SII / SIFMA strategic thinking in business


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SII / SIFMA strategic thinking in business

  2. 2. Business Acumen SeriesStrategic Thinking / Planning / ExecutionThe Five Foundations of Strategy THE 4 I’S1. 2
  3. 3. Business Acumen Series Strategic Thinking / Planning / ExecutionORGANIZATIONAL EFFECTIVENESS AUDITAnswer the following questions as honestly as possible using this 1-10 point scale:1 = Strongly Disagree 3 = Disagree Somewhat 5 = Not Sure7 = Agree Somewhat 10 = Strongly Agree1. We have a clear and detailed vision for the direction of our organization that is well communicatedthroughout the entire organization: ________2. Every employee has clear / quantifiable / observable performance objectives: ________3. There is a high level of open, honest and frank communication throughout the organization: ________4. I have a high level of trust in the skills, abilities, and integrity of my co-workers: ________5. There is a high sense of urgency within the organization to get things done: ________6. We have only the best, highly competent people in all areas of the organization: ________7. We focus very intently on the needs of our customers: ________8. There is no politics, rumor-mongering or finger-pointing within our organization: ________9. Our key leaders operate as a highly-effective team: ________10. There is a high level of both personal and mutual accountability within the organization: _______11. People display a positive, enthusiastic attitude throughout the organization: _______12. I personally set a living example of what I want other people in my organization to act like: _______13. Our organization displays great discipline in pursuing our focused business objectives: _______14. I am very pleased with where our organization is in the marketplace today: _______ 3
  4. 4. Business Acumen Series Strategic Thinking / Planning / Execution MICROSOFT CHARLIE TROTTER ⇒ The Top 5% ⇒ Hire Only the Best ⇒ Bet the Company ⇒ Teamwork ⇒ Require Failure ⇒ Communication ⇒ Managers are Qualified ⇒ Perform, Perform, Perform ⇒ Highest Standards ⇒ Shrimps vs. Weenies ⇒ Innovation ⇒ Espirit De Corps ⇒ Truly Delight Customers ⇒ Stop the Insanity Based on: “ Lesson on Excellence from Based on: “ The 12 Simple Secrets of Charlie Trotter” by Clarke Microsoft management” by Thielen **** For the rest of the workshops here is how to score yourself and your organization **** 1 to 2 = very poor 3 to 4= mediocre 5 to 6= good 7 to 8 = superior 9 to 10 = world class WHAT THE BEST CEO’S KNOW: KEY LESSONS FROM THE TOP 7 CEO’S IN AMERICA (Grove, Dell, Gerstner, Welch, Kellerher, Walton, Gates)1. Have an “Outside-In” perspective, place the customer at the epicenter of the business ______2. Be deeply passionate about your career, your work, your company ______3. Understand the critical role of building a strong corporate culture ______4. Create or adapt “next generation” products, processes, or solutions ______5. Implement the best ideas, regardless of their origin ______ Based on: “ What the Best COE’ Know” by Krames 4
  5. 5. Business Acumen Series Strategic Thinking / Planning / Execution THE TOYOTA WAY Challenging Vision We form a long-term vision, meeting challenges with courage and creativity to realize our dreams Kaizen We improve our business operations continuously, always driving for innovation and evolution (1% better every day) Genchi Genbutsu We go to the source to find the facts to make correct decisions, build consensus, and achieve our goals at our best speed. Respect, Challenge and Help your People and Suppliers We respect others, make every effort to understand each other, take responsibility and do our best to build mutual trust. Teamwork We stimulate personal and professional growth, share the opportunities of development, and maximize individual and team performance. From a new study of 25 top companies that are renowned for being number one at what they do: GE, Dell, Toyota, Nordstroms, Wal-Mart, Starbucks, Southwest Airlines, IBM, P&G, Whole Foods, Ritz Carlton, Intel… THEY UNDERSTAND THAT RESULTS RULE! SCORE YOURSELF ON THE 1-10 SCALE • Tell themselves the truth and value candor and honesty _____ • Pursue the best over the easiest in every situation _____ • Leverage the power or partnerships both internally and externally _____ • Focus the energy to make the main things the main thing _____ • Show the courage of accountability _____ • Learn, grow and improve every single day _____Based on: ”Results Rule! “ by Pennington 5
  6. 6. Business Acumen SeriesStrategic Thinking / Planning / ExecutionIS YOUR COMPANY UP TO SPEED? ADAPTED FROM FAST COMPANY MAGAZINEScore your company from 1 to 10: 1 = Strongly Disagree 3 = Disagree Somewhat 5 = Not Sure 7 = Agree Somewhat 10 = Strongly AgreeWE HAVE A STRONG EMOTIONAL BOND WITH OUR CUSTOMERS: ________Competing strictly on price, quality, and features is the road that most companies travel—and itis the road to disaster. In a world of overcapacity, endless choice, and savvy buyers—there willalways be some company that can do it a little faster, a little cheaper, or a little better than youcan. Companies that prosper over the long haul don’t just offer good deals, they exude genuineaffection and concern for their customers. They build strong, customer intimate relationships astrusted advisors and true business partners.WE HAVE A UNIQUE STRATEGY THAT CLEARLY STANDS OUT: ________You can’t do great things if you are satisfied doing things just “a little better” than your rivals.If you want to win big, you have to think differently. You must pursue strategic ideas thatchallenge the status quo in the industry. You must create a position that is unique, highlyvaluable in the marketplace, and defendable from your competition.OUR ORGANIZATION IS A FUN PLACE TO WORK—AND A FUN ORGANIZATION TO DO BUSINESS WITH: ________The most productive companies have an atmosphere of fun and excitement that permeatestheir entire culture. This does not mean people sit around and play video games and tell jokesall day long, it simply means that people smile and have fun while at work. They enjoy theirwork and the people they work with—and especially serving their customers.WE ARE BUILT TO CHANGE: ________The only certainty in business today is that some crucial elements of your strategy, thecompetitive landscape, your customer’s expectations, the underlying economics of your industrywill be different tomorrow. That is why change itself has become a core capability inorganizations that prosper over the long run. Companies that succeed—embrace, even revel inchange. 6
