Category: Strategic Planning

Continuing the discussion we started in the prior posts, the third main reason why you may be disappointed in your Balanced Scorecard program is fundamental to the limitations of the scorecard itself.

III. Your Balanced Scorecard isn’t driving action

This is most likely true if you are doing Balanced Scorecard instead of true Strategic Planning in your company.  Strategic Planning focuses attention on the things that will make a difference for your company. Balanced scorecard processes tend to rely on employee understanding of the links between measurables and reality – these links rarely motivate employees as well as will understanding the underlying issues. Your CFO or other technical managers may quickly grasp the relationships – but true strategic competency requires broad participation and support from all parts of the company.

Even with excellent training and support throughout the company for Balanced Scorecard, you are likely to have issues if you are not also driving execution through a proven tool for monitoring and accountability on actions (rather than numbers). The action plan process in Simplified Strategic Planning is an excellent approach to doing this. There are several keys to making implementation work. Most important is to have rock solid and unified support for implementation accountability at the top levels of your company.

IV. The change your business needs involves a more fundamental shift in strategy

Simply put, you can’t measure your way out of some strategic issues. To use an analogy, let’s say you are part of a team of jungle explorers, and you are measuring your efficiency. You might look at “miles traveled per day”. Under many circumstances, this might get you where you want to go. But there is no measurement around this that addresses the more fundamental strategic questions – such as “Are we in the right jungle?” and “Should we be in a jungle in the first place?” No matter how well you perform on your measurements, being in the wrong jungle will prevent you from succeeding – and you won’t even ask the right questions if you stay completely focused on any set of metrics.

To sum up – a Balanced Scorecard is a useful tool, quite similar to the “Measures of Performance” we have been teaching since 1981. More importantly, measurement can drive strategically useful behavior, so a Balanced Scorecard program can yield excellent results. But you need to be aware that no one approach can solve all of your business problems, and there is no substitute for a robust, formal Strategic Planning process.

Of course, the best thing to do about getting the strategic change and the results you want is to do good Strategic Planning.

For more ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

By Robert W. Bradford, President & CEO

Last week, I was talking with someone about their insurance agent.  She was absolutely thrilled at how the agent handled a recent car accident, saying “She made everything so much simpler!”  It got me thinking about simplicity, and how it works in companies we like – and those we don’t like.  What hit me was that the way your company handles simplification will put you clearly into one camp or the other, and it has a lot to do with the attitude you have about your business, your employees, and your customers.  These attitudes will determine how you simplify – and whether that simplification will work to your advantage.

Some might read the above statement and say “Hey, simple is always better, right?  Isn’t any simplification good?”  The answer is a resounding no.  For example, let’s look at a complication in the airline business:  sometimes people buy tickets and end up wanting to switch flights.  In the worst case, this will cause lost revenue as an airplane ends up taking off with an empty seat, because the airline was unable to resell the reserved space.  This looks like a good situation for simplification – and most airlines ended up making their operations simpler by charging a stiff change fee for the most popular types of tickets.  Sure, you could buy a refundable ticket for 50% to 100% more, but most people don’t do this because it amounts to hundreds of dollars.  What has happened here?  There was a complication – sometimes people change their travel plans – and the airlines responded with a simplifying policy – if you change your ticket, you will spend a lot more money.  On the surface, this looks like a perfect approach, but look closer – whose life was simplified?  Not the customer’s, that’s certain.  And, if you look even closer, the lives of ticket agents and people who work the phone lines for these airlines weren’t improved, either.  The improvement was mostly for the people who seek to assure a constant, predictable stream of income for every seat on every route flown by these airlines.  This isn’t a terrible policy, and it’s not irrational, but it moves the complication from the accounting and operations departments into the customers’ lives.  As a rule, this seldom works for a simple reason:  if enough competitors decide they are happy to take the complication on for themselves, it creates a huge disadvantage for those that stick with pushing the complication onto the customer.  In other words, by simplifying your life – or the lives of people in some departments in your company – you create a serious competitive disadvantage for your company with some customers.

