STOP STRATEGIC PLANNING
Without strategy, execution is aimless. Without execution, strategy is useless.
I’VE SURVEYED THOUSANDS of business leaders—CEOs, business owners, and Strategic Leadership Team members—asking them the question, “In your experience, do strategic change initiatives more often fail because of poor planning or poor execution?” Almost everyone says, “Poor execution.” Of course. We have good ideas, good intentions, and maybe even good plans . . . but execution is where they so often fail.
There are few better examples than the annual strategic planning charade. Remember the failure rate noted in the Introduction? Between 70 and 90 percent. Why? The most common reason is that once we’ve developed the plan, we fall back into the clutches of day-to-day demands. We lose focus. Execution bogs down.
Jay Dargatz, the CEO of a restoration company, describes it this way: “After the strategic offsite meeting we would come back all guns blazing . . . at least for the first couple of months. 38But then people got busy with their work, and we’d lose momentum. We weren’t consistent with our updates, and we didn’t set specific timelines or deadlines. And looking back, we should have held people more accountable.
“I don’t think everyone understood the consequences of not executing our strategies. It didn’t help that the process was so top-down. We just didn’t involve enough people—or enough people from different levels—at different stages of the process. We didn’t translate the strategy so that it was meaningful to everyone. As a result, I think people felt it was something we were doing to them instead of with them.”
Any of that sound familiar? There has to be a better way.
THE STRATEGIC MANAGEMENT PROCESS
When you read “strategic planning,” what comes to mind? The offsite meetings? The plan? Strategic planning emphasizes the wrong thing: the planning.
Stop strategic planning. To develop and sustain the right focus, strategy has to be a process, not just an event. The goal isn’t just to develop a plan or even implement a plan. The goal is to institute a system that ensures strategy is an ongoing, managed process.
Strategic Management Process
The Strategic Management Process has four phases: Assess, Position, Plan, and Implement.
In the Assess phase you develop a compelling Case for Change—the strategic “why.” It emerges from a solid understanding of the strategic context in which your organization operates, context that spotlights gain and pain—the consequences of changing versus not changing. Chapter 5 expands on how to create a compelling Case for Change.
In the Position phase you concisely define your strategic positioning—the strategic “what.” What are we driven to achieve, what business are we in, what makes us desirably different in the marketplace, and what must our culture look like to win? Chapter 6 outlines what good strategic positioning statements look like and how to avoid the failings of the typical mission and vision statements.
In the Plan phase you clearly outline the critical few SCIs that must be accomplished for your organization to win—the strategic “how.” This phase charts the course from strategy to reality. Chapter 7 explains why most plans are designed to fail, how focusing on your value proposition could destroy your business, and why you shouldn’t pursue a sustainable competitive advantage. It also describes how to prioritize and select the most essential SCIs.
The outputs from the Assess, Position, and Plan phases capture the why, what, and how of your strategy—your Strategic Framework. However, it’s meaningless unless you vigorously undertake the fourth phase—Implement. In the Implement phase you sustain focus by: (1) instituting mechanisms to systematically manage implementation, (2) creating an environment that consistently points people in the right direction, and (3) securing the capabilities that can and will make it happen. Chapter 8, and then Parts III and IV, detail how to do this.
How does strategic management stand apart from strategic planning? In short, strategic management is strategy + execution. The following table captures the main differences:
A STRATEGIC MANAGEMENT CASE STUDY: NORTH AMERICAN TEA & COFFEE
Riyaz Devji had had enough. As the CEO of North American Tea & Coffee (NATC), a manufacturer and distributor of private label food products, he was tired of poor financial results, high employee turnover, and ongoing customer complaints. He was sick of workdays spent mired in the details of the business, instead of overseeing the business. When I first met him, it was clear he was committed to change. He was ready for strategic management.
Working with NATC’s Strategic Leadership Team, our first step was to comprehensively assess the current situation, starting 42with NATC’s customers. To get a range of perspectives, we conducted surveys of their customers’ buyers and category managers, as well as interviews with their directors. The results were not good, which surprised the NATC Strategic Leadership Team. Many directors and category managers rated NATC poorly as a strategic partner, saying it didn’t have a good understanding of their business and priorities, and didn’t offer ways to better support them. All customer groups had serious concerns about packaging quality, fill rate, and on-time delivery. The results were not all bad, however, as NATC’s people were rated as both professional and personable.
We also conducted interviews with 17 key suppliers to determine their perceptions of NATC and identify how NATC could become a better partner. The conclusion: NATC was an unremarkable customer that elicited mildly favorable impressions.