  7. 7. Business Acumen SeriesStrategic Thinking / Planning / ExecutionWE STRONGLY EMBRACE THE VALUE OF VALUES: ________Today, more than ever, customers dont just ask “What products do you make?” or “Whatservices do you offer?” they also ask “What values does your company stand for?” The companywith the clearest sense of purpose, bolstered by honesty and integrity wins.WE ARE AS DISCIPLINED AS WE ARE CREATIVE: ________(AND AS CREATIVE AS WE ARE DISCIPLINED)Creating long-term value means delivering short-term results—every quarter, every week, everyday. There is no contradiction between creativity and execution. The most innovative companiestend to be the most disciplined when it comes to making their numbers. Think outside the box,but build a strong box to stand on while doing it.WE USE TECHNOLOGY TO CHANGE EXPECTATIONS AND RESHAPE OUR BUSINESS: ________Every business is a technology business. Regardless of your product, service or industry—everycompany that hopes to survive, let alone win, must embrace technology as a fundamental driverof their business strategy. Fundamental values and core business excellence is powered byrelevant (to the customer) technology.WE ARE BUILT FOR SPEED: ________Being fast does not mean reckless. But fast companies do understand the cost of hesitation anddelay—whether responding to a customer’s complaint or launching a new product. Successfulcompanies know that time is as valuable a resource as money or talent and treat it accordingly.WE HAVE BUILT A COMPANY OF LEADERS: ________There is much more to leadership than the vision and charisma of the CEO. The most effectiveform of leadership is grassroots leadership; the companies with the most confident andcommitted leaders, in all levels of the organization, are companies that win. 7
  8. 8. Business Acumen SeriesStrategic Thinking / Planning / ExecutionGOOD TO GREAT HEDGEHOG CONCEPTLevel Five LeadershipFirst Who… then WhatConfront the Brutal FactsCulture of DisciplineTechnology AcceleratorsFlywheel—Doom LoopBased on: “ Good to Great” by CollinsFrom a twice weekly survey for five years of 2,000+ senior managers and executives at: • IBM • Microsoft • Motorola • GE • CIGNA • Ikon • Morgan Stanley • Heineken • American Express • Merck • Master Card • Progressive Insurance • 3M • Fidelity Investments • Bank of America • AT&T • SAP • Borders BooksKeys to Effective ManagementCommunicate Clearly _____Force the Hard Decisions _____Focus on Results _____Remain Flexible to Change _____Prove Your Value to the Company _____Force Collaboration _____Rigorous but Not Ruthless _____Based on: “ Tough Management” by Martin 8
  9. 9. Business Acumen SeriesStrategic Thinking / Planning / ExecutionTHE 4 + 2 FORMULAThe Four Primary Management Practices1 = Not at all 3 = Poor 5 = Fair 7 = Good 10 = Superior /Excellent1. Strategy: Devise and maintain a clearly stated, focused strategy: ________Whatever your strategy, it will only work if it is sharply defined, clearly communicated, and wellunderstood by employees, customers, partners, and investors.2. Execution: Develop and maintain flawless operational execution: ________You might not always delight every customer, but make sure that you never disappoint them.Winners consistently meet the expectations of their customers by delivering on their valueproposition. Bad quality surely will hurt.3. Culture: Develop and maintain a performance-oriented culture: ________One of the best indicators of being performance-oriented is the way you deal with your own poorperformers. It is easy to reward good performers. What matters is whether you have thecourage to get rid of poor performers.4. Structure: Build and maintain a fast, flexible, flat organization: ________What really counts is whether structure reduces bureaucracy and simplifies work. Simpler andfaster - such are the best goals for all organizations.The Four Secondary Management Practices1. Talent: Hold on to talented employees and find more: ________Winning organizations pay great attention to finding, growing, developing, and rewarding verytalented people.2. Leadership: Key leaders are truly committed to the business: ________The research data clearly showed that the leadership effectiveness of the top executives, onaverage, influenced 15% of the variance in corporate performance, for better or for worse.3. Innovation: Make innovations that are industry transforming: ________Agile companies that were highly innovative and able to anticipate rather than react to disruptiveevents in the marketplace, were always the winner.4. Mergers and Partnerships:Make growth happen with mergers, alliances, and partnerships: _________Internally generated growth is essential, but companies that can also master mergers andpartnerships are much more likely to be winners.Based on: “ What (Really) Works” by Joyce 9
  10. 10. Business Acumen SeriesStrategic Thinking / Planning / ExecutionWORKSHOP: IDEAS INTO ACTIONGo back page-by-page and carefully look through the book. Compare and contrast your scores onthe various audits and re-read any notes you wrote. What are the themes that emerge… thepatterns? Look for any scores below a 7 as an area that needs improvement and anything in the1-4 range as a serious problem that needs attention.The goal here is to really dig into these topics so you can take an honest look at the actualcurrent state of your organization (company, department, team…). This is a rare opportunity totake a critical look at how well your organization is truly operating and specifically what must bedone to improve it. Take this exercise very seriously and push yourself to really understand whatthese scores and everything you learned today about world-class organizations could mean to theway you do business. Here are three major questions to keep in mind:What does this mean to me?How can I make these ideas work in our company?What can I do right away to improve my/our success?1. StrengthsWhat was the pattern of high scores? In what major areas did you seem to have as strengths,where you scored an 8 or higher across all of the workshops?2. WeaknessesWhat was the pattern of low scores? In what major areas did you seem to have as weaknesses,where you scored a 6 or lower across all of the workshops? 10
  11. 11. Business Acumen SeriesStrategic Thinking / Planning / Execution3. Key Strategies for SuccessBased on everything you have learned here today and your own personal business experience,what do you believe are the top strategies your organization (company, department, team,group) must focus on to build and sustain success? What are the 4—6 most important ideas thatwill drive your organization’s future?(Please describe these in detail. You might lead off with a single word or short phrase, but then you’ll needto give a definition and description to exactly what you mean. It must be clear precisely what each ideasmeans and how you will pursue it.) 11
