Center for Simplified Strategic Planning

Author: Denise Harrison

  • Lessons Learned: How Good Strategy Can Be Hurt by Poor Execution-Caterpillar Identifies an Attractive Market; but Outcome Hurts Bottom-Line

    Denise Harrison
    Strategic Planning Expert

    By Denise Harrison, Executive Vice President & COO

    “As part of Caterpillar’s strategy the company has identified the mining industry and improved support of its customers as one of Caterpillar’s key imperatives.” (Press release, 11/10/11)

    What trends did Caterpillar see that made the mining industry attractive?  The trends that were identified included:

    • Current and future growth of developing nations and their increased reliance on energy to raise standards of living
    • China produces more than half of the world’s coal – a key source of energy for the developing world (Hence, why Caterpillar identified China as key to its mining imperative’s success.)
    • A recent upsurge in mining accidents in China resulting in increased scrutiny by regulators and enhanced safety standards
    • Increased safety standards escalate the demand for automation which has been shown to reduce the number of accidents causing injury or death
    • Labor rates are increasing in China and automation of mining functions would boost mining efficiency and increase profits for mining companies

    In order to achieve its strategic imperative in the mining sector Caterpillar saw China as one of the keystones in its growth strategy. In order to capitalize on the opportunity quickly, Caterpillar decided that an acquisition would be the best way to gain traction in the market.  Caterpillar decided to buy ERA Mining Machinery, Ltd., a hydraulic roof support manufacturer.  Caterpillar purchased ERA for approximately $885 million.   The Caterpillar team expected to leverage ERA relationships and reputation to strengthen its position in the growing Chinese mining market.  Caterpillar also planned to leverage its global presence to sell ERA products world-wide.

    The Result:

    In spite of the fact that Caterpillar has operated in China for over 30 years, and has over 20 facilities in China, the company’s due diligence did not uncover significant accounting irregularities including inaccurate inventory data and revenue recognition issues.  This led to a write-off of $580 million in 2013.

    Lesson learned:

    Evaluating market attractiveness by analyzing future market trends is paramount for a good strategy.  However, a good strategy must go hand in glove with superior execution for a successful strategy. Often companies become so enamored with an acquisition and its possibilities that they overlook the weaknesses.  To learn more about what to look for when evaluating an acquisition, please  listen to our webinar: Acquisition: 8 Steps to Success.   Please click here.

    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 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Lessons Learned: Sony Falls from Market Dominance – Loss of Focus Causes Poor Decision Making

    By Denise Harrison, Executive Vice President & CO

    Strategic Planning Expert
    Strategic Planning Expert

    For many years Sony dominated the consumer electronics scene: from its ground-breaking Sony Walkman to its Trinitron TVs, Sony innovations in the consumer electronics space were unparalleled.  Now Sony is losing money in its consumer electronics business and is having limited bottom-line success in its entertainment business.

    Loss of Focus

    From 60,000 feet Sony’s two major business areas entertainment and consumer electronics look like there would be synergies between the businesses.  But when it comes closer to the ground, you find that the high-level synergies are not really the key to success of either business.  What makes a blockbuster hit in the entertainment field is very different from what drives success in the consumer electronics field.  Ideally, they would have been able to leverage the respective set of skills of each unit to differentiate Sony in the market, but, alas, that leverage never emerged.  The entertainment division has had a number of blockbuster entertainment successes – but the success was on the topline and the bottom-line numbers were lackluster when compared to their entertainment business peers.  The consumer electronics business fared far worse – the once market-dominant business is now losing money.  Trying to focus on two businesses with little in common, one often finds that business decisions are made to satisfice: trying to invest so that both do well, but not invest enough so that either one is able to keep its leadership position.

    Key Take Away:  When developing your strategy, ensure that your various business units are leveraging a common set of skills/priorities so that you are not trying to spread your investment over unshared and perhaps conflicting goals.

    Sony Loses Its Dominance in TVs

    Sony’s consumer electronics business long dominated the TV space with its cathode ray tube technology (CRT).  However due to its success in this business, it was slow to move to promoting flat screen technology, even though it was one of the first to develop the LED flat screen.  Instead it wanted to capitalize on its investment in the CRT technology rather than invest in the new technology to meet emerging consumer trends.  By trying to hold onto the old technology and garner as much profit as possible before moving to the new technology, they lost their lead to Samsung, a company who, not held back by a large CRT business, saw an opening to gain market share as Sony lagged behind.

    Key Take Away: While an existing business may be extremely profitable, don’t rest on your laurels.  Keep up with market trends and be sure that you are the company that moves business from a profitable core segment rather than one of your competitors stealing your business because you didn’t want to make a change.

    Not Capitalizing on New Technology

    Not only did Sony not capitalize on its LED technology, but it also did not capitalize on its first-to-the-market status with the e-reader.  Both technologies introduced by Sony were made popular by its competitors.  What happened?  Well, in the one case we know it was holding on to its old CRT business, but what about the e-reader?  Sony made investments in the entertainment side of the business while it let the marketing of these new technologies languish.

