Category: Strategic Planning

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

When beauty pageant contestants are asked what they would like to accomplish in their lives, one of the most vapid answers we often hear is “world peace”.  Smart people find this distasteful for two reasons:  first, it’s not what the contestants really want, it’s what they think the judges want to hear, and second, it’s impossible.

Do you ever encounter this in your strategic objectives?  When the owner, or CEO of a company says “I want to see profit rise by 80% each year”, does someone suggest “Increase profit by 80%” as one of your strategic objectives?

On its face, the world peace objective looks very strategic. After all, we can’t argue that and 80% increase in profit wouldn’t be great, and it seems strategic in its impact. But there are three key problems with the world peace objective:

1.  It’s about symptoms, not causes.

While the SMART definition of objectives maintains an objective must be a result, it’s very difficult to act on results. The best objectives help us act toward a mid-point goal which leads to the results we want. This means your objectives will lead to better results if they at least mention the cause that you are working on.

2.  It’s completely overwhelming in scope.

Think about it:  where would you begin?  You might take the “eat an elephant” approach and tackle the objective one bite at a time, but this one could be streamlined into a single, unworkable action step: “everyone do their jobs better and get better results”. In a real-world action plan, this would lead to about 2,000 steps, which would look like an insanely detailed job-description manual that NO ONE WOULD READ or use. Sure, you might score big with it, but I see far greater success with smaller, do-able objectives.

3.  People have real trouble getting excited about it.

Think about objectives that you have seen people get excited about. They are very, very specific, and people like thinking about the result of the objective. Certainly, the CEO and CFO will be excited about a big increase in profit, but it’s much easier to celebrate the opening of a new location, the launch of a new product, or a patent on a new technology.

So, next time you hear someone suggest a “world peace” type objective, ask this simple question:  “How, specifically, could we accomplish this?” If you can break it down into three or four concrete, big things you can do, consider making those your strategic objectives instead.

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

By Robert W. Bradford, President and CEO

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

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

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

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

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

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

By Denise Harrison,  Executive Vice President and COO

Sony, the leading consumer electronics company in the 20^th century, is not having success in the 21^st century – many of its core businesses are hemorrhaging cash.  Recently the company has taken steps to right the ship:

• Cutting jobs in the PC business and putting it up for sale
• Cutting jobs in the TV business and separating it out – potentially putting it up for sale
• Separating the video game and cell phone businesses

As noted by the CEO, Kazuo Hirai, Sony is looking to rekindle the spirit credited with spawning cool gadgets in the past. (WSJ, February 7, 2014)  Sony lost focus on what made it a success – innovation in the consumer electronics space.  Instead, it held on to old technologies and old businesses that had become commodities.  And by focusing on low cost production rather than innovation, it lost its competitive edge.

Key Takeaway:

One of the hardest decisions to make in developing a strategic plan, is knowing when to fold a core business.   When looking at a mature segment of your business, consider the following questions:

• Has this business become a commodity business where purchasers are only looking for low price?  This means there is little price differentiation resulting from additional features and/or additional service.
• Does your company still have a competitive advantage in this business?  (For example: Blackberry evaluating its skill set after the iPhone was introduced; can they still compete in the cell phone market?)
• Will you get higher return by investing in other areas – specifically areas in where your competitive advantage is better defined?

Making the transition away from a formerly attractive core business to new areas for growth is a difficult one.  Still many companies have faced this dilemma and made the transition to a new core. (DuPont is a good example.)  Will Sony be able to make this transition?  The jury is still out.

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

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

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

M Dana Baldwin, Senior Consultant

When your organization does strategic planning, what strategies do you consider for each of your market segments?  It is likely that you may select different bases for competing in different segments, because your competitive atmosphere is different in each segment, and what you bring to the market is different in each segment.

The two approaches to strategies we are going to examine are: differentiation (specialty) and low cost strategies (commodity).  In a low cost strategy, the true winner is the company with the actual lowest cost in the market place.  For example, if two companies make essentially identical products that sell at the same price in the market place, the one with the lower costs has the advantage of a higher level of profit per sale.  By having this advantage, the low cost company is able to do a number of things to maintain or increase its market share.  It can invest more in marketing.  It can pay for better positions in retail stores relative to its higher cost competitor.  It can lower price, thus squeezing its competitor’s margins and profits.  It can invest more in research and development, allowing it to improve the performance of its product.  The bottom line here is that the higher cost competitor is allowed to stay in the market at the sole discretion of the lower cost competitor, because, if it so choses, the lower cost competitor could drop its price to the point where the higher cost competitor would have to sell at a loss in order to remain in the market.  Eventually, the higher cost competitor could be driven out of that business.  You need to understand what percentage of the market is buying solely on price.  This often happens with mature products.