  12. 12. Business Acumen SeriesStrategic Thinking / Planning / Execution4. Action StepsPlease list at least 5 specific, measurable, and observable action steps that you can take toimplement the ideas you learned today. Based on the list you just created, as well as thestrengths and weaknesses you identified, what can be done right away to take the lessons of thisclass and put them into positive action for your organization? 12
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  15. 15. Business Acumen Series Strategic Thinking / Planning / ExecutionSTRATEGIC PLANNING – DEFINEDStrategic planning involves the organization’s (a strategic business unit, division, region, country,facility, product team, sales team, department…) attempt to spell out in clear detail the paths bywhich the organization’s vision is to be accomplished and how progress toward that vision will bemeasured and tracked. This process defines success in the context of the business theorganization wants to be in, how success in that business will be quantified, what will be done toachieve it, what resources (time, money, people, products, technology…) will be required, andwhat kind of organizational culture is necessary to achieve this success — while remainingconsistent with the overall mission of the corporation.Briefly, strategic planning produces a quantified version of the organization’s desiredfuture.In this process, the planning team is asked to conceptualize a series of specific future scenariosand then to decide which of these futures they wish to pursue and create. Strategic planning is achance for the planning team to develop and shape its vision for an ideal future before gettingdown to the nuts and bolts of figuring out how to reach that future, what will be required, andwho will be responsible. External Appraisal Internal Appraisal Threats and Strengths and Opportunities in Weaknesses of Environment Organization Critical Success Distinctive Indicators - Creation of Strategy Competencies - Contingencies Value Added P/S Implementation of Strategy Monitoring / Adjustment of Business Strategy 15
  16. 16. Business Acumen Series Strategic Thinking / Planning / ExecutionWHAT IS STRATEGIC PLANNING?LONG-TERM IMPACT OF CURRENT DECISIONSFirst, planning deals with the future impact of current decisions. This means that strategic planninglooks at the chain of cause and effect consequences over time of an actual or intended decision thata manager is going to make. If the manager does not like what is seen ahead, the decision can bereadily changed before resources are committed. Strategic business planning also looks at thealternative courses of action that are open in the future, and how those various choices influencedecisions being made today.The essence of formal strategic business planning is the systematic identification of opportunitiesand threats that lie in the future, which in combination with other relevant data provide a basis for acompany’s making better current decisions to exploit the opportunities and avoid the threats.PROCESSSecond, strategic planning is a process. It is a process that begins with the setting of organizationalaims and vision, defines strategies and policies to achieve them, and develops detailed plans tomake sure that the strategies are implemented so as to achieve the ends sought. It is a process ofdeciding in advance what kind of planning effort is to be undertaken, who is going to do it, how it isdone, and what will be done with the results. It is an on-going process that continues to cycleforward, extending out for the life of the company.PHILOSOPHYThird, strategic planning is an attitude, a way of life. Planning necessitates dedication to acting inthe basis of contemplation of the future, a determination to plan constantly and systematically as anintegral part of organizational management and a key element in the culture of the company.STRUCTUREFourth, a formal strategic planning system links together the three major types of planning:- Long-term (3-10 year) Strategic Plans- Medium-range (6 to 36 month) Program Plans- Short-range (1 –24 month) Budgets and Operational / Tactical Implementation Plans 16
  17. 17. Business Acumen Series Strategic Thinking / Planning / ExecutionWHAT STRATEGIC PLANNING IS NOT!Strategic planning does not attempt to make future decisions. Forward planning requires thatchoices be made among possible events in the future, but decisions made in their light can bemade only in the present.Strategic planning is not forecasting product sales and then determining what should be done toassure the fulfillment of the forecasts with respect to such things as materials purchases, facilities,manpower, and so on. Strategic planning goes far beyond forecasts of current markets andproducts and asks the more fundamental questions: Are we in the right business? What are ourbasic objectives? When will our present products become obsolete? Are our markets acceleratingor eroding? For most companies there is a wide gap between an objective forecasting of presentsales and profits and what top management would like sales and profits to be. If so, that is a gapto be filled by strategic planning.Strategic Planning is not an attempt to blueprint the future. It is not the development of a set ofplans that are cast in stone - to be used day after day without change into the distant future. Goodstrategic plans are flexible, responsive and adaptable.Strategic planning is not necessarily the preparation of massive, detailed, and interrelated sets ofplans. It can range from the very simple - to the highly complex.Strategic planning is not an attempt to replace good managerial judgment. Strategic planning iscarried out in order to assist in making sound business decisions – that are congruent with thedirection of the overall corporate mission, vision and strategic plan.Strategic planning is not simply an aggregation of functional plans or an extrapolation of currentbudgets. It is truly a systematic approach to maneuvering an enterprise over time through theuncertain waters of its changing environment to achieve prescribed organizational objectives.Strategic planning is about proactively creating the future of the enterprise, not figuring out wherethe company will be based on a long-term trend analysis of current numbers. 17
