by Denise A. Harrison, Vice President

Smaller companies often feel dwarfed by the giants in their industry, especially during tough times.  Often industry giants are better at weathering economic downturns with their wide array of resources. But Arena Resources’ strategy not only allowed the company to survive this economic downturn, but turn in exceptional performance – better than the industry leaders.  Arena Resources, a small oil exploration and production company, has less than 2% of the revenue of the industry leaders (Shell, Exxon Mobil).  In addition, very few industries have had to endure greater fluctuations than the oil industry with oil price highs of $147 per barrel in July 2008 and lows of $30 per barrel in December, 2008.  How did Arena Resources make it onto the Fortune list of fastest growing companies (#8) in spite of this industry turbulence?

The Road Less Traveled

Arena Resources chose not to compete directly with the industry giants, instead it focused on oil production assets in the southwestern United States that were no longer attractive to the industry Goliaths.  The cost of drilling and producing oil in this region exceeded what was acceptable in the larger companies’ financial models; these companies prefer to concentrate their resources on exploration of large oil fields with large potential.  When Arena purchased land in this region (approximately 11,000 acres), the land produced 200 barrels of oil per day. Arena knew through its research and evolving technology, which through investment the land could be more productive.  Through Arena Resources’ focused efforts this land is now producing 6000 barrels per day.  The company does pay a high cost to produce a barrel of oil – almost $35 per barrel, so when oil prices decline significantly, profitability plummets; but when oil prices are over $60 per barrel the company makes a nice profit. Arena is betting that the price of oil will remain over $60 per barrel for the significant future.  The high cost of production and the relatively small output is not attractive to its behemoth competitors, so this strategy to take the road less traveled allowed Arena Resources to grow profitably without going head-to-head with the major industry players.

What about Your Company’s Strategy?

Many companies decide to compete in markets that are attractive, even though larger competitors with greater resources are already firmly entrenched or aggressively pursing these markets.  Going head to head with industry giants often drains the resources of a smaller player with little forward progress in their market position.  Are you going after the attractive markets that set you in direct conflict with industry giants?  Are there niches that you could pursue that are not interesting to the larger companies? As you develop strategy your team should consider:

1.      Market segment attractiveness (including growth and profitability)

2.      Your competitive position in a market segment – what is the competition’s market share?  Are competitors already firmly entrenched?

a.       What other companies compete in this segment? In this case companies like Exxon and Shell focus their resources on exploration, looking for the big prizes.  Arena focuses on production, but the production increases that are attractive to Arena Resources are too small to concentrate on from a larger company’s perspective.

b.      What are the competencies required to compete this market? Do we have them?  Are there strategic competencies that give us significant differentiation? In Arena Resources’ case, its competency is secondary recovery from known oil and gas resources – little exploration risk but a requirement for execution excellence.  Their competency comes from their knowledge of the geology in the basin in which they work, combined with their technical skills in secondary recovery.

In order to compete and win, you must consider both market attractiveness and the competitive landscape of all of your market segments before you select the ones on which you will focus.  You will often find a segment that is smaller has less competition and will provide your company with significant growth and profitability.  In strategic planning, selecting the road less traveled may be a key ingredient to your company’s success.

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

CEOs often find their strategic plan is not strategic and not well thought out.  How can you prevent that from happening?  How do you uncover the real issues facing your company?

For successful strategic planning, don’t start cold and be sure you have a robust process.

First of all, the team should be the top management team, those reporting to the CEO who represent all areas of company activity.

Many teams simply announce a two-day strategic planning retreat and then embark on developing a strategy.  Starting cold does not let the team think about issues before they come to the meeting.

Solution: Send out a preliminary survey asking some thought-provoking questions.

• What are our top strengths?
• What are our top weaknesses?
• What issues face our company?
• What new opportunities should we be pursing?
• What challenges do we face over the next five years?

While some of these questions seem “easy”, an upfront survey allows the team to think about these answers.  First they consider the answers when they reply to the survey and then again before the meeting.  Many times, the answers to the survey will not be the same answers that they have in the meeting.  This is because they have had time to think about the questions after they answered the survey.  Having an upfront survey allows for better discussion during your meeting.

Be sure your process provides for making decisions based on information, not opinions.

In order to collect good information for decision making, we recommend a three-step process.

• Analysis of the current situation
  • Allows the team to assess where we are.
  • Allows the team to assess what topics are worthy of research prior to the next meeting where the strategies will be developed.
  • Topics for research typically include:
    • Market assessment
    • Competitor assessment
    • Other external forces: technology, suppliers, economy and regulations
    • Possible new opportunities
  • This research allows team members to develop information based on the data that has been collected rather than opinions and top-of-mind thinking.
• Developing the strategy
  • Here is where you review the research that has been collected and make strategic decisions about where the team should be focusing its time and effort.
  • This research review allows the team to have a shared base of knowledge.  Furthermore, this knowledge often uncovers areas of opportunity and issues that need to be resolved. With research, people can determine what is important and what is just a hot topic at this point in time.

