Posts Tagged ‘simplified strategic planning’

The Strategic Value of Values – Part 1

Friday, September 16th, 2016

By Thomas E. Ambler, Senior Consultant

Note:  This article is part of a series taken from Thomas E. Ambler’s article The Strategic Value of Values originally published in Compass Points in April 2002.  In Part One, we will introduce the series.

Strategic Planning Expert

Strategic Planning Expert

Daily our headlines shout of blatant disregard both for the law and for right vs. wrong by obscure and prominent businesses alike. We see headlines like “If you violate the law, you will pay for it”, quoting Harvey Pitt of the SEC in response to questions related to the Enron debacle with its possible auditor complicity, witting or unwitting. Or headlines like “Tyson Foods Executives Indicted” for smuggling illegal aliens, aiding them in obtaining false documents and paying INS undercover agents “recruiting expenses”. Deplorable? Yes. Shocking? Maybe. New? No. The products of human greed and moral expediency have been with us ever since Adam and Eve decided they wanted to be God.

Unfortunately, seldom do we see headlines that highlight those companies and organizations that consistently live out positive values. Our guts tell us that these businesses must benefit from their positive, Values-centered approach. But how much? Do the benefits rise above simply having well-rested employees with easy consciences? Does a Values-centered approach produce a payoff that makes these companies significantly more successful at achieving their strategic goals over the long run than they otherwise would be?

Values – A Definition

Let’s define the term “Values”. Consider first what Values are not. They are not operating or cultural practices, processes or policies. These are subject to continual revision in response to environmental changes. These may be values-based, but are not Values themselves. Instead, (borrowing from the definition of “Core Values” in Built to Last), Values are the organization’s essential and enduring tenets – a small set of general guiding principles; not to be compromised for short-term financial gain or expediency. Values are the “proven, enduring guidelines for human conduct” called “Principles” by Covey. Values include both the Commitment Statement portion of the Mission Statement and Goals in the Simplified Strategic Planning (SSP) process. For example, statements like “establishing Trust and Respect as the basis for relationships with all stakeholders”; “the Company exists to alleviate pain and eliminate disease” (Johnson & Johnson Credo); the biblical Golden Rule and “respecting and encouraging each individual’s ability and creativity” (Sony); would all qualify as Values.

The term “Values-centered” applies to an organization that only makes decisions which satisfy its Values. A Values-centered organization is more likely to take a profit hit in order to better satisfy other Values.

In a future post we will discuss Values’ Value.

For information on how to take your strategic planning to the next level, please listen to our webinar: Why Isn’t My Strategic Planning Working?

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Tom Ambler is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at ambler@cssp.com

Jump Starting Good Opportunity Ideas

Friday, September 2nd, 2016

Note: This article was originally printed in Compass Points November 2006

By Thomas E. Ambler, Senior Consultant

No one knows better than you that your markets are not what they used to be. They are undergoing an accelerating shift on what and where customers place value and who in the supply chain makes the best profits. Your ”sweet spot” isn’t nearly as sweet as it was not all that long ago. What you considered ”good business” yesterday has lost much of its glitter. As a result, you seek a dynamically changing portfolio of new market opportunities that will assure that you transform today’s Core Business into the best possible Core Business for tomorrow.

You want to pursue these Market Opportunities to the point where you can make a wise go/no go decision. The continual search for new Market Opportunities that are ”good business” consists of two distinct phases as diagrammed in Figure 1 below—the Opportunity Idea Generation Phase and the Opportunity Development Phase.

Both Phases require Opportunity Screening.  Business literature related to innovation offers a number of Opportunity Screening devices, but none are better than the general-purpose Market Opportunity Screen taken from our Simplified Strategic Planning process1. Based on sound new product/market launch research by MSU Professor Frank Bacon, it can be used as the screen for go/no go decisions at all stages in the development of an opportunity.

Once an opportunity begins to take structure in Phase 2, we know pretty well how to deal with it. The bigger challenge lies in Phase 1. How do we generate ideas for ”good business” in the first place?

Generation of ”good” opportunity ideas requires instituting a systematic, common sense process that ferrets out possibilities, a culture that fosters a willingness to fail, a recruiting method that seeks curious, intelligent, open-minded associates and a work ethic that just won’t stop.

Fundamentally, a ”good” opportunity is one that (a) fits with who you want to become as a company, (b) involves an attractive market and (c) takes advantage of a competitive opening.