  18. 18. Business Acumen Series Strategic Thinking / Planning / ExecutionWHY STRATEGIC PLANNING PAYS OFFASKS AND ANSWERS QUESTIONS OF IMPORTANCEFor top managers, as well as for all other managers in an organization, formal strategic planningasks and answers some key questions in an orderly way, with a scale of priority and urgency. Suchquestions as the following come to mind: What is our basic line of business? What are ourunderlying philosophies and purpose? What are the company’s long-range and short-range goals?What and where are our markets? What will our cash flow be over the next several years? How willwe remain competitive? What sort of skills and talent will we need? How should we invest currentfunds back into the company to secure the future of the venture? Where is our industry headed? —and many, many more.SIMULATES THE FUTUREOne of the great advantages of strategic planning is that it simulates the future - on paper. If thesituation does not result in the desired picture the exercise can be erased and started all overagain. Simulation exercises are reversible - so no brick and mortar or banking decisions are madewithout the careful examination of the future.FORCES THE SETTING OF BUSINESS OBJECTIVESA strategic planning process will not get very far if at some point specific objectives are not set forsuch things as sales, profits and market share. There is no doubt that individuals will generallystrive hard to achieve clear objectives that are set for their organization.FRAMEWORK FOR DECISION MAKINGOne of the more important attributes of an effective planning program is that it gives clear andspecific guidance to managers throughout a business as to priorities and objectives that are in linewith the aims and strategies of upper management.PERFORMANCE MEASUREMENTA comprehensive plan provides the basis for measuring performance. Management has availablestandards of both a qualitative and a quantitative nature in a strategic plan.CHANNEL OF COMMUNICATIONA well-organized planning system is an extremely useful communications tool. The planningprocess is a means for communicating among all levels of management about objectives,strategies, and detailed operational plans. Strategic plans form the basis of Management ByObjectives, delegation, accountability, empowerment and teamwork. 18
  19. 19. Business Acumen Series Strategic Thinking / Planning / ExecutionVARIED GOALS FOR STRATEGIC PLANNING1. Change the direction of the company / division / team.2. Accelerate growth and improve profitability.3. Uncover strategic issues for top management consideration.4. Concentrate resources on important areas - allocate assets to areas of best potential.5. Develop better information for managers to make sound decisions.6. Develop a frame of reference for budgets and short-range operating plans.7. Develop a situation analysis of opportunities and threats to provide better awareness of acompany’s potential in light of its strengths and weaknesses.8. Increase coordination of internal activities.9. Develop superb communications within the organization.10. Gain more control of operations.11. Develop a sense of security among managers coming from an improved understanding ofchanging environment and the company’s ability to adapt to it.12. Provide a road map to show where the company is going and how to get there.13. Set more realistic, demanding, yet attainable objectives.14. Review and audit current operations so as to make proper adjustments and modifications asa result of changing environmental and organizational factors.15. Provide awareness of changing environment in order to better adapt to it.16. Pick up the pace of a “tired” company. 19
  20. 20. Business Acumen Series Strategic Thinking / Planning / ExecutionBEFORE STRATEGIC PLANNING – BUSINESS THINKINGThere is a wonderful book called BusinessThink written by the folks at FranklinCovey that putsforward an excellent framework for good, solid strategic thinking when making important businessdecisions. Rather than try to reinvent the wheel – here is my version of their wheel that alreadyruns very smoothly (I would also highly recommend buying the book — if you think this short list isgood– you should see the rest of the book!).1. CHECK YOUR EGO AT THE DOORArrogance, defensiveness, the desperate need for approval and the fight to feel like a winner (andmake the other person feel like a loser) shut down dialogue, opportunities and decisions and endup devouring time and energy, not to mention people. Changing yourself, changing your mindset ,changing your behaviors and attitudes — can lead to changing the business (and your life). Stayfocused on your purpose: the best solution.2. CREATE CURIOSITYCuriosity is the driving force behind BusinessThinking, and it thrives on intellectual diversity.Breakthrough solutions require fresh thinking, and curiosity drives your exploration of theunknown. What we currently know can get in the way of the unknown and the pursuit ofphenomenal solutions and strategies. Your ability to enact curiosity can help create a culture thatencourages everyone to ask questions and discourages those who don’t.It ain’t what you don’t know that will hurt you…It’s what you do know – that ain’t so!3. MOVE OFF THE SOLUTIONSolutions are only valuable for the results they get – and some solutions are better thanothers. Avoid solutions that serve more as a distraction than as bonafide solutions. Get to the coreof the underlying business issues that need to be addressed – by moving past the easy answersand focusing on bringing clarity and definition to the issue – then deciding to give attention to thefew solutions that truly meet your business needs and requirements.LOOK FOR THE SECOND (OR THIRD) CORRECT ANSWER. 20
  21. 21. Business Acumen Series Strategic Thinking / Planning / Execution4. GET EVIDENCEIf you don’t have evidence, there is no reason to do anything – period! Get proof that a businessproblem needs to be solved or that an opportunity could exist - by collecting soft evidence, andthen converting soft evidence into hard evidence that your business can measure. It is important toachieve a high confidence level in the soundness of your evidence and assumptions based on thosefacts.5. CALCULATE THE IMPACTJust because you can do something – does not mean you should. It is not unusual that the cost ofa solution is more expensive than the cost of living with the problem. Make sure early on that yoursolution has a worthwhile impact on the company, and a solid economic return. You’ll never knowunless you convert hard evidence into monetary impact – this will help you move from thesubjective to the objective and from the could, to the should.6. EXPLORE THE RIPPLE EFFECTBy widening your functional lens to capture the broader impact of problems or opportunities on thecompany, you are calculating more than financial impact. Make sure you know who or what else inthe company is affected to get the full scope of the impact.7. SLOW DOWN FOR YELLOW LIGHTSThere are hurdles that can stop any solution in its tracks. If the problem or opportunity is a big asyou think it is, what stopped everyone from successfully doing anything about it before now? What(or who) might stop you in the future?IT IS IMPOSSIBLE TO BUILD AN EFFECTIVE STRATEGIC BUSINESS PLAN, WITHOUTTHE PROPER STRATEGIC MINDSET AND THINKING SKILLS. 21
