By Robert W. Bradford, President/CEO

Strategic Planning Expert Robert Bradford

In strategy, you will inevitably find resistance to your plans.  This resistance is sometimes forceful, and other times something you can overcome with resources and effort.  An interesting question is how to deal with resistance.  Should you always push hard to overcome resistance to your strategic objectives (probably not) – or should you allow resistance to stop you every time the going gets hard (also probably not)? 

There are several key questions to ask yourself about the resistance you encounter to your strategic objectives.  First, what is the nature of the resistance?  Are you finding the objective difficult because of competition, the learning required, or the resources required?  Second, is the resistance something that is even possible to overcome?  Third – and very importantly – how important is the objective to your strategic success?  

Very often, the thing that separates great companies from OK companies is the willingness to do difficult things.  A great company will often (but not always) undertake to overcome obstacles that stand between it and true strategic differentiation.  OK companies allow themselves to be stopped by adversity. 

This does not mean that you must always persevere to be great.  Another hallmark of great companies is the ability to give up where it is appropriate.  Not too soon – but also not delayed where the end result will be a large consumption of resources with little or no forward strategic motion. 

What kind of organization is yours?  Do you show perseverance or are you stoppable?  And when you persevere, how do you assure that you are not spinning your wheels, attempting to overcome difficult resistance that will lead to little gain? 

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

Strategic Planning Expert

By Denise Harrison, Vice President

Execution of strategy: we know it is important, but why doesn’t it happen? Based on my experience working with over 100 companies on strategy development there are four key areas that lead to execution success.

1. Focus on the few:
   1. Select a few – 8-10 key strategic objectives to accomplish in the next 12 – 18 months. No more than 10! Don’t fall into the trap of “We have to do this!” and end up with 12 to 15. It is better to work on a few rather than work on everything and get nothing completed. Four to six is even better, especially if the objectives are large.
   2. Once you have selected the key objectives, then develop action plans that are detailed roadmaps of how you will accomplish these objectives:
      1. What are the action steps (granular detail)?
      2. Who is involved with/responsible for each step?
      3. How much time will each step take?
      4. How much money will each step cost?
2. Balance your resources:
   1. Now you know the amount of time and money for each objective, do you have enough resources? Do you have the right resources?
      1. Often the required financial resources are clarified in the budgeting process
      2. The human resource aspect is often lightly considered (if at all) and this is where many implementation plans go off-track.
         1. Understand that your people have day-to-day activities that help the business run in addition to the projects that will position the company for future growth; you have to balance these requirements so that both are accomplished.
         2. If you find that you do not have the resources to accomplish your action plans, evaluate how you can
            1. Delegate (both routine as well as project activities)
            2. Eliminate (routine and/or project)
            3. Reduce (routine and/or project)
            4. Postpone (project only – you can’t postpone routine activities; they just don’t happen)
         3. The operative word here is balance!
3. Monitor your progress:
   1. Monthly have your action plan team leaders report on their progress to the strategic planning team
      1. Work with the team to relieve bottlenecks if projects are behind
      2. The strategic planning team should be able to help reduce bottlenecks – use this meeting as a solution-finding meeting rather than a way to assess blame. The team should be working together to move things forward.
   2. If new projects come up, then evaluate each project in the context of what has already been selected.
      1. If the new project is more important than one of the current key objectives, then add it, but be sure to take one away.
      2. Do not pile objectives on top of one another – sometimes we assume that we have hatched new resources during the year.
      3. Do not evaluate new projects in isolation – evaluate them in the context of the projects that are already on your plate. If the current projects need to stay on the list, save the new one for next year’s strategic planning.
4. Communicate early and often
   1. Communicate the strategy and key objectives to all employees
      1. Make sure that communication is clear and concise
      2. Make sure the communication is two-way (see article: Lessons Learned in Aligning an Organization -Two Way Communication is Key)
         1. Give employees a way to react
         2. Have them prepare what their departments are going to do in support of the strategy and key objects – make sure the communication is two-way.
   2. Communicate frequently and update when changes occur.
   3. If everyone in the boat has his/her oar in the water and everyone is rowing in the same direction as the company, it will move forward quickly – outpacing the competition.