Analyzing NATC’s financial performance painted a more worrisome picture: Revenues were highly concentrated in one client, and overall margin and EBITDA performance was poor, especially in one of the company’s two major locations.
We conducted an anonymous survey of NATC’s 250 associates to gain their perspectives about immediate supervisors, upper management, the work environment, and the culture. While the results were generally good, they also exposed areas of concern: Training was lacking. Managers did a poor job of engaging, communicating with, and supporting associates. Incentives and rewards were not well aligned with performance expectations. In short, NATC had not created an environment that enabled people to perform at their best.
The Case for Change emerged: If NATC didn’t become a strategic partner to its major customers, understanding their priorities and reliably meeting their needs, it would be at risk of losing those customers, which would be disastrous. If it didn’t become 43financially viable in its underperforming location, it would be forced to restructure. And if it didn’t create an engaging environment for its associates, then performance and results would both suffer. On the other hand, doing these would solidify customer relationships, build a more engaged and high-performing team, and significantly improve financial results.
Next, we established NATC’s strategic positioning, starting with a Brand Commitment statement: “Trusted Partner • Great Service • Fair Prices.” We also developed a simple Winning statement: “Profitable . . . with happy customers, associates, and suppliers.” That led us to construct a Strategic Scorecard with associated metrics and goals.
In the Plan phase, we identified three critical objectives: (1) We must become a strategic partner to our major customers, (2) we must ensure our underperforming location becomes financially viable, and (3) we must create an environment that effectively engages our associates.
In support of the first objective, we identified two SCIs. The first was to develop and implement a rigorous CRM system, committing to specific, customer engagement and reporting requirements. The second was to implement a customer-centric, quality measurement system with metrics and goals for packaging quality, fill rate, and on-time delivery.
For the second objective, we identified several smaller initiatives, including assessing and reducing material cost structure, bringing product blending in-house for high-volume brands, and developing new product variations for quick release-to-market. To meet our third objective, the primary SCI was to develop an engagement-performance system with key elements including communications, training, performance coaching, and reinforcement.
So far, so good. But up to this point, all we had was a plan. Now we needed to turn strategy into an ongoing, managed process.
The critical first step in this phase was to engage all the associates (within each geographic location) in an interactive One Team Meeting. The Strategic Leadership Team presented the Strategic Framework, and then we asked the associates—seated at round tables with flip charts—to discuss what they liked about it, what concerned them, and what questions they had. At each table, one associate recorded comments, and one reported out highlights to the larger group. The discussions were vigorous. Everyone had a voice. And we took away many helpful ideas. The associates’ post-event feedback verified that the One Team Meeting was an enlightening and energizing event.
However, if we didn’t continue to communicate about progress and success, then we risked squandering momentum. To avoid this, we implemented an ongoing, multichannel Communications Plan with clear objectives, timelines, and responsibilities.
To drive implementation, we identified a Champion for each SCI. The Champions created Execution Plans for their respective SCIs, identifying team members, time-linked milestones, resource requirements, and the projected return on strategy. We held monthly Progress Tracking meetings to monitor progress of the Execution Plans and review our Strategic Scorecard. We also conducted a midyear Recalibration meeting with the Strategic Leadership Team to determine what if any adjustments we needed to make to the Strategic Framework and Strategic Management Process. As a result, we revised one of the Execution Plans and enhanced our Communications Plan, increasing upper management’s involvement in recognizing and celebrating successes.
Unsurprisingly, this comprehensive approach led to comprehensive results. Key performance indicators such as packaging quality, fill rate, and on-time delivery all improved. The culture began to change, morale rose, and associate retention increased. NATC became viewed as more of a trusted partner to its major customers. EBITDA increased by 50 percent in less than two years, and the growth in associates’ profit-sharing checks reinforced their efforts. An unanticipated benefit was that Devji found he was spending less than half the time he used to spend fighting fires. He was able to devote more time to working on the business instead of in the business. Shortly thereafter, he sold his company to a private equity firm for a strong multiple.
“No question,” said Devji, “Committing to strategic management was the single best investment of time and money I made as a CEO.”
Don’t just plan strategy, manage it. Put an end to the strategic planning charade. Commit to strategic management.
• Planning is important, but the goal isn’t to create a plan. The goal is to develop and sustain a compelling, concise, and clear focus, effectively execute on it, and be able to do it repeatedly.
• Stop strategic planning. Commit to strategic management.