  22. 22. Business Acumen Series Strategic Thinking / Planning / ExecutionTASK 1 - DEFINE THE BUSINESS / DEVELOP A VISIONThe foremost direction-setting question managers of any enterprise need to ask is: “What is ourbusiness and what will it be?” Developing a carefully reasoned answer to this question pushesmanagers to consider what the organization’s business makeup should be and to develop a clearervision of where the organization needs to be headed over the next 3-5 years. Management’sanswer to “What is our business and what will it be?” begins the process of carving out ameaningful direction for the organization to take and establishing a strong organizational identity.Sometimes called either a Mission Statement or a Vision Statement, there are five key questions toconsider when developing this important tool.DEFINING THE DIMENSIONS OF A VISION1. What is the thrust or focus for future business development?2. What is the scope of products and markets that will - and will NOT - be considered.3. What is the future emphasis or priority and mix for the products and markets that fall withinthat scope?4. What key capabilities / resources are required to make this strategic Vision happen? (money,products, people, equipment, technology, sales, advertising, distribution, service, support…)5. What does this Vision imply for growth and return expectations?It is critical to develop a clear, specific , measurable and desirable vision for the business. This isthe cornerstone to motivation, delegation and effective implementation of the plan. The leadermust be able to vividly articulate and analytically describe the scope, direction, focus and future ofthe organization.** Key point : Remember - the ultimate mission of any company is always to serve thecustomer. 22
  23. 23. Business Acumen Series Strategic Thinking / Planning / ExecutionGAP ANALYSISNow that you have developed a clear and specific idea as to where you want to take yourorganization over the next 3-5 years - the next assignment is to step back and take a very closelook at exactly where you are today via a performance audit. The difference between where youwant to go – your vision – and where you are at this moment in time is called the “Gap.”A Gap Analysis refers to an in-depth audit of data - past /present / future - that provides a base forpursuing the strategic planning process. Typical activities covered in this analysis include thecurrent performance appraisal, situation audit, SWOT analysis, competitive analysis, the market/business audit, or the planning premises. These processes are designed to give the company arealistic and thorough overview of the starting place for the strategic plan.The major objective of the gap analysis is to identify and analyze the key trends and phenomenahaving a potential impact on the formulation and implementation of strategies for achieving yourvision. This is a critical planning step for two reasons:First, there are changes in the environment of a business that will have a profound impact on theaffairs of the enterprise. Best results will be achieved if these forces are identified before theimpact is felt, in contrast to attempting to react to foreseeable market shifts.Second, the results of conducting a gap analysis often lead to an enhanced understanding ofcurrent business processes - helping to identify and prioritize key areas of change. Vision THE Situation Audit SWOT analysis “GAP” WHERE YOU WANT TO GO. WHAT YOU HAVE TO DO WHERE YOU ARE TODAY. TO GET THERE. 23
  24. 24. Business Acumen Series Strategic Thinking / Planning / ExecutionSWOT ANALYSIS – WHICH LEADS TO YOUR GAPThe SWOT (strengths, weaknesses, opportunities, threats) analysis is a concerted effort torealistically and honestly determine where the business is today – so that you can make a directcomparison to the desired vision and determine exactly what must be done to close the gapbetween the two positions. The SWOT analysis involves an in-depth, simultaneous study of boththe organization’s internal strengths and weaknesses and those significant factors (opportunitiesand threats) outside the organization that may positively of negatively impact its future. Arealistic appraisal of where the organization currently stands in these terms is the crux of aviable performance appraisal and the very foundation of an effective strategic business plan.INTERNAL STRENGTHS AND WEAKNESSESThe purpose of this phase of the planning process is to identify those areas of weakness thatmust be managed, improved or avoided, as well as identifying areas for focus and investmentwhere the business has superior strengths or unique opportunities for success. Manyorganizations have great difficulty effectively assessing the internal weaknesses of theirbusiness, as no one likes to focus on the negative and there may be a good bit of fear inuncovering serious problems in operations or people. However, without a brutally honestassessment of these areas of weakness – it puts the organization in great jeopardy. It isimperative that the internal performance analysis be done with equal scrutiny to both strengthsand weaknesses.EXTERNAL OPPORTUNITIES AND THREATSThe performance audit must also include information about the outside forces that may impactthe organization’s goals. These outside forces are considered the opportunities and threats ofthe SWOT analysis. The planning team must study competitors, suppliers, markets andcustomers, economic trends, labor-market conditions and government regulations on all levelsthat can affect the organization positively or negatively. This analysis should include both currentand future trends – a longitudinal study.When conducting the SWOT analysis it is important to include the following environments:1. The general business / social / economic environment2. Your unique industry environment3. Your organization-specific environment4. The competitive environment 24