Efficient strategic execution is paramount to outperforming your competition during this recovery phase of the economy.  If you accomplish these four steps you should achieve over 90% of your objectives within the timeframe selected.

Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc.  She can be reached at harrison@cssp.com

By Robert W. Bradford, President/CEO

By Robert W. Bradford, President/CEO

By M. Dana Baldwin, Senior Consultant

Strategic Planning Expert

Pricing can be very tricky in times like the ones we are going through currently.  Too high a price and you can lose considerable volume, customer loyalty and market share.  Too low a price could lead to diminished profits, commoditization of the brand or product/service and lower long term prospects.  The key is to strategically determine the pricing band, which is best for your product/service in light of current conditions.

To do this, you need to determine where your products and services are positioned in your market places.  Each one of your offerings needs to be analyzed in terms of where it is located on a spectrum from pure specialty to pure commodity. 

We define a pure specialty product as one, which is priced to take advantage of the uniqueness of the product or service.  Key characteristics of a specialty product or service include:

• Unique “product” or “packaging” – “packaging” equals services wrapped around the product/service offered
• Market perceives clear superiority of the product or service provided
• Sales result from having the right product at the right price
• Strong margins/profits on each individual sale
• Value-based pricing – taking advantage of what the market and competition will allow to maximize profitability
• Exceed customer requirements – providing the extra services which add perceived value
• High level of customer support – to keep the perception of value valid

By comparison, a commodity product or service has very different characteristics.  They include:

• Little differentiation between products/services offered by all competitors
• Substitutability – One company’s offering is little different from another
• Sales result from low price
• Weak margins/profits due to tight margins
• Competitive pricing in order to gain market share
• Meet customer requirements – no added services can be afforded
• Order taking – because there is no budget for added services

Almost all products and services have some of each characteristic – commodity and specialty.  The challenge is to determine the behavior of the specific product or service in each market in which it competes.  You need to determine where each offering is located on the spectrum between pure commodity and pure specialty.  You also need to determine what the overall characteristics of each market segment are, to see where you are competing.  For example, are you providing a specialty product in a mostly commodity market?  Entirely feasible to do, but you must know this or your pricing could be hurting your profitability by being too low. 

An example of this is windshield washer fluid (appropriate for this time of year).  This is basically a commodity market, with the majority of sales of the blue fluid centered in a narrow band within a few cents of each other.  There is a specialty part of this market, however.  Some people buy the green version, which contains more alcohol and more soap, allowing better functioning at lower temperatures and with the ability to clean the windshield better.  The price of the green fluid is considerably higher, due to the higher performance and specifications.  This green fluid is a specialty item in a mostly commodity market.  If the vendors of the green fluid were to price their product at or near the price of the blue fluid, they would be leaving money on the table.

By properly understanding the positioning of their product, the makers of the green windshield washer fluid can keep their profitability higher and keep their perceived value high to command the higher price. 

Some additional thoughts: 

Pricing policy is one of the most strategic issues that a company can deal with-both for the short term and the long term.  It is tied to market strategy (expand, maintain etc.)  e.g., do we need to buy our way into a market?  Do we need to do some pre-emptive price-cutting to make a market a competitor is eyeing less attractive? 

In custom manufacturing, cost-plus std. margins can be the kiss of death.  You either over-price and lose the business or leave money on the table and get the business. 

Competitive intelligence needs to feed into pricing as well. 

You may want to take a look at Tom Ambler’s 2-part article “Mining Your Unexploited Value”.  It offers a process to address the pricing issue.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. and can be reached at baldwin@cssp.com.