    Key Take Away: Loss of focus and protecting turf can starve the investment needed to feed the growth of a new technology or product.  Be sure that you are vigilant in assessing how you are investing your resources to be sure you are investing to optimize your total company’s future success.

    For more reading how to better develop a strategy to focus on your company’s future potential please read:  Xerox Positions Itself to Succeed in the 21st Century by clicking here.

    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 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Challenging Old Paradigms and Achieving Success

    By Denise Harrison, Executive Vice President & COO

    Strategic Planning Expert

    That won’t work!  We’ve tried that before!  The idea is then rejected without consideration.  Yes, sometimes you should learn from history, but what if something has changed and history no longer reflects the potential of this idea?

    We Tried This Before

    As president of the research center of a Fortune 500 company, I was often faced with the “we tried it before and it didn’t work” argument.  Yes, it had been tried before, as a matter of fact, more than once, and the product had never gotten enough traction to be successful.  So why try it again?  Rather than reject the idea, I had the product team analyze current trends to see if there was anything new that would indicate that this product would be more successful this time.  Some background, this product’s success was predicated on insurance companies sharing their claims history on individuals.  The data would be stored in a third party database (this is where we came in) and could be accessed so that the insurance company could use claims history as one piece of information for a risk profile.  Historically, the insurance companies were not willing to share their proprietary information.  Why should they share now?

    Well, increased claims and lower profit margins were causing insurance companies to look for ways to prevent losses.  These trends made some of the companies more amenable to sharing information.  Once the industry leaders joined, the product moved forward; it was a success with the insurance industry because they had a better understanding of the risks they were insuring and a success for us as we were now the provider of this information.

    Corning: In with the Old

    During its 161 year history Corning has had numerous technological breakthroughs: silica for fiber optics, ceramics for both CorningWare® and military applications.  But along with the breakthroughs, there have been innovations that did not have commercial success immediately.  So when a consumer electronics firm came to Corning looking for a durable, lightweight glass for its touch screens, Corning took a look back through history and found a 40 year old project on glass fusion and formulation and dusted it off.  Using this proprietary technology the team was able to develop Corning Gorilla® Glass – now used in many electronic devices across the world.  It is now a $1 billion business.  A technology rejected 40 years ago comes to life and adds to Corning’s success.

    BNSF – Trains are Back

    Oil is traditionally moved across the country in pipelines; high volume, point to point.  Recently new deposits of oil are being produced in areas not traditionally serviced by pipelines, so EOG Resources contacted BNSF to see if they could work with the railroad to develop an efficient system to move oil from the production sites in North Dakota to various refineries.  At first the railroad hesitated – was this just a short-term opportunity?  BNSF decided to take the plunge investing in infrastructure that would support the movement of oil by rail.  This new “light tight oil” now moves by rail to all three coasts (East, West and Gulf) and now more oil moves out of North Dakota on rail than it does by pipeline.

    What changed to make rail an acceptable mode of transportation?

    • While generally more expensive than pipeline costs, rail costs have fallen about 50% from where they were 30 years ago.
    • Rail is now faster and more predictable. (No more rail cars missing in black holes!)
    • Rapidly increasing domestic production along with increasing supply from Canada and transportation constraints have created price distortion that have incentivized construction of new rail capacity,  making it cost-effective to ship by rail to areas that do not have access to this lower-priced oil.
    • Permitting/environmental issues with pipelines cause rail to be the only option in some cases.

    Key Take-Aways

    A good strategic planning process causes you to question your paradigms:

    • Try to ensure your team is not locked into old paradigms.  It may not have worked last time; but maybe something has changed to make it viable now.
    • Look at your facts and assumptions, what has changed?
    • Casting a broader net for possibilities; e.g., should you be evaluating rail as the cost has gone down and reliability has come up?  It may give you options you need to consider; especially when the Panama Canal opens and fewer goods are traveling by rail across the country, there should be excess capacity.
    • Have your customers’ needs and preferences changed?
    • Is there a technological change that makes a previously unattractive option more attractive?
    • Are there changes to supply constraints (e.g. availability of natural gas) that allow you to look at opportunities differently?

    To learn more about strategic thinking and challenging paradigms please listen to our Strategic Thinking webinar by clicking here.  Challenging paradigms can lead to strategies that your competition has not considered enabling you to gain a competitive advantage.

    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 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Strategic Alignment: Why Isn’t Everyone on the Same Page?

    by Denise Harrison, Executive Vice President & COO

    Communicating strategy and gaining buy-in enables an organization to truly execute the strategic plan. As President of a financial services firm, I communicated regularly but was stymied by the lack of understanding and buy-in of the strategic plan. What could I do differently?  I found that two-way communication is paramount to gaining the comprehension and action that I was seeking. So many use the “I talk, you listen” communication technique and fail to see the importance of having employees respond with their thoughts and ideas.