Figure 2 below, the OPPORTUNITY IDEA GENERATION CHECKLIST, is a very useful checklist of mind joggers and idea starters for Market Opportunities. It incorporates the three ”good” opportunity criteria and is derived primarily from the Market Opportunity Screening Worksheet used in the Simplified Strategic Planning Process.

What other idea starters have you found useful? Share them on the author’s blog site, http://strategy–thehighroad.blogspot.com or email them to ambler@cssp.com.

Jump-start your opportunity brainstorming sessions. Try out some of these idea starters.  If you want even more idea starters, take a look at the references below.  May you generate lots of Good Ideas that lead to Great Execution!

References
1. Robert W. Bradford and J. Peter Duncan with Brian Tarcy, Simplified Strategic Planning: A No-Nonsense Guide For Busy People Who Want Results Fast, (Worcester, MA: Chandler House Press, 2000)

2. T. E. Ambler, ”The Pursuit of Good Business,” Compass Points (October 2003)(available from the Article Archives of www.strategyletter.com)

For information on how to take your strategic planning to the next level, please listen to our webinar: Why Isn’t My Strategic Planning Working?

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Tom Ambler is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at ambler@cssp.com

Winning Companies Focus on Winning Customers

Friday, June 13th, 2014

By Denise Harrison, Executive Vice President & COO

Strategic Planning Expert

Strategic Planning Expert

Reprinted from Course and Direction March 2007

Is strategic planning dead? Many so-called experts criticize the time spent on evaluating the core businesses and current competition as myopic. They point out that companies often miss emerging markets (mainframe to mini-computer to PC) or are blind-sided by new competition (Wal-Mart entering the retail grocery market). The Simplified Strategic Planning process covers both the evaluation of existing customers and competition and the assessment of future customers and competition. First, you need to know what is going on in the markets your currently serve, not only current and future needs and preferences of customers, but also competition. Next, you must also look at market shifts and make sure your company is positioned to take advantages of changing market conditions.

Industry Scenario/Winner’s Profile

In order to capture possible industry transformations the Simplified Strategic Planning process asks your team to generate a scenario of the industry looking at the broad planning horizon, both market-wise and time-wise. For example, if you were selling storage devices to the mainframe computer industry you would look at the whole computer industry for your industry scenario and at a point in time beyond the period for which you are planning. What are possible industry shifts?

  • Mainframe to mini computer to PC
  • Pagers to cell phones
  • Film to digital imaging

In addition, your team should ask: Who will our future customers be? Who will our future competitors be? Once this scenario is developed, then the team is asked to construct the winner’s profile, the key characteristics of the winning company given the industry scenario. Future importance and current performance is assessed for each characteristic. Gaps are identified and plans are developed so that the team is working on the items most critical to position your company to be the future winner.

Winning Customer Profile

What about customers? Can you identify the profile for winning customers using the same industry scenario? Yes! Simply take the industry scenario and identify the key future attributes for the winning customer. Then rate your customers and prospects against the winning customer profile. How does your customer base stack up?

Recently several companies employed this approach to focus their marketing and sales efforts. The results were outstanding:

  • Customer lists shrank: one list went from 200 customers to 30, with revenue and profit increasing
  • The targeted customers grew faster than the industry average, taking their suppliers along with them
  • Accounts receivable problems diminished — in one case to almost zero
  • Competitors often gained accounts, but gained the companies who were not positioned for changing industry conditions and soon developed financial issues. Accounts receivable and bad debts soared.

In strategic planning your company must position itself to compete effectively in changing market conditions. Developing an industry scenario looking out beyond the current planning scenario will enable your team to anticipate changing industry dynamics, new customers, and new competitors. In addition, this future vision helps your team develop the profile for the winning customer. Use these profiles to guide your priorities for future development and you will find your company on the path to future prosperity.

If you are interested in learning additional ways to invigorate your strategic planning process, please read a complimentary copy of our book: Strategy Tune-up.

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

© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Ready, Aim, Fire?

Friday, June 6th, 2014

By Robert W. Bradford, President & CEO

Strategic Planning Expert Robert W. Bradford

Strategic Planning Expert
Robert W. Bradford

In over 1,600 strategic planning meetings, I have noticed that people have a tendency to approach their planning process from many different angles.  One of the most interesting sets of angles revolves around the very common idea that we can hit our targets more accurately using the sequence “Ready, aim, fire”.   This sequence originated with the drills for musket-armed infantry in the 18th century, and the basic sequence makes perfect sense – that is, we should ready before we aim and aim before we fire.  There are other approaches that managers adopt, and some make more – or less – sense, depending upon the dynamics of the situation.  These approaches can be summarized using a few, common, versions of this sequence.