• Implementation

  • Successful implementation is essential to successful strategic planning.
  • The purpose of separating the implementation from strategy development is to change the focus from strategy to tactics. In the strategy meeting you decided what you want to do during the next 3-5 years.  In addition, you decided what are the key projects that need to move forward (typically, 6-8).
  • The time between the second and third meeting allows for detailed action plans to be written (and re-written). When complete, action plans should be a clear road map of how you are going to accomplish the objective.  This plan includes actions steps, who is responsible for each step, and how much time and money each step will take.

Does your strategic planning have enough preparation so that your plan is well thought out?

In most cases, CEOs answer “no” to this question.  If you are simply having the two-day retreat and are frustrated with the results, it is time to try a more structured approach.  Get your team is properly prepared to develop a successful strategic plan.

If you’d like to learn all about a proven process, consider holding a one-day workshop on Simplified Strategic Planning.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at harrison@cssp.com.

© Copyright 2019 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

What are your strategic planning problems?  Many executives know they need a strategic plan but are left unsatisfied with their planning efforts.  Therefore, we would like to know what you find most frustrating/disappointing about your strategic planning process.

Please click on the link below to answer a short survey about Strategic Planning:

https://www.surveymonkey.com/r/strat12019

If you would like to know how to tailor the process to meet your firm’s requirements, please contact me: 910-763-5194.  Furthermore, if you’d like to try a proven process, consider holding a one-day workshop on Simplified Strategic Planning.

For more on Strategic Planning, click here.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at harrison@cssp.com.

© Copyright 2018 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

“Strategy planning is messy” declared one CEO as a team member expressed a desire for a more linear approach.  The team member was frustrated, because he couldn’t see the end game.

The CEO went on to say, “It’s okay that it is messy.  We have to consider many alternatives and new information before we funnel down and select a few things to do.”  I find that when people embark on strategy planning, they want the process to be simple and linear.  Some want the answers to be obvious.  So why is strategy planning messy?

Contemplating the external factors that impact your business – gathering information and creating a shared base of knowledge

First of all, when your team starts its strategy planning journey, it should identify the topics worthy of research.  Once the team completes the reseach, they can make informed decisions about the course and direction of the company.  This research allows the team to make decisions based on facts, rather than on opinions and top-of-mind thinking.  Typically, information is collected about:

• Core business segments – our customers
• Competitors
• Technology
• Suppliers
• Economic and Industry Trends
• Regulations
• Human resource availability
• Potential new opportunities

Once each team member completes their research, they share it with the team.  So now each team member has a foundation for decision making

Still, even with this shared base of knowledge, people interpret information differently and give different weights to the information.  But with this base, your team needs to decide:

• Which of our core businesses should get the most emphasis?
• What opportunities should we pursue?
• How can we enhance the way we differentiate ourselves in the market?
• What do we need to develop internally to get where we want to go?

The team goes through many steps to sort out these questions

The team often drills down, make selections and then cycles back.  During a recent planning session, we started out reviewing research on 14 opportunities to significantly enhance the company’s growth.  Next, we developed a profile of an industry leader, looking out five to ten years.  Then we screened the opportunities, using our research and our vision of the industry leader as a backdrop.  We easily selected the top three opportunities – by a landslide!  Next, we discussed the three opportunities and it quickly became obvious that one was not as good as the others.  What was next? Just drill down on the two? No, it was not that easy.  After discussing the two, we found that we had two ways to pursue each one.  Thus, we were back up to four.  We then looked at the benefits and costs of each choice and we were able to come back to two.  Now each of the opportunities was well developed and the team agreed that these were the ones to focus on.

Was the process pretty?  No!

Many voiced frustrations during the journey, sensing that we would never get to a conclusion.  In the end, however, all the team members embraced the process.   They were surprised that the team come to a consensus and a clear direction as quickly as they did.  While the process was messy, when it came down to selecting top picks, the list narrowed down quickly.  During the final discussions, it was able to dig deep and get to the heart of the issue.  Good information enabled them to sort through what was important and to have a deep dive discussion on the key opportunities.  By the end of the meeting, everyone was firmly behind the topics selected and ready to develop successful action plans.

But we didn’t use all the information gathered!

Yes, this is often the case; but how do you know what is important when you start?  After researching certain topics, you may conclude that a topic will not impact the strategy for this round of planning.  Additionally, a topic may not be relevant, but it will spur discussion on another topic.  Hence, team members start thinking about it to see if it can have some value now or in future planning.

