077 A strategy focused planning system beyond traditional budgeting -- by Dr James A Robertson PrEng

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Strategic change focuses on the essence of the business and how it thrives and undertakes activities directed at achieving lasting competitive advantage, an approach to budgeting is presented that seeks to bring the fundamentals of strategic analysis and design into the budgeting process

See also http://www.James-A-Robertson-and-Associates.com/

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077 A strategy focused planning system beyond traditional budgeting -- by Dr James A Robertson PrEng

  1. 1. 1 A strategy focused planning system beyond traditional budgeting www.JamesARobertson.com Dr James Robertson PrEng Africa Financial Controllers Conference 25 and 26th May 2009
  2. 2. 2 Building bridges
  3. 3. 3 Engineers do NOT design bridges to stand up
  4. 4. 4 Engineer against failure They design them NOT to fall down
  5. 5. How a client saw it (after a successful project outcome) 5 A critical principle for success Engineer against failure
  6. 6. Angus Struan Robertson 6 Vision
  7. 7. 7 Experiencing failure
  8. 8. 8 Experiencing failure
  9. 9. 9 Experiencing failure
  10. 10. 10 Epidemic 90% of strategic plans fail to deliver Corporate budgeting is seldom if ever strategically aligned How do we achieve strategic outcomes? What is the role of finance? How do we budget strategically? 3 3 3 3 3
  11. 11. 11 Strategic governance Governance = Care! Mervyn King
  12. 12. 12 There is a need for a new approach Success = getting to "NOT failure"
  13. 13. 13 What is NOT an engineering approach?
  14. 14. 14 What is NOT an engineering approach?
  15. 15. 15 What is NOT an engineering approach?
  16. 16. 16 What is NOT an engineering approach?
  17. 17. 17 Context Essential / critical questions If one asks the wrong questions one will get the wrong answers
  18. 18. 18 What is strategy?
  19. 19. 19 Strategy Doing the right things Professor Malcolm McDonald
  20. 20. 20 Tactics Doing things right Professor Malcolm McDonald
  21. 21. 21 The relationship between strategy and tactics Strategy -- doing the right things Professor Malcolm McDonald Tactics -- things right Thrive
  22. 22. 22 The relationship between strategy and tactics Professor Malcolm McDonald Survive Strategy -- doing the right things Tactics -- things right
  23. 23. 23 The relationship between strategy and tactics Professor Malcolm McDonald Die Strategy -- doing the right things Tactics -- things right
  24. 24. 24 The relationship between strategy and tactics Professor Malcolm McDonald Die slowly Die fast Strategy -- doing the right things Tactics -- things right
  25. 25. 25 The relationship between strategy and tactics Professor Malcolm McDonald Die slowly Survive Die fast Thrive Strategy -- doing the right things Tactics -- things right
  26. 26. 26 The essence of strategy Create Competitive Advantage The essence of strategy is integration - the ability to see in a complex holistic way Michael E Porter: Global Competitive Strategy : 9 June 2003
  27. 27. 27 Michel Robert on strategic driving force Product User Market Technology / Know-How Production Capacity or Production Capability Sales / Marketing Method Distribution Natural Resources Size / Growth Profit 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Michel Robert Robert states that every organization should have ONLY ONE of these as driving force, the others are managed within the context of the strategic driving force
  28. 28. 28 Essential components of strategy Core economic driver Core human resource driver Core market differentiator / value proposition / sales or marketing method Core customer / market / user Core asset / product / natural resource / size / growth Core technology / capability / know-how / distribution Essential reason the organisation exists (generally NOT profit) Core values Other 1. 2. 3. 4. 5. 6. 7. 8. 9. Identify the critical factors using relative weight contribution to corporate value creation Compare: Pick 'n Pay Edgars Woolworths
  29. 29. 29 What is strategy? The essence of why an organization exists and how it thrives
  30. 30. 30 The time dependency of strategy Not a forecast Forecast ? ? ? Today + n Years Professor Malcolm McDonald
  31. 31. 31 The time dependency of strategy Not an objective Objective Today + n Years Professor Malcolm McDonald
  32. 32. 32 The time dependency of strategy Strategic plan -- the path to competitive advantage -- plan I.T. for the future Today A realistic trajectory of continuous improvement within business constraints + n Years Professor Malcolm McDonald
  33. 33. 33 The trajectory from good to great Gilette case study “From Good to Great” by Jim Collins page 24 1986 Hostile takeover thwarted 1991 Mockler retires 1996 End Study 1975 Colman Mockler Appointed CEO US$14.92 Gillette General US Stock Market
  34. 34. 34 Historical Differentiators 60's Production 70's Sales 80's Finance The 90's and 2000's Excess supply Single division cannot solve A boom is unlikely!! Strategic Issues are Vital ) ) ) ) 5 5 5 ) Implies a Holistic, Integrated Business Approach Including Effective I.T.
  35. 35. 35 Differentiation Competitive Advantage THE KEY DIFFERENTIATORS IN 2000 AND BEYOND Market Focused Strategy Utilization of the Human Resource Effective Management Decision Making ) ) ) World Competitiveness Report; McDonald & Others Requires Information To Make The Right Decisions