    Once I understood the importance of two-way communication, I had each department communicate back their thoughts and ideas after hearing the strategic planning presentation.  They answered the question: “What are you going to do in support of the strategic plan?”  They had great ideas and now they bought into the plan, because their ideas were incorporated into the plan.

    Now, as a consultant, I work with teams on strategic alignment and have found that along with two-way communication, one needs to raise the level of strategic thinking in the organization. Sounds hard?  Not really – it essentially involves understanding who your customers are, assessing your strengths and weaknesses, and developing key initiatives that tie back to the strategy. If you are interested in more detail, I have presented my thoughts in a free archived webinar – just click on: strategic alignment.

    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 2013 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Made the “Nifty Fifty” New Product List and Fought to Make a Dime – Lessons Learned in Protecting Intellectual Property and Partnerships

    By Denise Harrison, Executive Vice President & COO

    Your new product makes the “nifty fifty” list of innovative new product introductions; you envision your picture on the cover of Fortune magazine; and then….you end up in legal battles and with little money.  Here are some lessons learned from one company as it tried to capitalize on its innovative new product.  For the sake of clarity and confidentiality we will call the company “Nifty”.

    Nifty Fifty – Patent Protection

    The product was an ingenious new way to make engines more efficient in the transportation industry.  The good news was that the new product included a revolutionary new technology and the Design Patent awarded was a strong one; so it was harder to develop “work arounds”.  If one is patenting just a “methodology”, it is easier to get around it by changing a step, but still getting to the same result.

    Identify a Niche Market to Get Started

    Nifty knew it did not have the wherewithal to gain traction in a large market, so it introduced its product in a smaller market, the aftermarket, a market that was not dominated by a few large players.  Good news – it was successful, but the company knew that it was only capitalizing on a small amount of its product’s potential.  Now that the company had some success, it looked for partners who could help it move into other larger markets.  The partners would:

    1.       Have capital available for the infrastructure needed for larger scale production.

    2.       Have a significant position in a specific market or markets.

    The Tale of Three Partnerships

    1.       The first partner saw the benefit of the new product to its market place, but when sales took off for its core product base, Nifty’s product sat on the shelf because their partner’s dealers had neither the time nor the financial incentive to push the new product.  Sales were lackluster with this partnership.

    2.       The second partner was a large engine manufacturer, an industry leader, who desired an exclusive arrangement to keep their competitors from having this differentiating product.  The license negotiation process produced a high-level product champion within the partner and both companies prospered under the agreement.  Later, the product champion was reassigned and not replaced – this did not bode well for Nifty’s relationship. Next, the second partner decided that they no longer wanted to cut royalty checks. Nifty was stuck with no money and an exclusive arrangement.  What next?  You guessed it – a legal battle.

    3.       The third partner was a competitor to the second partner and was more than willing to foot the bill for the ensuing legal battle.  Nifty, with the help of their (third) partner’s financial backing, won the suit. The good news was that there was a sizable financial settlement and the exclusivity agreement with the second partner was no longer in force.  A licensing agreement was then executed with this third partner.  Now, you would think the company was finally in partnership heaven.  But not so fast, this time the licensing negotiation was completed with no clear product champion in place.   As a result, the company did not get the financial and competency leverage that it had anticipated, and over time this third partner decided to stop paying the agreed upon royalties, believing that they were no longer necessary due to a loophole in the intellectual property licensing agreement.  Off to do battle again on the legal front.

    Lessons Learned:

    1.       Have a strong patent.  This legal protection is your first line of defense.  Without this, a strong market player can simply reverse engineer your product and take advantage of the opportunity, leveraging their infrastructure and market position.

    2.       When selecting a partner make sure:

    a.       You have a sense of how they do business. Do they have integrity when dealing with their other partners and suppliers or do they have a long history of legal battles?

    b.       They assign a product champion who understands the value of what you bring to the table and how their company can benefit from its use.  This person needs to rank high on the integrity scale and have power within the company and, ideally, will have “skin in the game” by having been instrumental in making the licensing deal.

    c.       You develop a tight intellectual property agreement.  Time to spend some money for an expert in the IP field, because you can bet that your partner is investing their money to ensure that their interests are protected – so make sure that you are using an expert who will protect your intellectual property because he/she knows IP and your product.

    d.       If you decide to sign an exclusive arrangement, make sure there are designated time frames, minimum performance requirements and geographic and industry boundaries.

    e.       You know where you stand in your partner’s priorities:  is your partner’s business growing like gangbusters causing its salespeople to focus on other high growth products?  Will your product get the time and attention it deserves?