Does this mean you should always take on complications for your customers, and seek to simplify their lives for competitive advantage?  No – but it does mean you should seriously examine all of the “normal” practices in your industry to see if you can create an easy win by breaking the “rules” that actually annoy your customers.  Obviously, it pays to assess the costs and benefits involved.  In my mind, a change like this requires data-based analysis and testing.  But never shy away from it – picking up a few points of market share, or even dominating a segment of customers, could well be worth the complications you bring inside your company to simplify the lives of the people who give you money every day.

For more ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

By Robert W. Bradford, President & CEO

Following up our prior discussion, another set of limitations of the Balanced Scorecard includes:

IIa. You are measuring things because they are easy to measure

This issue reminds me of the old joke about the man looking for his wallet on the sidewalk.
Passerby: “Did you lose your wallet here? I can’t see it…”
Man: “No, I lost it in the alley back there”
Passerby: “So why are you looking out here on the sidewalk?”
Man: “Because the light is much better out here.”

There is only one thing to say about this: the easier things are to measure, the harder it is to create real strategic advantage using the measurement. We need to examine the reality underlying our strategy with our measurements, unless we want to see a bunch of obvious numbers without actionable conclusions.

IIb. You aren’t measuring things that really matter

There can be lots of reasons for this issue. Perhaps you are measuring something that has little or no impact on your competitive position. Ask yourself: if ONLY this number improved, would we really be better off? In many cases, the numbers you look at overlap with other numbers. To use a simple example from financial measurements, it’s somewhat redundant to look at both gross margin and net profit, because net profit is simply gross margin minus fixed costs and a few other expenses. I won’t tell you which you should look at in your own company, but I will tell you it’s rare that a company should include both numbers in the five to ten core metrics in a streamlined Balanced Scorecard. This means you need to pick on, understand that it (like all metrics) will have the flaw of not being complete, and move on.

Another reason why companies sometimes measure things that don’t really matter is that the metric chosen makes the company look good. At worst, this can be a case of throwing in a number because it can be counted on to give us good news even when the other numbers are telling us bad news. Again, if the number does not affect your competitive position or your ability to succeed, consider eliminating it from your scorecard.

There is an even more insidious problem associated with measuring things that don’t matter – if this is your company’s problem, you are very likely shying away from measuring things that matter very much. Sometimes this is because managers fear the implications of managing to certain metrics. If managers fear measuring profit per employee, for example, because it might lead to staff reductions, you should be asking yourself whether this fear is useful. There are many industries where staff reductions are a vital strategic management tool – failing to consider them when appropriate can be a major strategic error.

The final points of this analysis will be found in the third installment.

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

Note:  This was previously published in Compass Points

Some time ago, I had an interesting conversation about the Balanced Scorecard with a friend who works in a large organization. His comments reminded me of so many comments I’ve heard about Balanced Scorecard and Strategic Planning that I went back through my notes to see what common threads underlie the biggest issues companies have with Balanced Scorecard initiatives.

To begin with, Balanced Scorecard projects are no more Strategic Planning than budgeting is. Sure, you can use a scorecard to drive certain fragments of the Strategic Planning process, but it is still a fragment of what is needed to create the right strategic change for your organization.

Based on feedback from the companies I’ve met through my Strategic Planning seminars, speaking and client work, here are the main reasons why you might be dissatisfied with your Balanced Scorecard program: 

Part 1 will discuss – In this post:

1. You have too many measurements 

Part 2 will discuss – In the next post:
II. You are measuring the wrong things
a. You are measuring things because they are easy to measure
b. You aren’t measuring the things that really matter

Part 3 will discuss – In the third post:

III. Your scorecard isn’t driving action
IV. The change your business needs involves a more fundamental shift in strategy 

I’ve explored each of these in my blog:  http://simplifiedstrategicplanning.blogspot.com/, following is a compilation of the main points.

I. You have too many metrics in your scorecard

This is most likely true, if you are doing Balanced Scorecard in your company. Why do I say this? There are four reasons you have probably put too many metrics into your Balanced Scorecard.