  25. 25. Business Acumen Series Strategic Thinking / Planning / ExecutionSWOT ANALYSIS - STRENGTHS / WEAKNESSES / OPPORTUNITIES / THREATSPOTENTIAL INTERNAL STRENGTHS POTENTIAL INTERNAL WEAKNESSES Core competencies in key areas No clear strategic direction Adequate financial resources Obsolete facilities Well thought of by customers Subpar profitability Insulated from strong competitive pressure Lack of management depth / talent Proprietary technology / data Missing key skills / competencies Cost advantages Poor track record in implementing strategy Superior advertising Falling behind in R&D Product innovation skills Too narrow a product line Superior manufacturing capability Weak market image Ahead on experience curve Below average marketing skills Proven management Unable to finance needed changes Key people / talent / knowledge Higher COGS than competitors Internal strife / corporate in-fightingPOTENTIAL EXTERNAL OPPORTUNITIES POTENTIAL EXTERNAL THREATS Additional customer groups Entry of competitors New markets / segments Rising sale of substitute products Expand product line Slower market growth Diversify into related markets Adverse shift in regulations Vertical integration (forward / backward) Vulnerability to recession and business cycle Complacency among rival firms Growing bargaining power of suppliers and Faster market growth customers Demographic trends Changing buyer needs and tastes Future technology Adverse demographic changes Regulatory changes Bad press / publicity Economic shifts 25
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  28. 28. Business Acumen SeriesStrategic Thinking / Planning / Execution TASK 2 - SETTING OF STRATEGIC BUSINESS OBJECTIVES / FACTORSThe next step in the strategic planning process is to identify all of the various elements that need tobe addressed in the plan - then set clear and specific objectives and action steps to achieve thevision.The tool we use to bring order to the chaos we have just created in the SWOT analysis is factoring.DEFINITION: A Factor is a clear statement of fact about anything that could positivelyof negatively affect our ability to achieve the Vision.Factoring is a process of identifying everything that could help or hurt us in our quest to create ourfuture vision of the company. Factors are always written as a complete sentence - and as astatement of fact. It may be that you simply go in and assign factoring priorities to some of yourexisting information from the SWOT analysis — but you may also need to write out a good numberof specific factors based on the information you have developed. Factors must be clear, easy tounderstand, specific statements about what you know and do not know about yourcurrent and future situations. A typical strategic plan will have dozens or hundreds of uniquefactors – so be sure to number every factor so that you can track and cross-reference each of themlater.Examples:1. We Know that our major competitors are Acme and Ajax.2. We currently have 15% market share.3. We Don’t Know (DK) if Sun Systems is planning to enter our market.4. We DK if we can renegotiate our supplier contracts.5. We DK if we can automate part of our production process.6. We Know that our current computer system is not sufficient for our needs.7. We DK the technical spec’s of an acceptable computer system.After you have written out your factors - go back and prioritize all of them using the followingcriteria:A = Very Important - take immediate action.B = Important - action required (may be dependent on another factor).C = Important - but no action required (information to keep in mind). 28
  29. 29. Business Acumen SeriesStrategic Thinking / Planning / ExecutionTASK 2 - SETTING STRATEGIC BUSINESS OBJECTIVES / FACTORSThe first place to start your factoring process is to go back and look over the information youcompiled in the SWOT analysis. You should have a long list of questions and answers - many ofyour factors will come from this list. Remember, if you could not answer a question, you put aquestion mark (?) next to it - these now all become DK’s for your factoring list.To aid in creating a very complete factor list, utilize the following factor categories to helpgenerate even more ideas. FINANCIAL EMPLOYEES Gross revenues / profits Skills, abilities, competencies, attitudes Sales Productivity Debt Turnover Cash flow Diversity Retained Earnings Training Credit Corporate culture A/P and A/R Benefits Bad debt Shrinkage FACILITIES Obsolete stock Capacity Modernization RESOURCE EFFICIENCY Location Sales per employee Appearance Profits per employee Cost Investment per employee Use of employee skills MARKETING Economies of scale Markets served Collective purchasing New markets Vertical integration Markets to exit Process reengineering Niche markets Value-chain management Market share Cycle Time Demographic and psychographic trends Automation Targeted and consistent marketing message Marketing channels 29
  30. 30. Business Acumen SeriesStrategic Thinking / Planning / Execution TASK 2 - SETTING STRATEGIC BUSINESS OBJECTIVES – STRATEGYOnce you have completed the factoring process, you should have a very long and comprehensivelist of prioritized factors. The next step is to group your factors into main categories to uncovertrends. As you look at your factors list, some grouping will be quite obvious - others may onlycontain a single factor.Some examples might be:Sales Products Employees TechnologyMarketing Competition Finances RegionSuppliers Customers Facilities ProductionThe aim here is to find a handful of similar factors that constitute a focus of organizational effort.These will become your major business objectives (your corporate strategy) for the next 3-5years. Once you have identified a group, closely examine the focus and direction of the similarfactors and then develop a broad “Strategic Business Objective” category ( also referred to as aStrategic Thrust) -that encompasses all the related factors.Example: You may currently have a poor marketing / advertising program, and some of thefactors might be:1. We are not well known in the community. A2. We DK exactly how we are viewed by the general public. A3. We have 5,000 brochures left from the last printing. C4. Our advertising budget for this year is $100,000. B5. We DK the best way to reach our target market. ABased on these factors - AND - our long-term vision statement - you might create a strategicbusiness objective that states:Objective 4 : Create a targeted, 2-year marketing campaign to position ABC Inc. as theinnovative solution provider for small business printing needs in the Jacksonville market.** After you have grouped all of your factors and developed a focused list of long-range strategic business objectives - prioritize that list from the most important(mission critical) to the least important. This list now constitutes the framework ofyour business strategy – how you will close the gap and achieve your vision. 30