    3.       Stay in the market:  Nifty stayed in the aftermarket segment and this gave it a better position as its various partnerships faltered.  Nifty still had sales and it still had manufacturing capabilities.  These actions allowed them to have more leverage than if they had simply given up all their capabilities when they signed the various partnership agreements.

    Having a great new idea is less than half the battle in launching a new product.  Developing a plan of how you will produce, distribute, generate demand for your product and finance the whole process is a key milestone to your success. Be sure you have your plan in place before you go to market.  Be sure it recognizes whether the potential market is “right-sized” for your resources.  Start documenting your steps early in your product development process to make the patent application easier to file in a timely manner and stronger by virtue of your proprietary “art.”  A partnership agreement may well provide you with the infrastructure and market access you need, but be sure to develop these agreements with your eyes open.  Then keep your eyes open even after the agreement has been implemented for signs that a powerful partner is becoming greedier.

    If you have had experience with launching new products and would like to add other issues that should be considered, please comment on our blog.

    If you would like to read more about new product ideas and where to find them please click here.

    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 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Are You Listening to Your Customers? How Small Changes Produce Market Share Gains

    By Denise Harrison, Executive Vice President & COO

    Strategic Planning Expert

    Too often we are so myopically focused on the product or service we are trying to sell, that we don’t listen to what our customer is saying.  The product or service may be great – but something around the buying experience or the initial purchase experience may be preventing our customer from saying “Yes.” If you truly understand these issues, you can gain significant customer loyalty and market share.

    Package Delivery

    As a frequent traveler, I am often not at home to receive deliveries.  I live in an urban area where packages left on my door step have a habit of walking away – apparently by themselves.  Many people have similar problems when receiving packages:

    • No way to receive packages when away from home (or even receive a notice that there has been a delivery attempt)
    • No way to receive packages because job requirements do not allow you to be home during the day
    • Packages stolen if left at the door

    For many years I have requested people sending me packages to send them UPS – my UPS person, knocks on the door (not sure why the others don’t); then if I am not home, he wraps my package up in the door mat and puts it between the storm door and the front door.  This technique has prevented theft over the years.  How hard is it to try something like this for the other carriers?

    Recently, though, someone sent me wine, which requires a signature – even my UPS person was stymied by this one.  I was out for the week and UPS has instituted a rule that, if not delivered in 3 days, it is sent back to the shipper. (This is not a new rule, just loosely enforced previously.)  So the wine was on its way across the country again. Who is happy about this?  Not me, not the shipper, and not UPS, because I made sure they knew I was not happy.

    Changes – Somewhat Better

    Being the quiet, mild consultant that I am, I vociferously complained over the years about this problem.  I had sent all of the carriers (UPS, FedEx, and USPS) suggestions that they should have recipient email addresses on file so that I could be notified when a package was on its way to me. I mean really, this is the 21st century. This notification would enable me to make arrangements or request a hold.  (While there has been some package notification, it has generally always been done at the shipper’s site – if the shipper has the capability and knows the email address.) Thus, if this service were offered – you can usually make arrangements; but not always – when you are out of town for a long period of time, this may still be problematic.  (I often wonder what changes would be made if the package carriers rated themselves on successful delivery rather than just efficiency.)  Do you think that they really look at solving the problem from the recipient’s viewpoint?

    Amazon Takes Charge

    Online retailers certainly have to deal with this problem; Amazon’s frustration with the problem has led to the next step up in providing a solution: lockers.  When something is shipped (and locker is requested) you receive an email when it arrives, with the code to open the locker.  You can then pick up the package at your convenience at a third-party site (e.g., 7 Eleven) where you have greater pick-up flexibility around date and time.  This is new, so only available in a few cities – but it provides a good solution.  Amazon made it easier for a certain segment of their customers to buy from it.

    Package Carriers – Are you Listening?

    How about lockers for your customers?  If a package cannot be delivered, send an email that asks about locker pickup.  If desired, send the code and let the recipient tell you when the package will be picked up.  Ideally this will help with customer/recipient satisfaction.  It will also help with efficiency; the carrier will not continue to try to deliver a package when the recipient is not home. As many of the carriers have locations already setup, this should be an easy fix – although they will need to make the lockers accessible during a wider timeframe.  (Ideally, this would be some kind of setup like Post Office boxes where box holders can pick up their mail at any time.) Might there be some sort of niche business opportunity here, operating a readily accessible “locker-room” or “package depot”?  Could USPS pick this up as an additional business?

    What Can We Learn From This?

    Look at the product or service from your customers’ viewpoint.  What barriers exist that prevent purchase that may have nothing to do with the actual product or service – but have everything to do with whether or not the customer buys?  Take the time to truly understand your customers’ full buying experience, including perhaps, even its disposal experience, and you can uncover barriers that, if overcome, will open doors and allow you to gain market share.

    Interested in how WD-40 doubled its business by listening to customers? Click on WD-40http://www.strategyletter.com/CD0108a/featured_article.php.

