When it comes to business strategy, the bottom line is, you'd better have one-or else. But just how do you go about planning the best strategy for your business? And is planning all it takes? Or is there more to the process than simply planning your strategy?
To answer those questions and more, I recently spoke with Michael Canic, the president of Edge Consulting Services, which provides strategic services that help leaders succeed through focus, alignment, commitment and execution. Canic is also currently writing a book, Ruthless Consistency: Aligning Your Organization to Win...or Else! I knew Canic could provide some insight and tactics on effective strategic planning for small businesses.
Patty Vogan: One of a leader's many responsibilities is to have a "strategic plan" for their company. Does a strategic plan produce sustained focus for the leader, their management team and the company's employees?
Michael Canic: Actually, a strategic plan doesn't produce sustained focus for anyone. What typically happens is that well-intentioned leaders go off-site for the annual "strategic planning" retreat. They plaster the walls with flip chart notes and discuss at length big-picture issues such as mission and vision. When it's over, everyone breathes a sigh of relief and gets back to the "real work" that's stacking up back at the office. The strategic plan is documented and distributed, and then it sits on a shelf and collects dust.
Vogan: So why don't strategic plans become strategic reality?
Canic: Because strategic planning is all about creating "the plan." Plans don't implement themselves. Strategy, right through implementation, needs to be approached as a process. That's why we created the four-phase strategic management process--to focus on turning strategy into reality.
Vogan: I like the idea of strategic management because that puts the strategic plan into action. What are the four phases of your plan and why are they important?
Canic: The four phases are assessment, positioning, planning and implementation. The reason they're so important is because ignoring any single phase can lead to disaster. Failing to conduct a thorough assessment can mean making decisions based on faulty assumptions. Failing to establish the positioning of a company can result in plans that focus on the wrong things. Failing to plan leaves you with a destination but not a roadmap. And failing to implement means your efforts at everything else are wasted.
Vogan: Do you think you could take each section and explain it using some examples.
Canic: The first phase is the assessment phase. The key here is that leaders have to be willing to attack their assumptions--to overcome their egos, to come to grips with reality, warts and all. So you start with a question the company needs to comprehensively answer: What is our current situation?
There are three things to look at here. One is the organization itself, from an operational, financial, structural and people perspective. Two is market data--current and potential markets and current and potential customers. You want to look at your performance feedback and value drivers. Third, and this is the one that's most often neglected, is what I call the "STEEP" factors: the sociocultural, technological, economic, environmental and political factors that can greatly impact a business.
Consider a fast-growing software company. Suppose their growth rate over the past three years has averaged 44 percent. Customers are happy. Investors are happy. It might be tempting to feel a little self-satisfied, perhaps become a bit complacent. But what's happening to the industry? If the trend is for "on demand" rather than "on premises" software--think salesforce.com--failing to recognize this and adapt could put you out of business.
The second phase is the positioning phase. The question to ask here is, What do you want to accomplish as a business? Forget the manicured mission and vision statements. Most of these are too vague, too long and not remembered. Boil it down: Come up with one, simply worded sentence that captures what you do as a business so that a stranger who heard this sentence could gain a basic understanding of what you do.
Then develop another simply worded sentence to capture what "winning" would look like. Think of the early days of Apple when the overarching goal was to create the most user-friendly operating system for personal computers. Or recall that more than 30 years ago, Nike had a single, laser focus: "Crush Adidas."
The third phase is the planning phase. The general question to ask here is, How do you get there? This is the phase that has to be information-driven. How much capital is required to support the infrastructure for growth? How rapidly do you have to grow to survive a consolidating market? Which distribution channels do you need to dominate?
Think of how many promising startups have died because they underestimated both the time to establish a significant market presence and the capital required to achieve it.
The last phase is implementation. Here you must answer the question, How do you ensure it happens? This is the most important phase and the phase where strategic plans fail.
A critical and underestimated part of any implementation is alignment--ensuring that the factors that impact people (from skills, authority, resources and incentives to processes and structure) are all aligned with the overarching goal. It's alignment through the eyes of the people, not just leaders, that counts.
A second critical aspect of implementation is commitment building. Here we like to structure leaders' regular communications and engagement with employees. Our underlying belief is that information, input and involvement together help to build commitment.
The last part of this phase involves execution management. Every month, the leadership team should meet for a few hours to track and manage the implementation of the plan. I strongly believe that every 90 days, the leadership team should also meet to recalibrate the plan. Reality changes, and the plan or elements of the plan can become irrelevant. Every 90 days, it's critical to question the assumptions upon which the plan was built and make adjustments as necessary. Have you lost a key customer? Has a new competitor come into the market? Has a promising investor bailed out on you? What has changed to the reliability of your supply chain?
Unsurprisingly, when a company vigorously adopts a disciplined strategic management process, they're much more likely to achieve their ambitions--the right ambitions.
Patty Vogan is Entrepreneur.com's "Leadership" columnist and owner of Victory Coaching, an executive coaching company for business and personal success, and a chairman for the largest CEO organization in the world, TEC International. She has over 15 years of experience in leadership management, team building, marketing and entrepreneurship, and is the author of two books. Her latest book,Waking Up in Tonga, will be available in December 2006.