  31. 31. Business Acumen Series Strategic Thinking / Planning / ExecutionWHAT IS STRATEGY?OPERATIONAL EFFECTIVENESS IS NOT STRATEGYCompanies must be flexible to respond rapidly to competitive and market changes. They mustbenchmark continuously to achieve best practice. They must outsource aggressively to gainefficiencies. And must nurture and grow a few core competencies to stay ahead of rivals.The root of the problem however, is the failure to distinguish between truly competitive anddefendable strategies — and the simple focus for improved operational effectiveness. The quest forproductivity, quality, and speed has spawned a remarkable number of management tools andtechniques: TQM, Six Sigma, ISO 9000, Value Chain Management, JIT inventory, theory ofconstraints, time-based competition, strategic outsourcing, strategic alliances, partnering. Althoughthe resulting operational improvements from these programs have often been dramatic, manycompanies have been frustrated in their inability to sustain true competitive advantage or profitabilityfrom these initiatives.OPERATIONAL EFFECTIVENESS: NECESSARY – BUT NOT SUFFICIENTCost is generated by performing activities – manufacturing a product, developing software code,recording data, delivering services, managing information and people. Cost advantage arises fromperforming those activities more efficiently than competitors. Similarly, cost differentiations andadvantages also arise from both the choices of activities to be performed and how those activities areperformed. Activities then, are the basic building blocks of competitive advantage. Overall advantageor disadvantage in the marketplace results from the totality of a company’s activities.OPERATIONAL EFFECTIVENESS VS. STRATEGIC DIFFERENTIATIONOperational Effectiveness (OE) means performing similar activities better than the competitionperforms them. Operational effectiveness includes, but is not limited to efficiency. OE basically meansto do the same activities as your competitor — just to do them faster, better, cheaper. In contrast,strategic differentiation means doing different activities, or the same activities in completely differentways. A strategy based on OE is much more easily copied – whereas a strategy based on unique anddefendable differentiation is much more difficult to replicate and effectively compete against.STRATEGY RESTS ON UNIQUE ACTIVITIES: THE ESSENCE OF STRATEGY IS CHOOSING TO PERFORM ACTIVITIESDIFFERENTLY — OR DIFFERENT ACTIVITIES — THAN RIVALS DO. 31
  32. 32. Business Acumen Series Strategic Thinking / Planning / ExecutionWHAT MAKES A TRULY COMPETITIVE STRATEGY?FIRST, IS IT UNIQUE?Does it reflect a powerful business model; do something that’s unequivocally world-class, best-of-breed, special, different, and fun ( Is it so unique and special that it intrigues, excites, evendazzles customers and staff? And, does it clearly offer value in the marketplace? In other words, inaddition to being cool, cutting edge and brilliant – people are interested, excited, motivated… almostdemanding to pay lots of money for it.That is what a good business strategy is supposed to do!SECOND, IS THE STRATEGY COHERENT?Does it generate clarity, commitment and consensus among employees as to the priorities and valuesof the organization? Does it create an exciting vision of the future of the organization that people wantto get involved with, know exactly where the business is going, and are motivated to dedicate a partof their life to helping it get there?THIRD, IS IT DELIVERABLE?A great idea is worthless without execution. Can you take this business dream – and make it abusiness reality? Will you be able to implement, measure and hold people accountable for theexecution of your strategy? Will your strategy work in the real world?Which leads me to…LASTLY, IS THE STRATEGY EVER-EVOLVING?Does the company have a process in place to ensure that the priorities, goals, objectives and valuesput forth in the strategy do not stagnate? That they are constantly measured, tested, talked about,debated and improved. This is not a once a year deal – it is an every day deal. Why? People have ashort memory – you have to keep them focused on the goal, focused on your values, focused on aclear, specific, vivid and compelling vision of the organization and a realistic strategy that clearly spellsout in great detail exactly what you are trying to achieve and each person’s interdependent role inmaking it happen.Before you set your strategic business objectives — make sure that they create a truly competitivebusiness strategy. 32
  33. 33. Business Acumen SeriesStrategic Thinking / Planning / ExecutionTASK 3 - DEVELOPING SMART STRATEGIC ACTION PLANSOnce you have completed the factoring process - and have prioritized all of your strategicbusiness objectives - it is time to take each of these objectives and their related factors andcreate a set of Specific, Measurable, Agreed upon, Realistic, and Time-bound (SMART) actionsteps to achieve the objective.In order of priority, take each of the factors and decide specifically what needs to be done - bywho - by when.For example: Under a strategic objective dealing with competition you might have;Factor Priority1. We DK if Sun Systems is planning to enter our market? AAction Steps Who Due date1. Visit Sun Systems website. RKS 09/15/052. Order Annual report / 10K / 10Q from Sun Systems. JBS 09/15/053. Check analyst’s report for industry trends. JBS 09/20/05** As you will notice, one factor can drive several action steps - or it can be a 1-to-1ration - or a single action step may take care of several factors.Once you have written all of the action steps necessary to handle the factors and achieve theobjective - simply put them into date order - and you have a step-by-step Strategic Action Planthat is time-bound and has specific individuals who have been assigned to take responsibility forevery important item.Note : remember to number all of your factors and action steps so that you can cross-referencethem - ensuring that you don’t let any fall through the cracks! 33