    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 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Dare to be Different – How Choosing a Road Less Traveled Allowed Cummins Engine to Outstrip Their Competition

    by Denise Harrison, Executive Vice President & COO

    Follow the leader – or dare to be different – which works better?  The Center for Simplified Strategic Planning challenges client teams to dare to be different – based on our experience of working with many companies, this approach works best.  We have found that teams that try to follow the industry leaders or simply try to emulate GE or other successful corporations often fall short of their long term goals.  Why? Your company’s strategy should be based on your strengths and weaknesses and your differentiation in the market, rather than follow a “copycat” strategy.

    Cummins Engine and Caterpillar, Different Companies, Different Strategies

    Faced with tough North American environmental regulations for heavy truck engines, companies who made engines had to make some tough decisions: Caterpillar decided to exit the market, while Cummins decided to remain.  How can two companies look at the same external environment and come up with completely different strategies?

    • Caterpillar’s strengths lie in heavy equipment development and production for construction, agriculture and other markets; their expertise did not lie specifically in engine development
    • Cummins’ strengths lie in engine development and production

    The key takeaway: Good strategy is based on recognizing a market opportunity and having the skills to take advantage of it.  Caterpillar felt that their skill-set did not match the requirements for designing engines to meet the lower emissions standards and that their resources would be better focused on designing equipment for specific applications for growth.  Cummins, however, strictly focused on engines, believed that their skillset made them uniquely qualified to capitalize on the increasingly regulated environment.  Both companies can be correct – good strategies are based on selecting markets that value your unique competencies.  Cummins’ competencies around heavy truck engines allowed it to significantly increase market share when Caterpillar left the heavy truck engine market.

    Growth in Emerging Markets

    Just when engine manufacturers thought it couldn’t get any more difficult, the global game changed with the imposition of more stringent emissions requirements.  Tough – yes, but made even more difficult because each region around the world has raised its standards, and each one has a different set of requirements.  So, should they produce one engine to meet most of the requirements, sub-optimizing in trying to meet multiple requirements?  Or should they develop a customized approach for each region?  Cummins chose the latter even though, on the surface, it seemed less efficient.   This strategy has allowed Cummins to penetrate foreign markets faster than its competition.

    Now let’s take a closer look at how Cummins Engine dared to be different, and how they are being rewarded for their efforts.

    How Cummins Chose this Strategy?

    Emerging markets are often criticized for being able to compete on lower costs, due to a less stringent regulatory environment.  As these markets develop, they not only see the financial benefits of industrialization, but also see the cost, primarily increased pollution.  But as pollution becomes unbearable, countries are adopting increasingly strict environmental regulations.  Will these regulations follow the regulatory standards that are set in North America? Of course not, that would be too easy!  Emerging trends include:

    • Increased industrialization
    • Increased pollution
    • Increased regulations (but different for each region)

    Heavy truck manufacturers located in these regions had to decide:

    • Should we develop the technology to meet the regulations?
    • Should we buy the technology and focus on production as demand continues to increase?

    For many heavy truck manufacturers, the second option was more attractive because the skill-set required for more environmentally-friendly engines was not something that the manufacturers excelled at.  Why not outsource the engine design?

    Cummins saw these trends and assessed ways to meet the demand–one way they could have met the demand was by providing the North American technology.  However, Cummins had the foresight to understand that with the varying regulations, different solutions would be best for each region.  So rather then proceed with “one size fits all,” they chose to pursue a “fit-for-market” approach.  The regional truck manufacturers embraced the Cummins approach because this meant that they would not have to change their truck design in order to fit the Cummins engine requirements. Instead, Cummins would design an engine to meet their region’s environmental requirements.  Their competitors were chagrined at this approach, as they had taken the “one size fits all” approach and this strategy slowed their engines’ acceptance in emerging markets.

    Keys to Strategy Development

    1. Understand your strengths and competencies; leverage these to your advantage
    2. Know your markets; different markets have different requirements
    3. Evaluate long-term trends (e.g., pollution acceptable moving to unacceptable)
    4. Position your company to succeed by focusing on markets that value your unique skill-set

    Cummins’ Results – Dare to Be Different

    Cummins, Inc. results have been outstanding in the current economic environment.  Profits were up 78% in 2011 over 2010. By truly understanding the different market requirements, Cummins was able to capitalize on their customization advantage and use these regulatory changes as a way to gain market share.  When your company is faced by a market change similar to the regulatory threat faced by Cummins, try to evaluate the threat as an opportunity, rather than just a threat. To learn more about designing your company’s unique strategy please read: Sometimes a Road Less Traveled Is Best.