© Copyright 2010 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution

By Denise Harrison

Strategic Planning Expert

Boeing’s 787 Dreamliner has not hit its development milestones, causing Boeing to take a $2.5 billion charge against earnings.  What happened?  Key to Boeing’s past success has been its ability to achieve its “big hairy audacious goals or BHAGs” (from Built to Last by Jim Collins and Jerry Porras).  In the 1950s Boeing bet 25% of its net worth on developing the 707 jetliner competing directly with McDonald Douglas the premier manufacturer of commercial aircraft at the time.  The Dreamliner, the world’s most high tech passenger jet, is another big bet – but what went wrong with its strategy?

The 787 Dreamliner is not only a bet on a large new aircraft, but also a bet on the composite materials that are being used in the design and manufacture of this new jetliner.  In order to keep development costs low and please Wall St., Boeing decided to outsource not only the manufacturing of components but also the design.  This way, its contractors would be taking on some of the financial risk of the project.  While this may have spread the financial risk, it increased the execution risk. 

• Many of the contractors were used to building parts and systems to Boeing’s design specifications. But now responsible for the design, they found they did not have the quality assurance systems in place to ensure the quality of the design and to ensure that it would work with the other systems that would eventually become part of the jetliner.
• By taking on more financial risk many of the suppliers are facing financial challenges during this recent global economic downturn – some may even have to file for bankruptcy protection.
• In addition, the contractors did not have any experience getting FAA approvals: this requirement slowed the process down considerably.
• The number of sub-contractors increased the complexity of the project as parts and systems were being designed and manufactured by people speaking 28 different languages.

The coordination tasks were and still are daunting – leading to this $2.5 billion charge.  What should Boeing have done?  Before a company embarks on a large new project it should assess what unexpected outcomes might occur.  For example: 

• Does it make sense to spread the financial risk among so many companies – does this increase the execution risk? Should we go back to our model in the 1950s and take more of the financial risk ourselves and take the hit on Wall St.?
• How are we going to manage all of these contractors in all of these countries with the different languages and time zones?
• What issues will arise from outsourcing design? What skills do we have in-house that may not be present in our contractors? How can we help them in this area?

If Boeing had taken a step back and thoroughly assessed the risks they could have taken a number of steps: 

• They could have kept more of the design in-house.
• They could have provided better support for design in terms of quality assurance and FAA approval.
• They could have consolidated the number of companies to which they outsourced this program.
• They could have developed more advanced communication tools earlier. For example technology allows you to video conference and share designs so that there is clarity around the issues being discussed – simple emails often do not communicate the full complexity of a specific issue.

Lessons Learned

As your company ramps up a significant new development effort, take the time to assess the risks.  Take a look at threats – things that can impact you from the outside.  Look for ways you can prevent the threats or reduce exposure.  What are some early warning signs?  Set up contingency plans and hedge your risk if you can.  These are the traditional risk assessment and mitigation steps.  However, often these steps are not enough.

In addition – you must also look for ways you could avoid shooting yourself in the foot – as Boeing ended up doing. Boeing’s problems did not just come from the outside; they were a direct result of actions taken by Boeing.  Talk about the good ideas that you have, but also about the possible unexpected outcomes.  For example, it was a good idea to mitigate the financial risk, but the unexpected outcome was to increase the execution risk.  Identifying this upfront would have allowed Boeing to mitigate some of the execution risk or decide to keep more of the financial risk.

Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc.  She can be reached at harrison@cssp.com.

by M. Dana Baldwin, Senior Consultant

Strategic Planning Expert

How many tales are told about people who are very good at a particular job within a company, who are promoted beyond that position and then fail?  There must be many examples of this phenomenon that are told time and time again.  There is even a descriptor: The Peter Principle, for people who are good at one job and fail miserably at the next higher level.

As a part of Strategic Planning, the job of each senior manager should be to determine one or more potential successors for his/her position.  My older son worked in a company in which no one could be promoted until he/she had groomed an acceptable successor to the point where the successor could take over the job of the superior and do it effectively.  How many companies require this?  Is this a philosophy your company should consider adopting?  Inevitably, there are pros and cons to each different approach.

