The Nested process coordinates strategy, planning and execution. Market Segment Analysis and Product Definition are explicitly aligned. This is a plan for planning.

1. The Nested
Planning Cycle
Carpe Futurum

2. The Nested Planning Cycle
Strategic Long-Range Plan
Annual Plan
Rolling Monthly Update
Execution
Refined from Strategic
to Execution
“If you don’t know where
you’re going, any road will
get you there” – Lewis Carroll

3. The Nested Planning Cycle
Strategic Long-Range Plan
Annual Plan
Rolling Monthly Update
Execution
Structured Strategic Planning
supports
Annual Plan
supports
Rolling Updates
supports
Decisions &
Execution
Many tenets borrowed from
Ram Charan, Northwestern
University Graduate School of
Management (pre-Kellogg)

4. Rolling 6 MosRolling 6 MosRolling 6 Mos
Strategic
Long-
Range Plan
The Nested Planning Cycle
Year 5Year 4Year 3Year 2Year 1
Jan Jan
Annual
Plan
Rolling
Forecast
Rolling
Updates
Execution
by quarter yearly totals
by month

5. Rolling 6 MosRolling 6 MosRolling 6 Mos
Jan Jan
Annual
Plan
Rolling
Forecast
Rolling
Updates
Execution
by quarter yearly totals
by month
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
Strategic
Long-
Range Plan
Year 5Year 4Year 3Year 2Year 1
by quarter yearly totals

6. The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
• Structured
• Done Annually
• Multi-Year Horizon (5-7 Years)
• Market Analysis by Strategic Business
Segment (SBS)
• Internal Analysis by Strategic Capability
Segment (SCS)

7. The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
• Market Models
• Competitive Analysis
• Market Segment Attack/Defense Plan
• Capacity Plan
• Technology Direction
• Capital Requirements
• High-level Financials by SBS
• Data: Volumes, Pricing, Dates/Deadlines, Financing
Output:
This is not a Holiday from “Real” Work

8. The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
• Structured – Ideally, Professionally Facilitated
• Tangible Results
• SLRP Horizon Typically 5 ++ Years, Practical Considerations:
o Product Life Cycles
o Leadtime of Capacity Additions
• Done Annually – usually ~4-6 months before the Annual Plan

9. The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
The Firm
Strategic
Business Units
Strategic
Capability Units
~ Profit Centers
Market Focus
Cost Centers
Capacity Focus
Technology Focus
80% of the SLRP Effort 20% of the SLRP Effort

10. Strategic
Business Units
“The Market Segmentation – Product Definition Dance”
• This is a big, important part of the SLRP
• What Market Segment(s) are you Targeting?
• What is your Product? …your Complete Product?
• How is the Product Tailored to Command the Segment
and Defend the Segment from Competition?
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)

11. Strategic
Business Units
• Market Segment: a group of customers who share desires, needs,
and buying patterns
• Market Segments are numerous – too numerous
• The important (SLRP) process is to Pare to a handful of the most
important Market Segments
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)

12. Strategic
Business Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
Market Segmentation Analysis is an art with many, many Drivers --
some of the more common Drivers:
• Quality Needs
• Distribution Channels
• Service
• Price
• Geography
• Documentation Support
• Credit
• Customer Size
• Brand Image
• Consumer Age
• Sex of Consumer
• Ethnicity of Consumer
• Socio-Economics
• Training Required

13. Strategic
Business Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
What is your Product? …your Complete Product?
Engineering creates devices, or structures, or “things”
Marketing creates Complete Products:
The brewmaster creates the beer, but Marketing creates the
product…a six-pack, sold through supermarkets, delivered cold,
that connotes certain personality traits of the drinker

14. Strategic
Business Units
Some Complete
Product Attributes: • The Device (the “Thing”)
• Post-Sale Service
• Design Aids
• Warranty & Return Policy
• Documentation
• Delivery
• Training
• Software
• Spare Parts
• Financing
• Applications Engineering
• Upgrade-ability
• 3rd-Party Extensions
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)

15. Strategic
Business Units
The Primary SLRP SBS function is to Define or Re-Affirm the Market Segments
to pursue, and construct Complete Products to exploit these Segments
Market Segment
Complete Product
attribute
attribute...
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)