1. A bigger document = better document:This is a holdover from when we had to write five page papers in high school. We are all now old enough to know that quantity does NOT equal quality, it just makes work and wastes paper.
2.  You can’t decide which numbers to throw out:You know you should have only two or three financial measurements, but there are so many good ones from which to choose. Is the solution to keep them all? Only if you want to make people’s eyes swim and make sure only the accounting types really read your scorecard numbers.
3. You want to be inclusive and have a metric for everyone:After all, if Bill in the mailroom doesn’t have a metric, how will we include him in our process? This is a hard one, because inclusion does create value – but let’s have a tactical number for Bill…and avoid pretending that our company should have a mailroom strategy. Either that, or admit that your Balanced Scorecard process is tactical rather than strategic.
4. You don’t want to exclude certain measures because someone says you “have to” watch them: I hope you’ll immediately explore what will happen if you do the exact opposite. The future belongs to the unconventional company, and you are seriously conventional if you do everything people say you “have to” do…

And what are the reasons for having fewer measures? There are only three:

1. It’s less work
2. It’s more effective
3. More people will read it

In our second and third installments, we will finish the discussions started here.

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

By M Dana Baldwin, Senior Consultant

Most people know that in order to help an organization focus on its future and to build plans/strategies to improve market share, profitability and competitive stature, that a company should go through a formal, well-organized planning process which will result in specific objectives and actionable strategies.

But how many companies should take the objectives and strategies and use them as the back bone of the planning for each individual area of the company.  For example, in looking at your core business strategies, defined as the strategies which will drive the components of your principal business sectors, do you simply say to the Sales group, here is what we have planned on doing, now go do it?  Or should the Sales group take the core business sector strategies and do a more structured plan to enable them to carry out the strategies that have been selected at corporate?

For example, let’s assume your company has six significant core business sectors.  How do you decide what people and how much investment to make in each?  There is guidance in the strategies selected in the strategic planning process, but you may have a multiplicity of products and services in each core business sector.  Which ones get more attention and which ones are somewhat left to fend for themselves?  Which ones can generate higher profitability, meaning it is likely we should be emphasizing them more than those with somewhat lower profitability?

Compounding the situation, Sales will need to interface with Production, to assure the company has the ability to actually produce the volumes of each product necessary to reach the overall goals.  If Sales doesn’t do an effective job of planning how to approach the market, and if Production can’t meet the projections of Sales, what kinds of chaos might occur?  Strategic planning is a necessary part of the overall planning process both at the corporate level and at the operating level, so that the end results will be as profitable and as feasible as possible.  By doing a good job of planning at this intermediate level, the organization stands a better chance of reaching the objectives and goals of high level strategic planning.  If your company is not reaching your strategic goals regularly, we can help!  We will look at your organization and structure a process that will connect the corporate level and the core business levels.  Contact me at baldwin@cssp.com or at 616-575-3193 to discuss how to better integrate your planning throughout your company.

For more information on how to get your people to help make your strategies work, watch our webinar Strategic Alignment : http://www.cssp.com/strategic-alignment-webinar/archive.php

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

© Copyright 2015 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

By Denise A. Harrison

Note: This was first published in Compass Points July 2006

Over the last twenty years, your company has earned the number one market position – time to relax and enjoy? No! The mass market is now fragmenting as consumers become more sophisticated. Niches are carving up pieces of the lucrative mass market and consumers are becoming more educated, picky and even downright snobby. What should you do?

1. J. Gallo faced exactly this dilemma as it was developing its strategic plan for the 21st century. The growth in the wine market was going to come from various niches as the wine drinking population became more savvy and had more disposable income to spend on wine. Gallo’s mass market image was fine for the mass market, but the image did not play well in the new image-conscious niches. The tried and true strategy of the past would not work for the future.