  36. 36. 36 Beneficial business impact Measures of strategic delivery Increased competitiveness Increased market share and resulting turnover Increased profit margins Increased earnings Increased shareholder value etc 1. 2. 3. 4. 5. 6. #
  37. 37. 37 Value Experienced / defined by people Intuitive / gut feel Transaction = exchange of value between recipient and provider NOT money / cash / finance 1. 2. 3. 4. Money = medium of exchange / proxy / surrogate for value = MEANS OF MEASUREMENT therefore easy to measure
  38. 38. 38 Economic value Money is medium of exchange Convert value into money to finance I.T. investment Economic value is essential component of value proposition Derived from other sources of value The business must use I.T. as a means to create economic value to finance the I.T. investment 1. ) 2. ) 3. Find ways to measure the value that REALLY generates money
  39. 39. 39 Developing robust strategic budget What is required for a valuable outcome Add value to customer who is willing to pay Materially and sustainably reduce operating costs AND does NOT destroy value in another way (e.g. morale or loyalty) Enable the creation of a product or service that currently does not exist for a customer who is willing to pay Defend, extend or create competitive advantage for a customer who is willing to pay 1. ) 2. ) 3. ) 4. ) Can you relate your requirement to a customer?
  40. 40. 40 The time dependency of strategy after Professor Malcolm McDonald Strategic plans must be future focused Design your budget for the future - NOT the past Projects are the mechanism whereby an organization brings about change towards the objective -- such projects MAY include information technology investments Strategic Plan Forecast Tactics Today + n Years Objective
  41. 41. Analysis and design for doable plans How to determine the right things? Analysis of Strategic Environment, Context, Requirements, Benefits, Value, etc 41 Strategic Gap Analysis Strategic Design Strategic Governance Framework Strategic Action Plan Strategic Project Management Strategic Plan Business Outcome Auditing, Monitoring, Performance Measurement and Incentives Continuous Strategic Improvement 1. 2. 3. 4. 5. 6. 7. 8.
  42. 42. 42 Analysis -- determine the right and wrong things Enhance / create right things All factors that impact significantly on the business The critical factors = the right factors = the strategic factors Prioritised and quantified to support decision making Ask the "right questions" in order to obtain the "right" answers 1. 2. 3. 4. Reduce / eliminate wrong things }Quantify Strategic SnapShots©
  43. 43. Recommended "gut feel" 43 Comprehensive strategic capability Structured analysis of strategic drivers Clearly defined and quantified strategic objectives (value) Structured analysis of strategic context (strategic map) Comprehensive plans Effective and reliable implementation that does NOT fail Culture of continuous strategic improvement I.T. projects are a natural outflow of the plans Commitment to, and plans for, comprehensive strategic capability Creating strategic context together with defining I.T. projects No structured strategic analysis, design and implementation capability I.T. projects must do the best they can to fit strategically 1. ) ) ) ) ) ) ) 2. ) 3. ) What follows is relevant to all of these scenarios Strategic Scenarios
  44. 44. 44 Different views of the mountain Impossible!! Easy!! Hard but we will make it! A few challenges but nothing insurmountable! x Objective What a deep gorge!
  45. 45. 45 Determining the critical components Everyone sees the problem and the solution differently Executive Production Operations Marketing Finance etc Strategic clarity provides focus Different perspectives remain valid and vital 1. ) ) ) ) ) ) 2. ) Impossible!! Easy!! Hard but we will make it! A few challenges but nothing insurmountable! x Objective What a deep gorge!
  46. 46. 46 Evaluation of requirements Gap Analysis -- Projects / Activities / Components What will be done? How well are we doing it already? Accountability Timeline 1. 2. 3. 4.
  47. 47. Executive management is often the most serious constraint -- ask the RIGHT questions -- what is REALLY required? 47 Gap Analysis -- Projects / Activities / Components Resources (costs and constraints) Risks Customer impact What value and how -- economics 5. 6. 7. 8. Forecast Projects and activities to close Today + n Years the gap MAY include I.T. Objective Plan and Solution = outcome of analysis and design process Evaluation of requirements
  48. 48. 48 Identify your core strategic drivers and then strengthen them
  49. 49. 49 Summing up Align your budget with the essence of why the organization exists and how it thrives -- strategy Plan for future strategic growth Design against failure in order to succeed Structured strategic analysis and design Structured strategic plans Structured strategic budgets 1. 2. 3. 4. 5. 6.
  50. 50. 50 Call to action What is your single most important insight from this presentation? What is the single most practical action that you can take tomorrow to apply I.T. more effectively? 1. 2. New insight that does not result in action within 48 hours is wasted
  51. 51. 51 Design budgets NOT to fail Psalm 136:5 "To Him who by wisdom made the heavens, for His mercy endures forever;"
  52. 52. 52 Questions? Acknowlegement and dedication Clients, associates and staff Father and mother Angus and Thelma Children Alexandra and Struan Fiona, Sandie, Ingrid, Teresa, Sandra, Helena, Julie and Maria To the glory of the Eternal Creator James@JamesARobertson.com -- 083-251-6644 Finding the missing pieces of your I.T. and strategy puzzles

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