16. Strategic
Business Units
Then, the hard work of research, analysis, and data management, by Product-
Segment, ensues; Tangible Output is generated:
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
• TAM/SOM (Total Available Market / Share of Market)
• Competitive Analysis – Products, Strengths & Weaknesses, SOMs
• Sales by SLRP Time Period – Quantities and Dollars
• Product Life Cycle: Introduction, Penetration, End-of-Life
• Investments Estimated (New Product Attributes, especially)
• Competitive Entry Barriers Defined or Re-affirmed

17. Strategic
Business Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
Year 1
Q1 Q2 Q3 Q4 Year 2 Year 3 Year 4 Year 5
Product – Market Segment:
Unit Volume
Revenue
Investment
Product ROI
TAM
SOM

18. Strategic
Business Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
The Market Segmentation -- Product Definition process should
answer the question:
How will the product achieve a commanding and defensible position
in the Segment?
What Competitive Market Barriers exist
or can be constructed?

19. Strategic
Capability Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
1) With Input summed across the SBS’s, Capacity additions/retirements are
defined
2) Product Development and Manufacturing Technologies defined
• Capital Requirements
• Timetables
3) Rough-Cut Cost Guidance for the SBS’s generated; Margins Analyzed
4) Strategies and Tactics that supersede the individual SBS’s defined and analyzed
SCS’s

20. Strategic
Capability Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
1) With Input summed across the SBS’s, Capacity additions/retirements are
defined
o Data generated for the Site Selection Process
o Capacity shortfalls identified
o Prioritize Product Support using Strategic or Financial Criteria (margin
per constrained unit of resource) – Feedback to SBS’s
o Compile a Capital Plan

21. Strategic
Capability Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
2) Product Development and Manufacturing Technologies defined
o Automation
o New Product Design Technology (e.g., CAD Tools)
o Timetables
o Capital Plan Compiled

22. Strategic
Capability Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
3) Rough-Cut Cost Guidance for the SBS’s generated
o Validate SBS Product Pricing and Margins
o Use in/for Product, Capacity, Technology ROIs

23. Strategic
Capability Units
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
4) Strategies and Tactics that supersede the individual SBS’s defined and analyzed
• Corporate-level Strategies
• For example, an investment in a European Service Center that is used
by all SBS’s in supporting their European accounts
• New Product Attributes, as proposed by one or more of the SBS’s
need to be assessed; example: extending credit terms

24. The Firm
The Nested Planning Cycle
Strategic Long-Range Plan (SLRP)
• Ensure the Aggregate Total makes sense
• The CEO & Executive Staff bless-or-kill (or modify) SBS & SCS Strategies…
…Sanctioning
• High-level Financials generated…and…Value of the Firm
• Fodder for Capital/Financing Strategy
• SLRP Data Finalized (for the various planning exercises throughout the year)

25. Rolling 6 MosRolling 6 MosRolling 6 Mos
Strategic
Long-
Range
Plan
Year 5Year 4Year 3Year 2Year 1
Rolling
Forecast
Rolling
Updates
Execution
by quarter yearly totals
The Nested Planning Cycle
The Annual Plan
Jan Jan
Annual
Plan
by month

26. The Nested Planning Cycle
The Annual Plan
• Highly Structured
• Done Annually; usually 4-6 months after SLRP
• SLRP Year 1 “Drill-Down” Exercise
• ~ 15 Month Horizon (i.e., remaining months of
current year + 12 months of the Plan Year)

27. The Nested Planning Cycle
The Annual Plan
The Annual Plan’s Purposes and Output:
• Goal-setting
• Budget determination – Zero-Based Budgeting (ZBB)
• Master Schedule Determined; Constraints managed
• Materials Purchasing Plans Determined
• Project Staffing, Deliverables, Timetables Validated/Reset
• Detailed Forecast Financial Statements; Cash Planning
• Basis for Incentive Plans
• Detailed plans developed for SLRP SCS and SBS Investments

28. The Nested Planning Cycle
The Annual Plan
SLRP Year 1 ”Drill-Down” Exercise
Detailed Demand Forecast
• Unconstrained – if you don’t ask for it, you know you won’t get it
• Inputs from the Field Sales Force, rationalized by Marketing Mngt.
• Product quantities and pricing by month
Manufacturing Response/Commit – The Master Schedule
• Master Schedule determined; Constraints (Product Quantity
Shortfalls) resolved using Strategic and/or Financial criteria
• Costs and Margins Forecasted