Knowing that they could not leverage their brand, they sought ways to leverage their knowledge of the wine industry. As the WSJ reported on February 8, 2006, Gallo decided to create a stand-alone brand: Ecco Domani, a Pinot Grigio wine made and bottled in Italy. To capitalize on the wine’s Italian origin, marketing decided to use the Italian fashion industry to develop a trendy image for the brand. They set up the Ecco Domani Fashion Foundation awarding grants to emerging designers. Publicity came fast and furious – the major networks covered the awards, Ecco Domani was on the short list of invitees to fashion’s promotional events and given access to fashion and media’s current luminaries. Pairing wine with fashion enabled Gallo to create a successful new brand – who knew that mass marketer Gallo really owned the label?

What next?
When a strategy works – repeat! Gallo continues to create stand-alone brands to capitalize on the trendy and often fickle wine market. Did you know the following were really Gallo brands? Red Bicycle from France and Black Swan from Australia.

Lessons learned:

1. If you are a dominant mass market player watch out for market fragmentation as consumers’ tastes and preferences mature. Keep looking for emerging trends so you do not open the door to niche competitors.
2. If your image is mass market, consider a stand-alone brand when you approach a niche market.
3. This niche market will often require different marketing techniques than the ones that have been successful in the mass market – consider a variety of creative approaches.

As markets grow, they often fragment into specialized niches. Use strategic planning as a way to identify and capitalize on these emerging trends.

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

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

© Copyright 2015 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

By M. Dana Baldwin, Senior Consultant

Note: This article was previously published in Compass Points in June 2007

Earlier, we discussed one way to compete with a lower cost, lower price competitor: differentiation — defined as finding a significant point of difference, which will allow you an ongoing competitive advantage. However, sometimes differentiation is not enough. Just ask the airlines how well it has worked.

For example, some companies tried attacking a low price competitor by forming low price subsidiaries. In order to have this work well, there are some basic principles which should be followed.

First: a company must recognize that this strategy will be successful only if the original company will become more competitive as a result of setting up the low cost subsidiary. Many airlines tried this approach, but failed because they did not successfully separate the subsidiary from the parent.

Second: The lower cost subsidiaries should be segregated from the higher priced parent to reinforce the differences. United serviced the United Shuttle and later, Ted, with the same ground and reservations staff, and their high costs, which really prevented either from being successful.

Third: The subsidiaries must be launched with a realistic expectation that they are really in business to make a profit. If they are simply there to occupy the space opposite a low cost competitor, and are not intended to make profits, it is highly likely they won’t.

Fourth: The subsidiary should be very limited in what it is intended to do. Focus on the specific needs of the market and limit what the subsidiary will do to only what is necessary to make it profitable. The subsidiaries’ resources should be optimized for its own operation, and not be the same as the parent’s.

The subsidiary should be able to compete in the market with its parent as well as the other suppliers. Potential synergy in the combined strategies of parent and subsidiary is the positioning of the sub can help customers realize the added value of the parent’s products and services.

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

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

© Copyright 2015 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

By M. Dana Baldwin, Senior Consultant

How can you compete with a low cost, low price competitor? Let’s discuss price wars: They usually don’t work! When your company is competing with a lower cost competitor, you must realize they can sell and make a positive contribution to their bottom line at or below a price where you will break even or lose money. All a price war does is to lower the profitability of everyone in the market segment.

So, how can we compete?  If we are serving different parts of the market, and if it is highly unlikely that our low cost competition will enter those segments, we can probably continue to do what we are doing and not worry too much about the low cost entry.

If we assume that this lower cost entity will eventually come after the segments we serve, or, is currently in our chosen markets, what can we do? The answer is essentially the same in either case.

Often, the first line of defense will be building up the differentiation between their products and services and ours.

You must be able to persuade customers to pay for the higher value we provide.

To get these added features and benefits, you must continually introduce new and innovative products/services.

You must bring your costs in line with the level needed to compete effectively and to support the innovation and development you are pursuing.

These three must be pursued in concert with each other.

What will this mean for your company? Start with an objective analysis of where you stand relative to your competition. Knowledge of your markets needs and preferences should guide your future course and direction in your strategic planning.  A good strategic plan is a necessity when a new player hits your markets, so you may react effectively to defend your position, and to determine where you need to go to remain viable and profitable.  We can help you to develop a realistic, actionable strategic plan.  Contact me to discuss how we may help your company.