    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 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Three Action Plan Mistakes Strategic Planning Teams Make and How to Avoid Them

    by Denise Harrison, Executive Vice President & COO

    Strategic Planning Expert

    Action plans are the detailed road maps that turn your strategic plan into results.  Action plans support the key strategic objectives that your team selected as the most important projects to work on for the next 12 to 18 months.  If your action plans achieve the objectives, then you are moving towards achieving your strategy – if not, then you slow down the pace at which your team will achieve your strategy. Here are three avoidable action plan mistakes:

    Mistake #3:  “We can’t develop the action plan until we make the decision as to which path we will be taking to achieve this objective.”

    What?  No action plan?  Not acceptable! The first part of the action plan should identify the key criteria that will be used to make the decision regarding path selection.  After the criteria have been developed, you will identify the steps necessary to collect the data to make the decision and finally, you will determine the steps needed to present the information for the team to select the appropriate path.  Waiting until the decision is made slows the process and often does not allow time for the identification of criteria and the gathering of the data.

    Another approach I often recommend is to develop multiple action plans, one for each path so that the steps, timeline and resources can be identified for each path.  This option works well with make/buy decisions.  By outlining the steps for the “make,” you can benchmark what a “buy” decision saves you in terms of time-to-market, probability of success and overall resources.  It may be worthwhile to go the “buy” route even if the cost is greater, but the probability of success is higher, and the speed to market is faster.

    Mistake #2: Action plans are not detailed

    Recently a team had an objective to install a new ERP system.  The action plan submitted had less than 10 steps and was to be completed in 4 months.  What happened?  Yes, you guessed it, a major train wreck.  By not forcing the action plan steps to get down to a granular level, the true resource requirements and timing were not identified.  Action plan steps need to be clearly defined – each step should be small enough that resources can be adequately identified: who, how much time, and how much money.  To prevent “high level” action plans, first ask your team leader to work with their Action Plan Team to make the plan detailed enough to guide development of the individual steps.  After the Action Plan Team develops a first draft, let the action plan sit for a week.  Then have the team members update the plan with any additional thoughts that have occurred during the week.  Finally, have the whole Strategic Planning Team review each action plan during your Implementation meeting.  This allows the senior team to ask detailed questions and make suggestions for enhancement.  Just because you want the action plan to move forward is no reason to shut off the discussion around detail, timing and cost.  To “protect” a project and make it seem less complex than it truly is only causes failure and often derails other action plans, as resources need to be reallocated throughout the year in order to fix the problems that are occurring in a poorly developed action plan.

    Mistake #1:  We have to do this…..

    “We have to do this….” is often heard when it comes time to select the 8-10 action plans that we want to accomplish in the next 12-18 months.  If the group buckles under, your list may grow to 15-20 plans.  Just because you would like to do 15-20 doesn’t mean that you should.  Most teams can digest 8-10, but often pull this number back when they have fewer resources or they are working on an action plan that will take significant resources to move things forward.  If you try to move too many action plans forward, you may not make significant progress on any, and the team may become demoralized because of constant resource conflict and slow progress.  Selecting the few, rather than the many, is one of the most difficult parts of strategic planning – but teams that are able to do this are more successful than the ones that consistently try to do too much. If you complete your plans quicker than anticipated, you can always add more.  Remember that the benefits of most actions plans don’t occur until they are completed.

    In summary, the keys to successful action plan development:

    3. Action plans need to be developed even if there are two or more courses of action – don’t wait for the decision, make the decision-making process part of the action plan.

    2. Action plans need to be granular, clear road maps with detailed steps and detailed resource requirements.

    1. Selecting a few action plans is better than trying for more and accomplishing less.  Part of strategic planning is making tough decisions – if you punt, you will not be as successful as if you make the hard decisions upfront.

    Action plan discipline is one of the keys to the success in achieving your strategic plan, but it is only one piece of the puzzle.  In order to be successful you must integrate your action plans into your monitoring process.   To learn more about successful execution please read:  Everyone Knows Execution is Important – So Why Do We Fail to Execute?

    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 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

     

  • Do You Really Know Your Strategic Competency? Reassessing Your Strategic Competency May Lead to Significant Growth

    by Denise Harrison

    Strategic Planning Expert

    Early in the PC era Apple was clearly a leader in innovation.  But in 1996 Apple lost over $800 million dollars.  Apple was originally known for breakthrough ideas for personal computers, but others were more profitable and had significantly more market share.  What was wrong?

    What was Apple’s Real Strategic Competency?

    Yes, we all know that Steve Jobs, even with the management changes (Steve Jobs helps found the company,  Steve Jobs leaves the company, Steve Jobs returns) was key to its current success, but let’s dig deeper to see if it is bigger than a single individual.  Everyone’s vision of Apple was a company that made easy-to-use computers.  But as long as the team at Apple thought its strategic competency was tied to PCs, it was in a rut, banging heads with tougher competition.  But was the PC hardware/software combination really their competency?  How could they know? Only by taking a deep look at the answers to the following questions could Apple rethink its true competitive advantage.