The hardest part of strategy planning is what you say “no” to 

As mentioned above, during strategy planning, you will consider a great deal of information and many options. You want to choose the options that best position your company for success.  During the life of your company, you will focus in different areas to achieve success.  For instance, say you are having difficulty meeting your delivery schedules or have issues with product quality.  While innovation may be fun, if you can’t successfully produce a product, all the innovation will go unnoticed.  Alternatively, your competition will notice it and copy it.  You may have to say “no” to some good ideas until your company is able to capitalize on its innovation.  This doesn’t mean you stop innovating.  It is simply a question of emphasis.  Sometimes you need to build the foundation for growth to occur.  Unfortunately, this sometimes makes strategy planning seem messy, as people don’t see things happening that are important. Making the hard decisions as to what must come first can cause a great deal of discussion and healthy disagreement.  Through these conversations the team selects the course and direction and the key strategic initiatives for future success.  Is fixing production fun?  Enhancing quality sexy?  If these aspects are not fixed, we may not have the platform to launch our innovative products and services.

Strategy Planning: Messy, but thorough

So, no, strategy planning is not necessarily a linear process.  It allows for ideas to come in from multiple sources.  It generates discussions about multiple options, often cycling around and discussing them again.  Then, the actual strategy summarizes what the team has discussed, the course and direction for the next 3-5 years for your core business segments, the new opportunities you want to pursue and what you need to develop internally to get where you want to go.  Then you take it down to tactics – what turns strategy into action:  what are the 6-10 key strategic initiatives the team would like to accomplish in order to move the strategy forward for the next 12 to 18 months.

If you have questions about strategic planning, please contact: Denise Harrison, harrison@cssp.com

Do you think that Strategy Planning is messy?  Attend the Simplified Strategic Planning Seminar for more instruction on how to develop all aspects of Simplified Strategic Planning.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at harrison@cssp.com.

© Copyright 2018 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

Silo mentality causes conflict in an organization.  Recently, a CEO approached me to discuss strategic planning.  He knew, that to be a success, he was going to have to get rid of the silo mentality and get the team moving in the same direction.

What is organizational silo mentality?

When people refer to a silo mentality, they are often referring to divergent goals of different organizational units.  Can strategic planning help? Yes!  The goals of strategic planning require getting people with divergent viewpoints in one room to make decisions regarding the entire organization.  But wait, they have divergent viewpoints – how can this work?  It is not unusual for people to see the organization from their own vantage points – based on what they see every day.  For strategic planning to be a success, however, these viewpoints need to be shared.  Then the team becomes more well-rounded in their thinking about the organizational direction.

How do you eliminate the silo mentality?

1. Set-up a planning team with representatives from various parts of the organization.  The team will include people with a view to the customers, those that know operations, and those that know the more administrative functions. Do these various functions always see eye-to-eye?  Of course not.  These three divergent perspectives form what we call the tension triangle.
2. Develop your plan in three separate meetings:
   1. Situation Analysis
   2. Strategy Formulation
   3. Implementation

Why three meetings?

In the first meeting – Situation Analysis – you will decide what topics need research to make informed decisions.  You will look at research assignments to analyze market segments, competition, technology, suppliers, the economy and regulations. You will also develop the company’s strengths and weaknesses in small groups that have a mix of functional participants.  This will enable people to talk informally about what they see as the company’s key strengths and weaknesses.  Furthermore, and more critically, the team will hear different points of view.

In the second meeting – Strategy Formulation – you will review the assignments.  This will allow the team to develop a shared base of knowledge, sharing their expertise and learning from others.  This shared base of knowledge is important to breaking down siloed thinking and to enable everyone to make informed decisions about strategy – the direction the company will take to optimize its future results.  Once you have made the decisions around the strategy, your team will select the 6-10 strategic initiatives that will move the company forward for the next 12-18 months.

The team will develop Action Plans for each strategic initiative between meetings two and three

The third meeting- Implementation – during this meeting the team reviews the action plans for:

1. Completeness
2. Resources: do we have enough time (people)? Do we have the right people (skillsets)?  Do we have enough money?

Finally, the team will develop goals – the scorecard that will help us determine if we have been successful.  When everyone decides on common goals and develops action plans to achieve those goals, your organization eliminates the silo mentality.

If you have questions about how your team can work better as a team using strategic planning, please contact me, Denise Harrison: harrison@thestratplan.com or 910-763-5194.  I look forward to hearing from you.

Do you want to learn how to eliminate the silo mentality in your organization?  Attend the Simplified Strategic Planning Seminar for more instruction on how to develop shared viewpoints as well as all other aspects of Simplified Strategic Planning.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2018 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission