came through from most of them was, they simply don’t know how to plan.
In many cases if they documented one it was poorly conceived and soon became lost in the day-to-day realities of business. Many are nothing more than a series of spreadsheets built to show increasing sales and profit year over year. Some financial forecasting is warranted in a plan but they area measurement of plan attainment, not the plan itself.
A good strategy starts with a clear vision. This is the first step and one that is frequently overlooked. If you don’t start yourplanning process on a solid foundation, how can it ever be successful?
Most management teams have great difficulty committing wherethey want to go and what they want the business to look like in five years. Iusually get a response I want to grow X% or I want my sales to be X dollars bythat timeframe. That isn’t a vision statement, that’s an off the wall forecast.A clear vision is one you can articulate to all stakeholders and use as adecision tool by asking does this investment take me closer to or further frommy strategic goal?
A vision statement must include specifics, what will we looklike in 5 years? How many locations? What markets will we be in? What productswill we sell? What will we be known as within our chosen industry?
After you can answer questions like this and articulate thevision clearly then you are ready to begin the planning process.
If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business".
Posted by Martin Harshberger on Mon, Dec 14, 2009 @ 03:09 PM
What role does vision play in the development of your business plan? If you listen to Jack Welch it’s a big role.
“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.”
Jack Welch
Many small business leaders are unfamiliar with the strategic planning process. Better strategic planning results start at the end. Where is it you want to go?
Step #1 in the planning process: Clarify and document your vision.
Where do you want to be in five years? What specifically will that look like? Write that down in as much detail as possible. If you are tempted to blow this off or think this is easy, you’ve probably never done it. It’s not as simple as it sounds.
Now ask yourself, what’s been holding you back? Why you aren’t already there? The answers to these questions can be enlightening. Maybe it’s because you’re confused or conflicted about what you really want. Or maybe something stands in your way that you haven’t had the awareness or courage to confront.
Don’t skimp on this phase of the planning process. If you’re unclear about your vision, your whole plan will be useless.
Taking time to understand your business, both as it is today and as you want it to be tomorrow, is not as simple as it sounds.
It helps to have a knowledgeable and objective outsider involved in the planning process. An outsider will challenge you to think creatively. You’ll be better able to see familiar situations in new ways. And it will be harder for people to get away with excuses and blame shifting.
Frankly, I think it’s a dangerous mistake for the CEO or some other senior executive from within the organization to try to facilitate this assessment exercise. All too often participating staff members try to say what they think that executive wants to hear. A “herd mentality” develops that stifles honesty and creativity.
But a competent facilitator won’t accept pat answers, clichés, and jargon. He or she will encourage innovative thinking and force participants to drill down to bedrock facts.
When I go into a company, I start by asking the key players to clearly describe in writing what they want their company to look like in five years. What businesses will they be in? What products and services will they be selling? How many employees and locations will they have?
Most business owners, CEOs, and other major stakeholders think they know the answers to these questions. That is, until they try to put them on paper. Typically they struggle for hours before they reach agreement on their direction and general goals.
This process almost always births useful insights and promising opportunities.
A strong vision is the foundation of any successful business.
Your vision gives you a point of reference for evaluating and planning all aspects of your business. You’ll make better and faster decisions when you evaluate every choice by asking, “Does this take me closer to or farther from the attainment of my vision?”
If you want your company to achieve maximum success, all business processes, management practices, and employee incentives should flow from and be in alignment with a clearly defined strategy. All employees should understand and be “on the same page” as your vision and strategy. Every employee should consider the vision when they encounter their individual “moments of truth”.
In the fast food industry, moments of truth occur at the counter when the orders are taken. In manufacturing companies, they happen when a sales professional interacts with a prospect or customer, a serviceman repairs a customer’s machine, a shipment goes out the door to a customer, a customer service representative answers the phone, and at numerous other points.
Where are the moments of truth in your business? What interactions are crucial for your success? Design and execute your strategy and all of your processes and practices to create positive moments of truth experiences for your external customers.
How do you create an environment that equips and motivates your internal customers to create positive moments of truth experiences for your external customers?
You start by clarifying your vision and communicating it consistently and constantly, so that every aspect of your company is built around it.
Your vision is your definition of success. Your strategy to achieve your vision is the foundation for your success. When you have a clear vision and a sound strategy – supported by good planning, communications, and metrics – your entire workforce will perform at a higher level. That means more profits and faster growth for your business, which is exactly what this book’s about.
These concepts always work. Why? Because clear expectations built on the foundation of a sound vision always increase commitment, motivation, teamwork, and productivity.
Shifting expectations, on the other hand, increase confusion, discomfort, apathy, and disharmony.
If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business".
Posted by Martin Harshberger on Tue, Dec 08, 2009 @ 01:04 PM
Does your company or organization have a clear, crisp and documented Strategic Plan? Or are you one of the many that claim to have it “in your head”?
When I speak to business owners and CEO’s I hear that answer so often that I’ve come to expect it. According to the National Business Association, more than 50 percent of small to mid-size businesses don’t have written business plans. And when written plans do exist, most are on a shelf or in a file drawer, gathering dust.
Does your organization have a written plan with clearly defined goals?
- Does that plan articulate your vision and direction clearly and succinctly?
- Does everyone in the organization understand the plan and refer to it often?
- Are departmental goals and individual compensation tied to plan achievement?
- Can it be easily communicated?
- Does it provide a benchmark for evaluating your business?
- Does it give you the flexibility to alter your course rapidly in response to changing circumstances?
- Do you have a dashboard with key metrics to gauge progress against plan?
- Are those metrics visible to all employees?
- Are the people affected by the plan fully engaged and committed to accomplishing it?
If you answered “no” to two or more of these questions, there’s a good chance you don’t know where your organization is going or how it’s going to get there.
What a lot of companies call business plans are nothing more than “blue sky” gazes into the future. Their vision statements – which are actually more like “wish lists” – are vague and their goals are not specific. A poorly developed plan is worse than no plan at all.
The National Business Association estimates that 78 percent of businesses that fail don’t have well-developed business plans. Where does your company stand?
An undocumented plan is a daydream.
I’ve worked with a lot of executives who think that the plan in their head is well thought out and that everyone in their company is in agreement with it. But when they attempt to put it in black and white for others to see and discuss, they’re invariably surprised to see how much confusion and controversy erupts.
The documentation process forces you to set priorities and think through difficult questions. It provides a mechanism for discussing goals and building consensus. You’re less likely to gloss over key issues when you put things in writing.
A written plan gives you several significant benefits:
- It provides a fixed point of reference to guide your decision making, so you won’t be pulled off course by tempting diversions.
- It serves as a foundation for communicating direction, promoting teamwork, and instilling motivation.
- It promotes action instead of reaction.
- It provides a means of measuring your progress.
- It helps you invest resources wisely.
- It provides a common framework for aligning people and processes.
- It focuses your entire organization on common objectives.
Committing to the planning process is the first step in inventing your company’s future.
When you finish your plan, communicate it broadly. Refer to it constantly to guide your decision-making and gauge your progress. Use it to evaluate all major projects, processes, expenditures, and opportunities to make sure they are aligned with your organization’s vision and goals. Departmental goals and compensation plans should be aligned to plan achievement.
It takes courage to document and communicate your vision. Revealing your desires and your goals puts you out on a limb, where your success or failure is visible to all. You’re putting your reputation at risk.
But if you don’t commit to a vision, you’re putting your whole company and all of itsemployees at risk.
If you found this article helpful you may want to download our free whitepaper, "How to Recession Proof Your Business".