Why do people fail after being promoted?  After all, common sense tells us that if someone is capable in one position, they could have the attributes necessary to succeed at the next step in the progression.  Unfortunately, there appears to be the possibility of little correlation between the actual skills and knowledge required in the new position and those realistically present in the successful person in the lower slot.  How often does your company inventory the capabilities required for each position and then try to match the best possible candidates based on that assessment?  A formalized approach to succession planning/promotions should be an important part of the management of your staff.

What can one do about this?  The process must start at the highest levels of the company – in the executive suite, and should cascade down through the company to whatever level is deemed appropriate by the company.  Sometimes this will encompass only senior management and one or two levels below.  In other circumstances, depending on the nature of the business, this approach could delve deep into the company, extending even to people with highly technical skills and knowledge.  Your company should decide how deep to go during the process of building your strategic plan, and should review progress on a regular and repetitive basis.

How does a company go about setting up an effective program to help improve the likelihood that when a person is promoted, the individual will be successful?  After the determination is made that your company is going to change the way succession planning is conducted, the company needs to start at the basics. 

First action item is to conduct an assessment of the skills and knowledge actually required by each of the key positions.  These assessments should be in depth, so that there is good understanding of the attributes the company is seeking when a candidate is to be considered for promotion.  General agreement on the list of attributes should be reached by the appropriate people in the organization.

Second action item is to assess the strengths and weaknesses of each candidate for promotion.  Your goal here is to understand what each person knows and where that person may need some mentoring, added experience or education, in order to be considered qualified for the new position.  This often is included in the career path development for each individual. 

Once the standards are set, and the individual has met them, he/she is ready for promotion, with the expectation that there will be a better fit for the new job’s requirements, and that the individual will have a much better chance of succeeding, instead of being promoted beyond their capabilities.  This is one instance where everyone wins, because the process tries to assure that people are ready to be moved up, with some assurance that they will succeed.

As a footnote to this article, please visit our website, www.cssp.com, and select our Archives section.  See Tom Ambler’s article, “Building and Sustaining Intellectual Assets,” which provides a process for stewardship of Skills, Processes and Knowledge.  These are often the fundamental building blocks for determining what the requirements for each specific job are, and provide the basis for assessing the qualifications of each candidate for higher positions.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. and can be reached at baldwin@cssp.com.

© Copyright 2009 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution

By Steve Rutan

The recovery will come.  Regardless of whatever pain and turmoil you may have been through during the last year, you have managed to survive.  It’s time to begin thinking about what you need to do in order to be ready for better times ahead.  While you cannot be sure of the timing, you can prudently prepare yourself for the upswing.  Here are three important actions that you should be taking right now:

1.      Sustain your Marketing Message

2.      Align your Supply Chain

3.      Assess your Human Capital

Consider this recovery planning effort to be the opposite of the contingency planning you do when you are bracing for a downturn.  The potential for increased sales, profits and market share will be realized by those companies that are ready when the party starts.

Sustain Your Marketing Message

It is wise to maintain your marketing efforts during a downturn.  Depending on how hard hit you have been in the last several months, you may have made drastic reductions in your marketing efforts and expenditures.  Regardless of the present condition of your marketing program, it is time now to polish your message and begin to get your customers excited about your products and services again.  Use the resources at your disposal and the weeks or months that remain before the recovery gains serious momentum to renew your customers’ inclination to buy from you. 