    • Does it provide high value to the customer? Well, the computer itself, not so much, but the intuitive human interface was breakthrough in its day.  Competitors like Microsoft took the user friendly interface (GUI)  idea and ran with it.
    • Does it differentiate you from the competition? Well, not during 1996; but how could the team use their “intuitive” understanding of human/machine interface to differentiate itself? The barrier to adoption of digital devices still remained “ease-of-use”.
    • Is it difficult to copy? Well, yes, folks did copy the Apple designs, but no one was able to innovate the way Apple can.

    So what is Apple’s Strategic Competency?

    Apple realized that it was good at making digital devices easy to use – not just PCs.  It was able to take hardware and combine it with software that produced a device that even the digitally-challenged are capable of using.  Yes, often the first release of any Apple product was plagued with bugs, but ultimately the products worked, allowing customers to interface with technology in ways they had never envisioned.  Apple’s breakthrough products have included:

    • Macintosh
    • iTunes, iPod
    • iPhone
    • iPad
    • MacBook Air

    Once the senior management team realized that the strategic competency wasn’t just about the PC, product development moved to solve different problems that could be resolved by using digital solutions and solving the “ease of use” problem.  As soon as these devices were recognized as easy-to-use, markets expanded.  However, in order to harness their intellectual capital fully, the team had to understand that the strategic competency was not about the PC, it was about the combination of hardware plus software plus “ease of use” know-how that really set them apart in the market place.  Apple’s subsequent growth and success is now well-documented.

    Evaluating Your Strategic Competency

    In order to truly understand your growth opportunities, be sure that you truly understand what sets your company apart from the competition.  Often teams look at just the traditional differentiators. Instead, you need to look at what is really setting you apart in the eyes of both your customers and competitors.  Look at your major victories for the past several years. What made these achievements successful?  Dig deep: break your triumphs down into the skills, processes and knowledge that allowed you to be successful–what did it take to get these projects to the goal line? A strategic competency will not simply be one strength, but rather, a combination of strengths (a combination of skills, processes and knowledge). Once you do this, re-evaluate your strategic competency; you may find it is different from what you originally thought it was, and like Apple you will be able to re-think your growth strategy.

    © Copyright 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Xerox Positions Itself to Succeed in the 21st Century – What You Need to Do to Ensure Your Company Does Not Become Obsolete

    by Denise Harrison, Executive Vice President and COO

    Strategic Planning Expert

    In 2000, people were ready to sound the final bell for Xerox Corporation.  Financially troubled, mired in shrinking market segments, the future of Xerox was bleak.  Xerox had to reposition itself in order to succeed in the 21st century.  To do this it had to speed its transition from analog based systems to digital systems and enhance its service based organization.

    By 2006 the transition was well underway – over 25% of its business was in the services arena, and by 2011 over 50% of its business was providing services to its customers.  Statistics on Xerox service offerings include:

    • 900 million healthcare claims processed annually
    • 50% of all toll collection processed in the US
    • 66% of US insured patients are touched by Xerox services
    • 60% of all US child support payments processed annually.

    And many of us thought they were a company that just made copiers.

    Transition 

    How did this transition occur? What did Xerox do between 2006 and 2011 to increase the service side of its business?  First Xerox assessed its key strengths – what it could leverage as it moved into the 21st century:

    • Global presence
    • Xerox brand
    • Xerox technology and innovation. 

    These strengths enabled Xerox to excel in providing document management solutions.  However, this market was not big enough for Xerox to meet its growth expectations.  It needed to expand into new markets in order to meet its growth target and to better leverage its strengths.  Xerox identified two markets where it could leverage these strengths to provide value to the customers:

    • Business process outsourcing
    • Information technology outsourcing. 

    These markets already had formidable competitors, IBM and Accenture to name a few – how could Xerox compete?  While it had many skills required by the markets to be successful, it was missing the knowledge of the actual business processes.  How could it bridge this gap?  It could develop the skills in-house or it could acquire the knowledge from the outside.  Xerox thought that the best way to close the gap quickly was by acquiring ACS (accomplished in September of 2009).  Notably, ACS had a competency in business process outsourcing with the requisite knowledge of business processes, and it also had a competency in IT outsourcing.  These two competencies, when matched with Xerox’s global presence, brand and innovation capabilities, would give the combined company a leg up on the competition in the targeted markets.

    Lessons Learned: 

    In order for Xerox to make this transition, it had to:

    • Understand the technology trends (analog to digital) and not deny reality
    • Evaluate its current strengths and competencies
    • Identify the market segments where Xerox’s strengths could be leveraged
    • Assess the target market requirements
      • Identify Xerox strengths that could be leveraged to create differential competitive advantage
      • Identify the Xerox competency gaps
      • Develop a plan to fill the gaps
        • Build in-house
        • Outsource
        • Acquire
      • Develop and execute a plan to dominate the markets that value its differential advantage 

    The jury is still out as to whether or not Xerox’s execution will be successful.  The acquisition of ACS in 2009 and its successful integration will determine whether or not this resulting combination of skills, processes and knowledge truly results in a strategic competency. Ideally this combination of capabilities will give it a sustainable competitive advantage that:

    • Provides value to Xerox customers
    • Differentiates Xerox from its competitors,
    • Is difficult to copy.