  34. 34. Business Acumen SeriesStrategic Thinking / Planning / Execution SCENARIO PLANINGAs you conduct your SWOT / Gap analysis there is a good chance that you will uncover specificfactors that represent serious decision points for your organization (either positive or negative). Itis crucial that you include these issues in the plan so that you and your team can anticipate themand manage them accordingly.These factors may deal with issues such as:New competitors entering the market.New markets becoming available.New regulation or deregulation in the industry.Loss of a major competitor, customer, supplier.New technology that makes some of your products or services obsolete.Recession, war, natural disaster.Loss of a key employee – loss of a facility.The list could go on, but each of these subjects could seriously impact your business and must beplanned for. The suggested course of action is to create a series of scenario/contingency plansbased on the probability and impact of a specific issue.Probability: what is the likelihood that this factor will come to pass? You can score this either asa percentage of 100 – or Low, Medium, High.Impact: if it were to happen, what would the potential impact be to your business — Low,Medium, High.For example, you may know that one of your current competitors is struggling due to over-expansion and may have to close down some of their operations in your region. If that were tohappen it could be an excellent opportunity for you to secure their customers and gain significantmarket share. You might score that as:Acme forced to close all Colorado stores – Probability: 70% / Impact: HighSCENARIO PLANNING DRIVES THE CREATION OF CONTINGENCY PLANSFor all high probability / high impact issues, you and your team should create a set of contingencyplans that can be implemented as soon as the issue reaches a certain “Trigger Point” - a setthreshold event that will indicate it is time for you to take action. Once a trigger point has beenreached, you will be able to implement your contingency plan swiftly, gaining superior advantagein the marketplace or reducing exposure. 34
  35. 35. Business Acumen Series Strategic Thinking / Planning / ExecutionThe purpose of the scenario planning is not to develop a forecast, because you know it would bewrong. Instead, the aim is to draw a circle around multiple possibilities and think about whether youare prepared to face the range of various futures that might unfold. It also helps you think abouthow you might be a catalyst in moving the world a little bit in the direction you’d like to go.ELEMENTS OF SCENARIO PLANNINGKEY FOCAL ISSUEDRIVING FORCESCRITICAL UNCERTAINTIESSCENARIO FRAMEWORKSCENARIOSNARRATIVESKEY FOCAL ISSUEA significant upcoming decision or strategic uncertainty that has long-range consequences for thefuture of the organization. (Strategic Inflection Point)Scope and timeframe for choices and concerns should be clearly defined.Typically posed as a strategic question:Should we build a facility in Mexico in the next three years?Should we invest more in R&D around a new consumer trend?What is the future of talent acquisition in the high-tech arena?What does the growth of India and China mean to our business in the next 10 years?DRIVING FORCESThemes and trends that are likely to impact, shape and influence the Key Focal Issue in a significantway…ECONOMIC (STRENGTH OF DOLLAR TO EURO, RECESSION, PRICE OF OIL…)SOCIAL (DEMOGRAPHICS, CONSUMER DEMANDS, POPULATION…)POLITICAL (REGULATIONS, ELECTIONS, TAX, LEGAL…)TECHNOLOGY (MOORE’S LAW, PATENTS, INNOVATION…)CORPORATE (CHANGES IN STRATEGY, LEADERSHIP, CULTURE…)COMPETITION (STRATEGY, MARKET SHARE, INNOVATION…) 35
  36. 36. Business Acumen Series Strategic Thinking / Planning / ExecutionCRITICAL UNCERTAINTIESThe top two most relevant uncertainties that impact your scenario.Defined by level of uncertainty and importance. When plotted together they create a matrix such asthe one below for the boat manufacturing industry — using length of recession and gas prices as itstwo critical uncertainties.SHORT / SHORT = HOLD ONSHORT / LONG = NEW ENGINESLONG / SHORT = CLOSE FACTORIESLONG / LONG = GO INTERNATIONALNow for each you would create a narrative.NARRATIVE STORIESA detailed, coherent and logically consistent story of what this future would actually look like.Should read like a well-developed novel, but be as realistic as possible.Should answer the question: “How exactly did the world get from here to there?”It is important to place the organization in the scenario and explore all of the implications that thisunique future would have on the organization. What would the impact be? What decisions wouldhave to be made? What are some possible options? How would it change strategy for theorganization? 36
  37. 37. Business Acumen Series Strategic Thinking / Planning / ExecutionWORKSHOP1. Identify the top three to five Key Focal Issues you believe are facing your group at this time.Then choose one specific issue to pursue.2. What are the major Driving Forces that affect that issue? Regulation, innovation, politics,corporate culture, competition, legal, social, consumer trends…3. What are the TWO Critical Uncertainties that are the most important to this issue?4. Create a Scenario Framework of the four possible future scenarios around those two CriticalUncertainties. Then choose TWO scenarios from the framework to pursue.5. Craft a short, but detailed Narrative for these two scenarios – Think: newspaper story. Make itas realistic as possible. How did the world get from here to there? Discuss the variousimplications of this future scenario on your group and your current strategy. What actions would youtake if this scenario played out?6. Determine Impact, Probability and Trigger Points for both scenarios.Make a recommendation as to whether either requires a full Contingency Plan. 37
  38. 38. Business Acumen SeriesStrategic Thinking / Planning / ExecutionWORKSHOP CONTINUED 38
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  41. 41. Business Acumen Series Strategic Thinking / Planning / ExecutionDISCIPLINED EXECUTION1 = Strongly Disagree 3 = Disagree Somewhat 5= Not Sure 7= Agree Somewhat 10 = Strongly AgreeWe have a clear vision for exactly where we are trying to take our organization _______We have a detailed and specific plan to accomplish the key objectives we are trying to execute _______Our senior leaders are all 100% committed to executing the key objectives _______The key leaders/employees in our organization are all superb at execution ______All of the major objectives we are pursuing are fully aligned and mutually reinforcing _______We have excellent systems and processes in place to ensure consistently superb execution ______There is continuous and transparent communication throughout he entire organization about exactlywhere we stand on executing on our key objectives _______Every employee has all of the training, support, equipment and resources they need to deliver theresults required of them _______We are superb at adjusting and adapting our strategy and objectives when truly necessary _____We do a great job of celebrating both small and big wins and praising great performance _______We refuse to tolerate mediocrity or lack of accountability and deal decisively with people who arenot able to meet the clear standards of performance in our organization _______ 41
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