Align Your Supply Chain

As they say in business: Timing is everything.  Constantly monitor your prospects for improving sales and strive to completely understand the impact that your supply lead times will have on your ability to satisfy demand as it picks up speed.  You want business to improve; your suppliers are also eager to see you increase your orders.  Spend extra time in contact with your vendors and make sure you are prepared to match your lead times with the pace of increased sales.  The idea here is to make sure you do not drop a single order due to a shortage on the supply side of your business equation.  When the recovery picks up steam, expect that the entire supply chain will need to re-stock inventories to be responsive to rising demand.  Your readiness in this area not only puts you in a position to recover your lost sales, it allows you to gain market share if your competition is not taking similar steps

Assess Your Human Capital

You may still be reeling from the anguish of having released valued long-term employees.  As business picks up, you will be more likely to be in hiring mode again.  With the same energy and analytical skills that you dedicate to examining your physical supply lines and support services, it is time to assess your human capital needs and tune up your recruiting and hiring processes.  There is plenty of talent available in the market right now.  Be ready to support all aspects of your business as the economy and your customers’ activity levels provide you with the confidence to re-load.

If short-term cash flow is still a compelling tactical concern, plan your near-term expenditures around variable costs and minimize your financial risk.  Spend money on activities that are connected directly to near-term sales and profits. 

·        Add marketing money where it is most likely to recapture sales immediately. 

·        Begin to replenish your supplies inventory in those areas that are likely to be translated into sales, cash flow and profits as soon as possible. 

·        Add people to operations processes that will directly contribute to your bottom line. 

By following these three guidelines, you will see the short-term tactical benefits to your business health that will enable you to once again pursue your long-term strategic aspirations.

Steve Rutan is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached at rutan@cssp.com.

by: M Dana Baldwin, Senior Consultant, CSSP, Inc.

Strategic Planning Expert

In these uncertain times, it is very important to do things right, right?  Absolutely!  But doing things right is only good if you are doing the right things! What are some of the right things to do?

Make your company invaluable to your key customers.  Your company should be focusing on serving your core customers to the best of your ability, so they will continue to buy from you, even if those purchases are at a much lower level during these trying times.  But, are you really doing the right things to build your relationships with those key customers and clients that will keep them as customers when the economy finally does rebound and sales volumes really do increase.

One thing you should consider doing is working to become deeply integrated into your key customers’ operations.  For example, if you supply components to a manufacturing company, are you working with their purchasing group to optimize value for your customer?  If your customer does a lot of research and development for their product offerings, are you involved as a resource in the engineering and development areas of the company?

The purpose of these types of efforts is to become more important and more valuable to each customer.  By becoming better integrated into the fabric of those customers, when a customer has a need you can meet, your company will be the first one they think to ask for assistance with their problems.

Get rid of those things that are no longer necessary to the mission of your company.   Every company builds up things which are not necessary to the effectiveness of the core business during low volume times.  Those things that are outside the core business arena, or are no longer used and likely won’t be needed in the future, should be trimmed if doing so will help lower costs, provide more liquid assets (cash) in place of the unused items, or free up space which could be better utilized, either now or when business picks up in the future.

Look to the future.  Work hard at trying to predict where your markets will be headed once the economy starts to recover.  Look for niches where your expertise and your customers’ needs match, and brainstorm solutions to their problems. 

One approach is to develop new applications for existing products or services.  One company which sold lasers for measurement systems determined that there was a limited but potentially lucrative niche in applying laser measuring systems to parts of wind generator units.  While their original business segments are languishing, this new application is doing quite well.  The potential volume is modest, but for a smaller company, it is a lifeline.

Another stratagem is to work hard to anticipate how your company can better be a part of your customers’ futures.  Work to help them survive the slow times, and innovate so that you will be more valuable in the future.  Building these relationships, especially if you can do it while others are husbanding their resources, will very likely enhance your competitive position not only now, but when the economy improves. It should result in your expanded relationships becoming that much better, and closer, for both.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. and can be reached at baldwin@cssp.com.

by Denise A. Harrison, Vice President

This week we asked our readers to fill out a survey concerning current business conditions and their approach to these conditions.  A brief summary of the results: 

• 40% of survey participants expect revenue to decrease by 20% or more
• 20% expect revenue to increase by 20%
• 74% of survey participants cut administrative expenses
• 60% have had staff reductions
• 60% are streamlining their processes.
Click here to see the detailed results.