Ready, aim, aim, aim, aim…

This sequence is unfortunately all too common.  People who are likely to expend huge amounts of time and money on their planning often fall into this category, as do people who never really feel ready for their next big move.  One of the common causes of this poor sequence is the idea that a plan must be perfect in order to work.  Obviously, there is no such thing as a perfect plan, so the sequence itself is a trap brought on by a sense of perfectionism.  The best counter to this sequence is to look for action in the short term supporting the strategy – if it doesn’t exist, it’s very likely someone is being too critical, and that criticism is going to hold the organization back.

Ready, fire, fire, fire…

The “machine gun” approach has some advantages.  The biggest advantage is that it is very action-oriented, and may, with luck, lead to an effective strategy.  The disadvantage is that the “fire” part of the sequence may use up resources to no effect without adequate measurement of results and reflection.

Ready, fire, aim.

While it sounds wrong, this approach actually matches the tactics of naval gunners for most of the past 200 years.  The idea behind it is that one cannot accurately incorporate all variables into one’s aim, and so taking a shot to see where the shell hits is the simplest and best way to hit the target.  Historically, this approach usually led to one shot that went too far, one that fell short, and the third shot hitting dead on – at which point the commander would order “fire for effect”.  In a rapidly changing and dynamic environment, this sequence can work better, and faster, than “ready, aim, fire”.  The key drawback is that you will often waste ammunition in the first two “ranging” shots.  The key advantage is that the feedback of watching whether you hit or not is going to give you better information on your targeting than any amount of analysis.

Ready, aim, fire

If you have a single shot available to you, this approach – the classic – makes the most sense.  Its application in the historical setting was in conditions where re-loading would leave you vulnerable to an enemy melee attack (such as a bayonet charge), and it makes sense in business situations where you will just get one shot.  In strategy, it is better to avoid the “one-shot” situation if you can, but that’s not always possible, so this sequence is the one you should use if you find yourself forced into this kind of “do or die” position.

Which approach do you normally see in your business?  Is it appropriate?  A good evaluation of this seldom-examined cultural phenomenon is just one element of our Simplified Strategic Planning leadership.  If you’d like to discuss how these concepts apply in your business, give us a call or attend one of our Simplified Strategic Planning  workshops.

Are you frustrated with your strategic planning efforts?  If so, please listen to our  webinar:  Why My Strategic Planning Isn’t Working by clicking here.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.
© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Why Stretch Goals Make Bad Strategic Objectives

Friday, April 18th, 2014
Strategic Planning Expert Robert Bradford

Strategic Planning Expert Robert Bradford

By Robert W. Bradford, President & CEO

This is my fifth post on bad strategic objectives.  In my first post, I discussed a test to tell whether an objective you set for your organization is truly strategic.  By now, I’ve also highlighted four common types of non-strategic objectives, the incremental objective , the accounting objective, the lead brick objective and the world peace objective.  Today, we’ll take a look at one more very common type – the stretch objective.

We hear all kinds of people extolling the virtues of “stretch objectives” – people who tell us to “shoot for the moon, because even if you miss you’ll be among the stars”.  In some cases, this advice can be truly useful.  In most strategic planning situations, instead of ending up “among the stars”, you’re more likely to end up lost in space without any air.

Why is the stretch objective a problem in strategic planning?  First, in strategic planning, we are explicitly creating a plan of what we will do in the future.  The credibility of the plan itself is vital – and stretch objectives encourage us to depart the sensible world of the possible for the la-la land of the unlikely.  Second, good strategy requires that we carefully match our intentions with our resources – and the stretch objective inclination pushes us to ignore the realism required for good resource planning.  Finally, stretch objectives create a feeling that your planning and execution have failed even in cases where you have achieved quite a bit.

This is not to say that you shouldn’t consider audacious objectives – but rather that there is a place for audacity, but that objective-setting is not that place.  Remember, your strategic objectives are the crucial link between your strategy and execution.  One of the key transitions we need to make when shifting from strategy to execution is the transition from thinking of possibilities to thinking of realities.  A good, audacious objective will connect possibilities with reality, and force your thinking into an action plan that delivers a substantial, but realistic result.  By way of contrast, many stretch objectives will cause people responsible for execution to throw up their hands in despair and not even consider execution.

If you face the temptation – or the pressure – to include stretch objectives in your strategic planning, how do you handle it?  A well-thought out, disciplined strategic planning process can be a vital tool in assuring your objectives are both strategic and realistic.

