Strategic Planning: “Budget +10%” Isn’t a Strategy

Everyone wants to do “strategy.” Everyone wants their stuff to be “strategic.”

Strategic Plan
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The word “strategy” is being abused so badly it needs counseling.

Wikipedia says “A strategy is a long term plan of action designed to achieve a particular goal, most often ‘winning.'” Everyone wants to win. And sometimes winning means increasing financial performance by 10%. The problem is many organizations use the end metric to define their strategy. To be clear – financial or numerical results FOLLOW from strategy (they don’t drive it). Strategy and the defined tactics and initiatives for executing it result in financial performance (hence the more oft used term “financial RESULTS”).

Why am I harping on this point? Simple. Define your strategy as “budget +10%” (or some other such ROMA-based number) and your team will have no idea what they’re supposed to do to achieve it. Instead, provide them a goal and vision then clearly lay out the competitive environment, how you’ll compete, what initiatives you’ll pursue, then execute. Doing this means your odds of hitting your magical budget +10% goal go up dramatically.

Setting the vision and the goal

What’s the end state? Why does your organization exist? What’s the definition of “winning” in your industry? A good vision is far enough out to push the boundaries of thought but close enough in that people see it as achievable. It’s broad and allows for exploration of new ideas – it doesn’t confine the company in what it can pursue. It’s inspiring. It’s somewhat squishy and hard to nail down but provides a clear direction. Check out Amazon.com’s vision:

“Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”

Pretty cool. Aspirational. “ANYTHING they might want to buy online.” Okay… maybe it’s a little too broad (I don’t see them selling car insurance or stock research anytime soon) but you get the point.

Defining the environment: ask Dr. Porter

There are frameworks and then there are FRAMEWORKS. Dr. Michael Porter’s Five Forces fall in the latter category. (Neat guy. Met him a coupla years ago. Quite an amiable and cerebral chap). Do it. Use it. It will get you grounded in the strategic environment. I won’t belabor the point.

How you’ll compete

Understand what you’re good at (and what you’re not). These core competencies help determine how you’ll compete in the marketplace. Are you incredibly efficient but have no brand? Probably leads to a low-cost private label provider competitive stance. Great brands and great service? More likely a category killer or premium price point stance (think Starbucks , Best Buy, or Whole Foods).

There are bad places you can end up by not having this clearly defined. You can either be stuck in the middle (great brand, crappy service; crappy brand, high price; no brand, low price and poor efficiency – you get the picture) or you can deviate from your original competitive stance and end up in some bad places (Like the experience Starbucks had during the shift to more efficient means of producing their delicious quad shot venti caramel macchiato’s. They’ve subsequently made a “back to basics” reorientation on what made them competitively successful in the past.

Define how you’re going to fight and stick to the path. I’m not saying don’t change. I’m saying don’t change every year.

And now for some initiatives

Initiatives. I hear the word and cringe. Visions of consultomonkeys go dancing through my head. PowerPoint until I barf. Conference calls. Kickoff meetings. Initiative trackers. Someone please stop the insanity.

The thing is, they’re a necessary evil. Your team needs a focused set of concrete tasks and projects to go chase and execute against ruthlessly. By focused, I mean 3-5. If you need two hands to count them, it’s too many. And no, you can’t combine 30 of them in to three broad initiative “umbrellas” with a bunch of sub-initiatives. Bad strategist! Bad! Please stop. Now.

Lay these initiatives (3-5) out over a 5 year planning horizon. Each year should enable you to tackle a few new ones. If at the end of that period it looks like you’ll be on your goal, good for you. If not, you need either a more reasonable goal or more powerful initiatives. Do not pass go. Do not collect $200 of EBITDA. Go back to step 1.

Great. I have a strategy. Now what?

You know the vision (and therefore what is and isn’t “on strategy”). You know the environment (and hence what will and won’t work out in the marketplace). You know how you’ll compete (and therefore won’t do stupid stuff like pursue a price war when you’re the branded market leader). You have identified the tasks for this year (and kept it manageable so you don’t drive your people insane with initiatives). What are you waiting for? Get to work and execute! If you’ve done a solid job on all the above points, the +10% should pop out at the end as a result.

Oh, and by the way, as you execute your plan, please try to keep in mind the leadership principles. These are people you’re trying to lead. If you forget that human element and don’t genuinely care for them, you’re not going to have many of them left to carry out the plan…

– Mike Figliuolo at thoughtLEADERS, LLC