In the low cost strategy, a company must have a thorough understanding of costs and how to continually reduce them.  The company must be willing to standardize its offerings in order to manage costs, which implies that exceptions requested by prospective customers must be limited or excluded in order to keep costs down.

The other approach we are examining is differentiation.  Differentiation involves being perceived by the market place as having a relatively higher value to the customer or user than the offerings of its competitors, and often at the same or even higher pricing levels.  These are different customers – not buying just on price.

In a differentiation strategy, the company must totally understand its customers’ needs and preferences.  It must be driven to innovate to continually address those wants and needs.  And, it must build its brand to maintain its position and visibility.

Years ago, Sony sold the Walkman radios and disc players at a higher price than any of its competitors, yet dominated the market place.  The reasons for this seemed to be that they provided the highest quality, most consistent performance and the best sound delivery in the market place.  The interesting thing here is that, due to both volume and to good design and engineering of the products, Sony also was, for a very long time, the low cost producer as well.  This gave Sony the distinct advantage of having sufficient resources available to effectively out-market its competitors, as well as having the resources to do more product development and refinement to keep Sony at the forefront.

The Sony example is actually a combination of low cost and differentiation strategies, which, done well, can be extremely effective in the market place.  To do this requires a high level of commitment to both approaches, but the benefits can be outstanding.  For years, Sony was by far the leader in personal musical devices, with the highest volume and profitability.  Eventually its position was overcome by advances in other technologies like the smart phone and MP3 players, and, most likely, Sony’s eventual loss of concentration on what got them to the top.

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

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

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

By M. Dana Baldwin

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

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

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

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

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

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

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

To learn about Gaining Market Share, click here.

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

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

By Robert W. Bradford, President and CEO

Recently, I discussed a simple test to tell whether an objective you set for your organization is truly strategic, and highlighted a common type of non-strategic objective, the incremental objective.  Today, I’d like to cover a similar type of objective that is unfortunately very common – the accounting-driven objective.  Many management gurus will tell you that profit is the only measure of whether you are managing well, but the reality is much deeper than this.  This is because profit is merely a simple way to measure whether you did the right things well after the fact.  Before the fact, you can’t always tell if you are doing the right thing with accounting – you can only guess (even if it is a very educated guess).  This is, essentially, one of the main problems with accounting-driven objectives.  They are objectives that, strictly speaking, only measure the accounting outcome of your endeavor, and not whether anything real was accomplished.

Take, for example, a company I worked with many years ago who set a very simple objective:  increase profit by 20% next year.  On the surface, this looks like a great objective – it is a result, it is measurable, and it is achievable.  The objective has three key problems, however:

1.  It’s just too big – a bit like “Achieve world peace” – and there are a nearly infinite number of ways to get it done.
2. It’s possible to achieve with no strategic improvement at all.
3. Most managers would have no clue how to tackle writing the action plan for this.

In the following year, the company did improve their profits by 20%.  What bothered me was that about 10% of this profit improvement came from disposing of an outmoded asset.  Now, this was a great thing to do, no question – but it had no other strategic benefit, other than the financial improvement.  The next year we introduced a great new product line that disrupted the company’s industry and put them on track to a dominant market share position, and we could have started on that a year earlier if we had put that objective in the place of the accounting-driven one.

Remember, accounting is simply a way to measure how you managed financially with an activity.  It is possible to do a great job on the operational objective – such as introducing a new product – and still have dismal financial performance, perhaps because of a mistake in pricing or distribution arrangements.  The best strategic objectives measure both whether something happened and the positive intended result of that event.  If you focus too much on the measurement, you run the risk of doing strategically inappropriate activities for short-term financial improvements.

Have you had this experience with accounting driven objectives?  A disciplined examination of your objectives can prevent this frustration in the future.  A good way to test for this is to ask “What is the core strategic benefit of this objective?”  If the answer is simply a financial measurement, you may need to take a step back and define the objective in terms of non-financial strategic benefits.