If setting good objectives is hampering your execution of your strategic plan, you might also want to consider re-thinking your strategic planning process.  A great starting point to this would be to attend one of our popular Simplified Strategic Planning seminars.  Click here for more information.

To improve the execution of your strategic plan, download an archived version of the webinar Strategy Execution: Path to Profitablity.  Click here.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.
© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Are your Objectives Really Worth Pursuing? Or are they just “Lead Bricks?”

Friday, March 7th, 2014

By Robert W. Bradford, President and CEO

Strategic Planning Expert Robert Bradford

Strategic Planning Expert Robert Bradford

In my first post on strategic objectives, I discussed a simple test to tell whether an objective you set for your organization is truly strategic.  I’ve also highlighted two common types of non-strategic objectives, the incremental objective and the accounting objective.  Today, I’ll cover another common non-strategic objective – the lead brick objective.

For some managers, one of the uncomfortable things about the simplified strategic planning process is that it requires accountability for the completion – or non-completion – of objectives that move your organization in the direction of your strategy.   This discomfort is healthy – it’s hard to get anywhere without feeling uncomfortable about your current position – but it is unfortunately easy to avoid by devising certain types of objectives.  One of the most common is an objective that simply reflects what would happen anyway in the normal course of your business.  For example, if you have good reason to expect a specific market segment would grow by 10% this coming year, you’d feel very comfortable committing to an objective to grow that segment by 5%.  Why wouldn’t you – it will be done about as easily as falling off a log!  Unfortunately, for strategic planning purposes, this type of objective is not just a waste of time – it will preclude you from actively pursuing a more vigorous objective that would necessarily require attention and resources.  This is certainly true if you limit the number of objectives you manage – and we strongly recommend you limit yourself to a maximum of 10 (or less!).

How can you manage around this tendency?  First, you want to test your objectives with two questions:

  1.  Are we likely to achieve this objective without an action plan?
  2. Will the active management of the action plan make a difference in our results?

If the answer to the first question is “yes”, there is no need for an action plan to achieve the objective, so don’t waste a precious action plan on it.  If the answer to the second question is “no”, then the action plan is useless, and should also be avoided.  Strategic action plans should be strictly limited to objectives that require top level co-ordination of resources – both people and money.  They should also be limited to objectives that will change the direction of your enterprise or propel it more successfully along the chosen direction.

Have you experienced the frustration of “lead brick” or other useless objectives?  Consider attending our popular seminar “Simplified Strategic Planning” and come home with a treasure trove of ideas to improve the results you get from strategic planning in your organization.  Register at www.cssp.com today!

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.
© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Market Segmentation – Starting with the Basics

Friday, January 24th, 2014

By M. Dana Baldwin

Strategic Planning Expert

Strategic Planning Expert

The basics of Strategic Planning can be misunderstood by those who need to determine what they are and how they apply to the overall development of your strategic plans. On one hand, some teams will overlook the importance of carefully defining the market segments so they can obtain the best analysis of how they and their customers do business. On the other extreme, some teams make the analysis somewhat more complicated than is necessary.

As your team approaches strategic planning, it is very important to recognize that the basics must be done thoroughly and well in order to provide a solid foundation for good decision making later in the process. The first set of worksheets in the Simplified Strategic Planning manual is ”Market Segment Analysis”. A worksheet is to be completed for each of your market segments. The starting point for this is the definition of those market segments.

Let’s begin with the overall picture. What are we selling, to whom are we selling it and where are we selling it? ”It” can be either a product or a service, or a group of products or services that have the same or similar characteristics or behaviors in the marketplace. What are the characteristics of this item or group of items that define its behavior well enough to distinguish it (them) enough from other groups of items/services?

You should be looking for common behaviors in the market place: Types of products/services sold, the characteristics of customers who purchase these items, common geographies where sold, channels through which they are sold, etc., are the usual bases for analysis. The process can be a simple as listing products or services down one side of a page or flip chart, then listing the types of customers to whom they are sold across the top and putting an X in each row and column where each is actually sold.

Most often, this will result in more combinations than we really wish to analyze, or than we can effectively work with. We should combine or group like items with like buying behaviors so we have a workable number of market segments to analyze. Reasoning is that when we get beyond the eighth or ninth market segment, we are spending time on a relatively small percentage of our overall business, and unless there is a significant reason to include such a small segment by itself, it should either be omitted or combined with a similar segment for analysis. On occasion, there may be a need for different combinations of product, market, geography and channel because of differing buying characteristics, and effective leadership is required to establish when this should be included in the overall planning process.