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

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

© Copyright 2015 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Note: This article was previously posted in Course and Direction.

People make a lot of the SWOT analysis in strategic planning. As a rudimentary approach to thinking about strategy, the SWOT works pretty well. Decades of experience has shown us that great strategy requires much more focus on strengths and opportunities.

There is so much more to great strategy than a simple SWOT analysis. Sure, it’s a great buzzword, but I’d much rather see a strategic plan built around the strategic competency work of C.K. Prahalad and Gary Hamel. Why? There are three main reasons. First, the SWOT methodology creates unnecessary friction around the weaknesses and threats. Second, SWOT-based strategies seldom push the management team hard enough on creating a truly distinctive competitive advantage. And third, there has been little, if any, effort put into making the SWOT analysis more data-based (by most practitioners).

Interestingly, as we have put more and more emphasis on competency-centered strategic planning, we have naturally found that the “W” in SWOT — weaknesses — has become an optional exercise in most companies. This isn’t to say that you should never examine your weaknesses — just that strategic awareness of competencies is far more useful. For example, McDonald’s would be far better served focusing on the convenience of their offering than by attempting to fix the things people dislike about McDonald’s food. This is because many of the things that put McDonald’s ahead of their competition have nothing to do with qualities like healthiness and refined taste. Getting slightly better marks on healthy eating is unlikely to score a big win for McDonald’s over a vegan restaurant. Being slightly more convenient, on the other hand, will definitely get people choosing McDonald’s over Wendy’s.

What does a competency-centered strategic planning process look like? The core of the current approach to Simplified Strategic Planning is well-suited to recognizing, building and exploiting competency. It’s critical that the team be asked to examine and consider possible competencies in the first (situation assessment) meeting, then return to those candidates and choose one to build the strategies around in the second strategic planning meeting. The team should select most objectives for implementation to do one of two things: (1) Build the competency (by increasing your skills or increasing your uniqueness with those skills) and (2) Exploit the competency (by applying it to gain advantage in the marketplace). This will lead to much of the third (execution planning) meeting centering on activities that, while they may appear tactical, will create strong competitive positioning.

A side benefit of this approach is that strategic alignment becomes much easier to attain in organizations that build their strategy this way, since the competency and related strategies and objectives are clearly framed and easily communicated. This means that everyone in the organization will have a clearer picture of how their work contributes to the strategic success of the organization. If you want everyone pulling the company in the same direction, this is clearly a useful result!

So why not just toss out your old SWOT analysis if your strategic planning isn’t working for you this year? I think this is a darn good question.

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

By Robert W. Bradford, President and CEO

One of the most vexing issues encountered in strategic planning is a focus on the negative, especially threats and weaknesses.  Obviously, we’d all like to avoid having weaknesses, but let’s face the truth:  no matter how hard you try, or how much you pretend, every organization has weaknesses.  Greatness never comes as the result of eliminating weaknesses for one simple reason:  it’s impossible.  Beyond that simple fact, making corrective action beyond a certain point an inevitable waste of time, attempting to correct weaknesses can do more harm than good.  This is because many things that make an organization distinction are inextricably wrapped up in attributes which also have a dark side.  In other words, great strength is often the result of a unique way of managing weakness.

By embracing the weakness, and owning the strength it inherently brings, many organizations can find a path to distinction that is unavailable to their pretentious competitors, who act as though they can do no wrong. As customers, we often recognize these organizations as more authentic, providing an unusual offering that their bland competitors are unwilling to embrace.  This is why Apple products are unapologetically expensive, Southwest Airlines is enthusiastically cheap, and major cultural and sporting events are often ridiculously inconvenient.  We buy these products and services not in spite of their weaknesses, but to some extent because of them.  This is because the underlying weakness holds the seeds of a greatness that only brave competitors are able to embrace.

How do you embrace your weaknesses?  Is there a market-beating strength hidden inside them for you to embrace?  For more about strengths and weaknesses, please view Strengths and Weaknesses, a webinar by M. Dana Baldwin.  Click here.