If you are interested in hearing more about setting objectives and executing to achieve your strategy please listen to our webinar on Strategy Execution by clicking here.

One of the issues that comes up in the second session of the Simplified Strategic Planning process is whether your objectives are “strategic enough”.  Strictly speaking, objectives are only strategic if they have a significant impact on what you sell, how you sell it, or how you beat or avoid competition.  A set of well-executed, truly strategic objectives will definitely move your organization in the direction you envision in your strategies.  We encounter several kinds of objectives, however, which are not strategic – and in some cases, end up wasting the precious management resources of an organization.

The first type of non-strategic objective is the incremental objective.  It can usually be spotted by watching for objectives that are simply expressed as an increase in a key metric.   While increasing your most important metrics – especially those which measure your achievement

of goals on page 6.2 – setting an objective that is simply an increase in one of those metrics has two problems.  First, it can generate a lot of very non-strategic (and even counter-strategic) activity to hit the objective, and secondly, it can be very hard to write a good action plan for.  A much more useful approach to this, especially if you are repeatedly failing to hit a key metric, is to set an objective to remedy this issue in a specific, strategic way, such as introducing a new product/service or changing processes.  This will assure that hitting the objective will have a significant impact on one of the three strategic factors – what you sell, to whom you sell, or how you beat competition.

In my next post, I’ll discuss the second type of non-strategic objective – the accounting-driven objective.

By M. Dana Baldwin

What are the characteristics of a good leader?  While there are many fine attributes that a leader should have and exhibit, what leadership comes down to is the ability to interact and lead people to accomplish tasks which lead to the success of the organization and of the individual.

In a recent article, Jack Welch and Suze Orman listed six attributes, phrasing them in the negative (Don’t be…).  When I reflected on the list, I realized that the approach, while thought provoking, left something to be desired, at least in my humble opinion.

My thoughts after my cogitation turned to the positive: What would be the characteristics of a successful leader?  In no particular order, I came up with the following:

Commitment to values:  A successful leader should have high ethics.  Yes, people with lower levels of ethics can succeed for a while, but after a while, the good people will see through any façade and likely end up leaving for places with higher ethical standards.  This attribute includes both personal and professional integrity, mixed with true humanity.  A leader should care enough about the people with whom he or she works that those people feel the support and enthusiasm of the leader in each of them as a person as well as an employee.  In my opinion, this could well include the willingness to have fun while working.

Ability to learn and adapt: Everyone ought to be open to new ideas, concepts, approaches and processes.  This is especially true of the leader.  The leader sets the tone for the organization, and if the leader is close-minded and not willing to listen and learn/adapt, the organization likely will suffer.  Look at the automobile industry.  The Big Three for many years didn’t listen to what I call “the car guys.”  Especially in the 1970s, they made cars up and down the line that looked the same and were produced solely for the lowest cost, not what the market wanted.  As a result, the imports became transplants and provided what customers wanted.

Leaders need to be decisive, to be willing to make decisions when they should be made.  Inherent in this, however, should be the willingness to allow subordinates to make decisions when appropriate, instead of reserving the right to make all decisions.  This allows subordinates to grow and mature, giving them confidence and experience.  When the foreseeable consequences of a wrong decision are small enough, a leader might consider allowing a bad decision by a subordinate to go at least part way to completion in order to show what should have been considered in making the decision originally.  The ability to allow subordinates to make mistakes and to learn from them is a necessary part of growing and maturing.

Be real:  People can spot a phony person a mile away, if not at first, later when the consequences of the phoniness can be seen.  Leaders need to be genuine people.  They need to live what they preach, and show, by example, that they are actually the kind of person they are portraying in real life.

Good leadership can overcome a lot of ills within a company, and bad leadership, sooner or later, will take the energy, vitality and life out of a company.  One important aspect of good leadership is to assure the continuing stream of competent, able, true leaders in an organization.  If you want to improve your leadership abilities, please contact me at baldwin@cssp.com so we may discuss how coaching and teaching might improve those abilities and your company’s results.  Often this is accomplished within the framework of Simplified Strategic Planning.  A significant component of strategic planning often is succession planning.  For more information on this subject, please listen to my recent webinar: Succession Planning.

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

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