By consolidating the products/services and the customers to whom they are sold into groupings with similar behaviors in the market place and analyzing these groups as market segments, we begin to establish the discipline and rigor necessary for effective analysis. Care in defining each of your market segments helps establish the necessary foundation for our ongoing process of defining, analyzing and integrating the results into the overall program which comprises Simplified Strategic Planning.

Interested in more ways to improve your strategic planning process?  Download our Strategic Planning Tune-up book by clicking on Tune-up.

M. Dana Baldwin is a Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

What is Strategic Thinking?

Thursday, March 14th, 2013

By Robert W. Bradford

Strategic Planning Expert Robert Bradford

As you may know from Simplified Strategic Planning, strategy is the course or direction of an enterprise.  In business, this revolves around three basic questions:

  1.  What do we sell?
  2. To whom do we sell it?
  3. How do we beat – or better yet, avoid – competition?

Strategic thinking is a specific approach to thinking that relates directly to these questions.  While there are many different approaches to strategic thinking, here are some that we have seen to be productive in strategic planning:

  1.  Systems Thinking
  2. Understanding How People Think
  3. Understanding the Nature of Your Assets

All three of these approaches present some difficulty to most managers because they require a mindset that is distinct from the mindset required for optimal tactical performance – that is, the way managers think about their business on a day-to-day basis.

The first approach, systems thinking, could be the subject of an entire book – or even series of books.  It basically involves conceptualizing your organization as a part of a larger system.  This is one of the most concrete approaches to what some call “big picture” thinking – seeing your organization as a consumer of inputs and a producer of outputs.  In strategic planning, it’s critical to understand that some inputs – such as demand for your product, or price sensitivity – will affect your organization in ways that are beyond your control.  It’s also important to recognize that some things you do (investments, training, supplier choices and so on) will have an effect on important inputs.  The thing that makes systems thinking difficult for many is the fact that – in a dynamic environment – your outputs will change your inputs, and over a long period of time this effect will have a dramatic impact on the success of your organization.

The second approach, understanding how people think, can be as important as systems thinking.  In Simplified Strategic Planning, we devote substantial bandwidth to the concept of specialty/commodity thinking, because it is one of the little-understood concepts, which can make or break an organization.  You might see this approach as a version of systems thinking that applies to specific groups in your system (i.e.… customers, suppliers), but it is also important to recognize that organizations and markets as systems are defined by the way the people in those systems think.  In other words, the way a group of customers thinks about their willingness to spend money will affect the functioning of the market system of which they are a part.

The third approach to strategic thinking, understanding assets, is one we have been exploring with clients extensively in the past ten years.  Again, some of the greatest benefit from good strategic thinking comes from penetrating analysis of one of the least understood facets of this approach, the strategic competency.  Unlike other assets, strategic competency clearly appreciates with greater use, meaning that a strategic plan based upon a well-defined strategic competency can yield increasing returns over time.

These are three of the most critical and conceptually difficult facets of strategic thinking we tackle on a daily basis with our clients.  How are you using these ideas in your organization?  What challenges do you see in their use?  If there is anything we might do to help in this area, please contact us.  If you are interested in learning more about how to have your employees think more strategically and align their actions with the corporate strategy please click here to listen to our webinar on strategic alignment.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.
© Copyright 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Watching Trends: Ebbs and Flows

Friday, February 17th, 2012

By Robert W. Bradford, President & CEO

Strategic Planning Expert

Watching companies respond to massive changes in the current strategic environment, I am struck by how much we tend to overemphasize the present when planning for the future.  In strategic planning, it is vital that you do the best job you can to anticipate future trends that will shape the strategic environment of your industry.  Unfortunately, this is impossible to do with 100 percent accuracy.  What we must do, however, is the best job we can, especially when dramatic changes will change the competitive structure of the industry. 

I can remember doing strategic planning with manufacturers in the 1980s, and hearing over and over again that Japanese companies were going to own the entire planet.  Now, some Japanese companies have done OK since then, but overall, the Japanese economy has been in a genuine slump for almost a decade now, and is even farther from recovery than the US economy is.  The key point of this example is that the present is NOT the future.  The present only has clues to what the future may bring, and sometimes we may mis-interpret those clues.