     If Xerox succeeds in accomplishing the above, it will have a sustainable competitive advantage.

    If you have questions about how to develop a strategy that positions you to compete in a changing market place, please contact me at harrison@cssp.com or visit our website www.cssp.com.  In addition, if you are interested in reading more about strategy development, please read: March to a Different Drummer.

    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 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

  • Lessons Learned: Japan’s Earthquake and Tsunami Teach Important Lessons

    By Denise Harrison, Executive Vice President and COO

    Strategic Planning Expert

    The location and severity of any specific natural disaster are difficult to predict – so you need to prepare for a disruption in your supply chain, given that a natural disaster could impact your business at some point in time.  Even Toyota, known for its superior management practices, was caught flat footed after the earthquake/tsunami, when its supply of a pearl luster pigment, Xirallic, was interrupted for several months. Was its supplier a small company?  No, it was the large chemical behemoth, Merck that supplied this product from its facility which was located in the region that was affected by the disaster.

    Toyota and other car manufacturers scrambled to meet their production schedules without this important pigment.  What did they do?

    • Some car manufacturers immediately stopped taking orders for cars requested in the colors that used Xirallic.
    • Some manufacturers changed to an alternative supplier offering some colors with a similar pearl luster quality

    How should you prepare?

    First you need to know where your risks are:

    • Identify your sole source suppliers (only one supplier is capable of producing this product/service)
    • Identify your single source suppliers (you have a single source, but other suppliers are available)
    • Answer the question: How fast does a disaster interrupt your production

    Is it immediate?

    Two weeks?

    Two months?

    Six months?

    • The timeframe of the impact is important to how much focus you give to mitigating a specific risk

    Sole source – mitigating risk 

    • Does your supplier have multiple production sites?

    For example, Merck is building another production site in Germany, ensuring supply in the event that a natural disaster impacts one region of the world and not another

    • Are there substitutes for the product/service?  In a pinch what could you do?
    • Do you build inventory on the “immediate risk” items so that your production is not shut down while you explore other options?
    • Do you have a communication plan for notifying your customers concerning the impact of a disaster when such an event happens?  The faster you notify your customers of the impact and the expected timing, the faster they will be able to decide their course of action.  Merck was slow to notify its buyers concerning what impact the disaster had and the possible timing for resolution.  While this is not always easy to predict, a happy, but unrealistic forecast is not what your customers want – they want to understand, to the best of your ability, what the timing looks like so that they can take steps to mitigate the risk for their customer base.

    Single source – mitigating risk 

    • You can follow all of the steps in the sole source example, but you have some additional options as well.
    • Have alternative suppliers pre-qualified, but make sure that you are qualifying suppliers that have a different risk profile.  Identifying an alternative supplier one mile down the road from your current supplier does not necessarily lower the risk by identifying and qualifying an alternative supplier.  This would help you if the production issue was a plant fire, but not help you if the whole area were flooded by a hurricane and production was impacted throughout the region.

     Develop Plans to Mitigate the Risk

    Once you have developed a list of your sole source and single source suppliers, and assessed the risk associated with each supply disruption, you need to develop a plan to mitigate the risk for the suppliers that would have a high and quick impact on your business if a disaster occurred.  You will also need to develop the communication plan so that your customers are kept in the loop and are not blind-sided by the lack of availability of a product.  One company I worked with identified one item that was sole source and had immediate impact on their production.  They decided to keep a large inventory of this product on hand; while it was a minor cost item, without it, the product could not be produced.  When the supplier had a strike, this company had enough supply of this item on hand to continue production.  This foresight allowed them to gain market share while their competitors were shut down.

    What about Service Industries – Are there any important supply issues? How about labor?

    Yes, remember the Icelandic volcano that cut off travel to and from Europe?  Many firms, including service firms found that the volcano disrupted their supply of human capital.  As a service firm, it is important to understand where your risks are around human capital and ensure that you have back-up plans in place when travel logistics are interrupted for long periods of time.

    Lessons Learned

    Did Toyota learn its lesson quickly enough to prevent the next production glitch? No, the recent flooding in Thailand has put another monkey wrench in its production schedule. What about your company?  An earthquake/tsunami in Japan or a volcano in Iceland or floods in Thailand –no matter what your threat looks like, you should understand the impact that the threat has on your business and develop plans to mitigate your risk.  If you have questions about how to incorporate threat risk assessment into your strategic planning process please contact me at: harrison@cssp.com

    For more on this subject please read: Turning Threats into Opportunities.

    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.

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

    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.