We have had numerous requests to re-post some of our readers favorite blogs. One of the favorites is The Top Ten Reasons NOT to do Strategic Planning. It is a two-parter, and the second half will be posted next week. Enjoy!
“It is the economy, stupid!” That statement, made famous in political battlefields, similarly describes the challenges facing many businesses today. When asked, “Why are you struggling?” It is the obvious answer, and yet there are companies performing well and growing. So what separates those who are struggling to survive and those who are achieving their performance goals? The ability to adapt business models to take advantage of market opportunities–they exist in every market, even a down cycle.
Who would argue that in this down cycle we have seen companies emerging stronger–usually by NOT playing by the rules that everyone else seems to follow. Apple, recently named by Fast Company magazine as the Most Innovative Company in their March 2011 issue, continues to pull away from the pack with their launch of the Ipad and by broadening distribution for the Iphone, granting Verizon the right to sell the coveted phone.
So what are the concerns that keep leaders from acting and developing a clear plan for the future that will help them overcome the “business gravity” they encounter?
#1 I have a plan already.
Usually, the plan consists of a list of objectives, operating enhancements, and sales goals, based on a SWOT analysis. While those are all valuable to help companies survive day to day, they do not provide strategic direction or organizational alignment. Creating these “plans,” in the absence of strategy, is one of the reasons companies average only a 25% ROI on growth initiatives. There is often too many initiatives not tied to a direction, resulting in a rifle shot not a laser. Many confuse strategy with strategic implementation. For example, The Rockefeller Habits is a great book on improving focus within your current business model and I recommend it for that purpose. However, it does not help you determine if your objectives are helping you achieve your strategy. If you are excelling at an outdated business model you will eventually fail.
#2 It is not the right time.
Like having children, there is never a good time. Yet it is one of the most important things we can do to ensure that everything else we are spending time on has value. If you are devoted to implementing a tactical project– a new ERP system, onboarding new employees, or launching a new product–without knowing how they fit into your overall vision and growth plan, you may be spending a lot of time and money less productively than you thought. Strategy should guide these decisions not be pushed out as an after-thought.
#3 It costs too much.
Like everything else, you get what you pay for. If you want to produce a great strategy, spend the resources (time, people power, professional support) to do it right. The great thing about a strategy is that you don’t do it every week, every month or even every year. You devote time to getting it right and then updating it. The really great thing is that spending on strategy development generates a return on investment larger than any other project. So how much is it worth? And don’t forget there is an opportunity cost–if you put it off you are delaying the potential reward. You can never recover the period of time you could have been moving forward, achieving higher performance and reaping the reward. NPV is alive and working with regard to your strategic return. Finally, this is the future of the company. Put this work in the hands of the best minds, internally and externally.
#4 Who can plan in this environment?
The uncertainty and volatility of the environment means that business models are becoming outdated faster, and markets that we serve are changing forever. We are the Emperor with no clothes if we feel we can keep doing what we have always done only harder and faster, or just wildly guessing what will work!! The worst faux paux of all is to copy competitors because there is a reasonable chance it won’t work for them either, and even if it does, it may not be the right thing for YOU. Companies that are succeeding have dynamic plans with high level strategy that they adapt as the market evolves. I guarantee that Apple, Southwest Airlines, FaceBook, and other strong performers know who they are, why they succeed, and who they serve, and continue to innovate their offer using those key strategic insights.
#5 We are doing well.
Awesome. Like any successful entity, great football teams or companies, none of us can afford to rest on laurels on get complacent. Champions get one night to celebrate and then back to practice the next day. Companies that get lulled by success and turn it into habit get blindsided by new approaches. Most retail businesses that have a viable digital alternative are struggling with the changing business model in their industry and some of the big players are not proving agile enough to respond–rental movies, social communication, newspapers, books, etc. In fact, one of the most challenging aspects of business growth (and least understood) is that companies need to start on their next big revenue generating concept when the current one is raking it in. As you know, the business development cycle says that you reach the peak of success just before your business becomes mature, engaging price pressure from multiple competitors and starts becoming a commodity. If you wait until then to innovate, it may already be too late. Those who develop a clear strategy and can cite what is next when they are at the top today are in the best position to grow long term.
The next five reasons will be published on July 26th–watch for it! Any guesses on what they are?