In strategic planning, it is vital to analyze WHY the future will be different – and why the current changes we see today may or may not continue into the future.  For example, many businesses today are concerned about China’s growth as a manufacturing power.  When thinking strategically about such an issue, we need to break it down into probable causes to be able to assess whether the current trend, growing Chinese economic influence, will continue in the long term.  Some possible causes such as less strict environmental and labor regulations, when compared with Europe and North America, seem to be fairly stable and likely to remain over the next five years.  Others like lower relative labor costs show signs of changing fairly quickly.  Recalling the rapid change in relative costs in Mexico around the time of the enactment of NAFTA, we can see that labor cost advantages can be temporary and subject to rapid change.  None of this is to say that China will not be a growing economic power in the next few years, but rather that there are reasons why that trend would continue, and reasons why it may slow down, or even (in the case of serious political upheaval) reverse.

In strategic planning it is far too easy to rest your assumptions about the future on a simple continuation of the present, the predictions of experts or the conventional wisdom of others in your industry.  None of these is a good substitute for clear-headed analysis, based on systems thinking, which will give you a much better picture of the future that is yet to come.  Make sure you allow the time to take a close look at such issues in your strategic planning, and consider having an outside resource with expertise in this type of strategic thinking challenge the assumptions upon which your plan for the future is built.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.
 
© Copyright 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.
 
 
 
 
 
 
 
 

 

 
 

 

Innovation/Opportunities: Short-term vs. Long-term – How do You Decide?

Friday, October 7th, 2011

by Denise Harrison,  Executive Vice President & COO

Strategic Planning Expert

In 1996 Apple lost $816 million, but in 1997 they launched an initiative that was to transform how people bought, sold and listened to music.  There was no clear path for how this would happen, no easy technology solutions – just a lot of questions and a vision.

Strategic planning teams are often confronted with investment decisions as they select the “few” things that need to move forward.  It is often easier to select product enhancements, product line extensions with low risk and short term payoff, rather than investing in the high risk “dream” alternative.  The “dream” alternative can require significant investment, time and often has a lower probability of success – but if successful, it is often transformational for both the company and the industry.

What should you do?

It is important to select the few projects that need to move forward – but they should be looked at as in a portfolio:

Short-term: often product line extensions and enhanced features.  These have clearly definable direction and lower risk and offer short-term return.

Medium-term: often new platforms that offer significantly enhanced performance/lower cost/greater ease of use.  These require higher investment, more time and have higher risk because the outcome is less certain – but the benefit of a new platform that offers significantly enhanced capabilities is typically rewarded in the marketplace.

Long-term: often the dreams – a problem with no clear solution, but if one is found will allow your company to leapfrog the competition.

What mix is right for your company?  Well, there is no easy answer – some companies, particularly technology companies must invest heavily in the “dream” – look what has happed to RIM, with its Blackberry being eclipsed by Apple’s iPhone.  RIM once provided the new platform that leapfrogged its competitors, but that advantage did not last long.  Other industries, slower to move, can still be transformed – look how Amazon changed the way we buy and read books with its Kindle.  Yes, Barnes & Noble has copied and even has a color version – but Borders, unable to keep up, is out of business.

How do you ensure that investments are made for the long-term “dream” projects?

Many companies take their long-term projects and earmark a certain percentage of their development budget to be spent on “dream projects”.  This way the projects are not “voted off the island” because their returns are far into the future and uncertain at best.  But once you set the money aside, how do you decide what projects to fund?  Some companies look at a technology and think of ways to commercialize it – but this often results in a solution looking for a problem.  A better way to manage the long-term portfolio is to define the problem(s) to be solved.  Don’t provide the solution – this will stifle the creativity.  Instead nurture the ideas and let them grow.  “The fastest way to kill an idea is to criticize it,” Scott Crump, CEO of Stratasys.  Stratasys leads the world in 3D printing – taking CAD drawings and turning them into functional prototypes, assembly tools (jigs, fixtures, patterns) and production parts enabling their customers to accelerate their time to market. Crump credits Stratasys’ investment in long-term projects for developing transformational platforms/technology that places Stratasys in the leadership position in this market.  These projects reaped rewards after traveling through a maze of twists, turns and dead-ends – and finally victory.

For short and mid-term projects, quantifiable selection based on risk and reward makes sense. For longer term “dream” projects, you should consider putting a certain amount of money aside to work on clearly defined problems.  Finding these solutions will allow you to leapfrog your competition.  But keep in mind the journey will not be straight and will require perseverance.

For more information on innovation please read: Innovation: Where to Look for It.  If you are looking for ways to add more innovation to your strategic planning process please contact me at harrison@cssp.com .

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

© Copyright 2011 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.