29. The Nested Planning Cycle
The Annual Plan
Detailed Operating Budgets Determined
• Headcount
• Spending
• Project Deliverables and Timelines Validated/Updated
Zero-based Budgeting is an Annual Necessity

30. The Nested Planning Cycle
The Annual Plan
What’s a Zero-Based Budget (ZBB)?
Simply: No Baseline starting point; no blind % increases
All Budget Elements and Amounts are scrutinized and justified anew,
for example:
• Headcount (of course)
• Floor Space
• Office Equipment
• Travel
• Outside Services & Contracts
ZBB – “Every Dollar
has a Name”

31. The Nested Planning Cycle
The Annual Plan
ZBB + Driver-Based Budgeting (DBB) = Good Combination … DBB?
DBB…Identify the fundamentals that Drive Spending, such as:
• New Product Introductions drive Advertising Spending
• # of Manufacturing Job-Orders drives Production Control headcount
• Specific Machine Usage drives Spare Part Consumption

32. The Nested Planning Cycle
The Annual Plan
Annual Plan Project Management
• Resource Deployment by Project
• Determine/Update What’s Delivered and When
J F M A M J J A S O N D
Project A
Project B
Project C
Project D
Project E
Resource XYZ
1 2 2 3 3 2 2 1 1
1 1 2 2 3 3 3 2 1 1 1
4 2 2
“ZBB Line”
No Support
Support

33. Strategic
Long-
Range
Plan
Year 5Year 4Year 3Year 2Year 1
Jan Jan
Annual
Plan
Execution
by quarter yearly totals
by month
The Nested Planning Cycle
Rolling Monthly Updates
Rolling
Updates
Rolling 6 MosRolling 6 MosRolling 6 Mos
Rolling
Forecast

34. The Nested Planning Cycle
Rolling Monthly Updates
• Highly Structured
• Done Monthly
• Update to the Prior Month’s Update and the Annual Plan
• ~ 6 Month Horizon (Materials and Labor Leadtimes determine)
• Purposes and Output:
o Master Schedule; Constraints rationalized
o Budget updates – but, NO Zero-based Budgeting
o Project Staffing, Deliverables, Timetables Validated/Reset
o Detailed Forecast Financial Statements; Cash Planning

35. The Nested Planning Cycle
Rolling Monthly Updates
• Process and Results very similar to the Annual Plan
o Unconstrained Demand
o Manufacturing Response; Constraints Managed
o Detailed Budgets and Headcount Forecasts
o Materials Purchasing Plans Revisited
o Project Resource Deployment Reviewed/Updated
Rolling 6 MosRolling 6 MosRolling 6 MosRolling 6 Mos

36. The Nested Planning Cycle
Execution
Hire, Spend, Commit, Procure as per the Approved, Current Rolling
Forecast as Items roll within Leadtime
Compare Actuals vs the Rolling Forecast AND the Annual Plan
Incentive Programs Payout accordingly
Ready, Aim, Fire
Plan, Update, Execute

37. • Should Your Marketing Manager be Doing Your Cost Accounting?
• Combating “Whack-a-Mole” Business Management
• How Intel took on the Japanese … and Won!
• Do you view the World like an Accountant… or an Economist?
• Making a Profit Selling $1 Bills for 99¢
• The Nested Planning Cycle
• ERP – Dare to be Mediocre!
• 3/5’s of a Mile in 10 Seconds
• Does your Company know its Costs? Take the Quick Test
• Managerial Finance Series:
o Integrated Cost Management
o The Cost of Variability
o Activity-based Costing
o Managerial Modeling of non-Manufacturing Areas
o Cost-based Pricing – A Bad Idea
o Internal Profit Centers – Another Bad Idea
o Job-Order vs Process Costing
o Plant-Specific vs Like-Plant Costing
o Fully Absorbed vs Direct vs Incremental Costing
o Complete Unit Integrity (CUI)
o Is Direct Labor Really Direct?
o What’s a Joint Cost?
o The Cost of Capacity
o Inventory Valuation Methods
o Zero-based Budgeting & Resource Deployment
o Yield Loss or Scrap?
Jeff Johnson
jeffdjohnson@Comcast.net
Most of these presentations were
originally created and delivered as
part of Intel Corporation’s internal
training and employee development
program, known as “Intel University.”
The author updated them for more
general use in 2016.
from Jeff Johnson