Principle 2: Focus on Achieving Goals (Item 2)
Clear direction allows organizational alignment and a focus on achievement
of goals.
Alternatively: Mutually agreed plans translate organizational direction
into action.
Your strategic plan must address meeting the needs and expectations
of all your key stakeholders (i.e., owners, customers, company, employees,
community, alliance partners).
The Goals and objectives must add value to all the stakeholders in
an appropriate balance.
Good planning requires that you obtain input from your major stakeholder
groups:
- Shareholders or owners
- Customers
- Company
- Employees
- Community
- Alliance partners
For all of them you are asking, "what do you want us to do"
and "what is your picture of the future and our part in it".
There may be conflict between these demands. Principle 10 (`Value
for All Stakeholders') expects the company to provide a balance
between the value demanded from the company by the various stakeholder
groups. The balancing process begins here at the input stage.
This input should be obtained constantly all year round and especially
immediately before major strategic planning activities.
Specifically, from each stakeholder group, executives need the following
information:
- Owners and shareholders: the required profit, rate of return,
return on investment, dividend and reinvestment into the company
- Customers: expectations about new products and services;
rates of innovation; extensions to the product (especially for things
you usually don't consider to be part of the product or service; such
as financing and delivery options); how you intend to address the
things customers dislike about your products and services
- Employees: the processes that require fixing and how to fix
them (you will see in Principle 4, `To Improve the Outcome, Improve
the System', that usually the employees usually know what needs
to be fixed to improve system and processes to get better results,
but they lack the power, authority and resources to fix them); safety
systems to be fixed; impressions of customer expectations and requirements;
perceptions of how you are sticking to company values and ethics;
perceptions of whether they are enthusiastic about the company
- Community: perceptions that the company is a good corporate
citizen; impending regulations (these usually indicate the community
cannot trust the industry or company to self-regulate); unintended
consequences; things the community dislikes about the company
- Alliance partners: definitions of which processes and systems
you will jointly manage; how you can help each other improve the services
and products you provide each other; how products and services that
you and they are about to release will affect each other; how processes
and systems that you and they are changing or about to change will
affect each other.
Behaving strategically is an important differentiator between excellent
companies and those not so successful.
Companies that make an effort to be strategic do significantly better
than do those that remain in a reactive mode.
Most companies remain at the level of just reacting to the daily demands
of their customers or threats from their competitors. This is certainly
easy to understand. Finding time to do more than meet daily demands
is the fundamental challenge to all people in companies.
We now know that not finding time for strategy is a major reason that
businesses fail. Companies must be `systematic' in development of strategy.
A strategy is how you intend to approach an issue. Something you plan
to do to reach a goal or objective. It could be how you intend to reach
your Goal, meet the `necessary conditions', address all 10 Principles
for Business Excellence. Strategies are bundles of actions. For example,
in your attempt to make money, you may decide to position your company
to address a particular market, or invest in technology to reduce your
cycle time and reduce errors, or follow your competitors rather than
lead them into new products and markets. All these are strategies.
You will need strategies for all the things that are important to your
company. At a minimum, you will need strategies to address your main
risks and the factors that are essential to your success – both
short and long term.
You should know what your company is trying to achieve – its purpose
and goals for success. You should know what your company stands for
– its values, beliefs, ethics and how these will influence your
decisions. You should have systems, structures and methods to put your
strategies into action – to implement them – and to ensure
that everyone who should be doing them is doing them. Measure this if
you can. You should measure how well other people think you are sticking
to your values. You should measure your progress in reaching your goals
and targets alter your approach (strategy) according to those results.
It is very useful to remember that all strategies are `experiments'
– ie, an approach to reach a desired outcome. No matter how tried
and true it is, who has done it before or where it came from, every
time you apply a strategy, it is an experiment to see if you can reach
your objective. When you think of strategies as experiments, you approach
them differently. You don't cling to them and you want to know if they
are working – are they achieving the results you want? What is
stopping them from working?
Just because something is popular, does not mean it works. Many strategies
do not work, yet people continue to adopt them. For example, eating
carbohydrates to get thin is the strategy most people use following
advice from nutritionists. However, they continue to get fat. Overwhelming
failure has not stopped the experiment.
If what you are doing is not leading you towards your Goal, it is leading
you away from it. Or, it is consuming your scarce resources and stopping
you from working towards your Goal.
You could develop strategies in two ways: frameworks and scenarios
– and you need both.
You can use a framework help organize your thoughts into cohesive strategies.
There are many very good frameworks and it is not important which one
you use. For example:
- Goldratt's Goal and Necessary Conditions framework as discussed
above
- A customer focus framework
- Porter's Industry Analysis framework of Differentiation, Cost leadership
or Focus
- The 10 Business Excellence Principles described here
- One of the Business Excellence Frameworks (e.g. MBNQA, EFQM or ABEF)
- Goldratt's Constraints framework (i.e., improve throughput while
simultaneously reducing inventory and operating expenses)
- A risk assessment framework (described later in this Principle)
In order to be comprehensive, it is a good idea to use several frameworks
in combination. You do not have to be exhaustive and hunt for every
conceivable framework. Most companies do not have the time. And, it
is not possible to be complete.
The trouble with `framework strategy development' is that it assumes
that you know in advance what you are doing. Many management writers
argue that this type of strategic planning is a waste of time. The argument
often flows from the observation that when company look back on the
clever things they did to get from some past position to their successful
present, it looks as though `strategy' happened. The trouble is that
the world does not work in reverse. When you look forward from any point
in time and consider the decisions made in the context of what was happening
at the time, it looks more like bumbling around than strategy.
You are trying to avoid four things like the plague. Each of them spells
doom for companies:
- React response only – the phone rings and we do it because
our customers want it
- Shopping list planning – doing a whole lot of things without
any apparent reason.
- Adopting strategies that are not in keeping with the Goal and necessary
conditions
- Not learning from what you have done or always trying to do it better
Building for the future includes a willingness to make long-term commitments
to your key stakeholders – shareholders, customers, employees,
the community, alliance partners and suppliers.
Long-term commitment include:
- developing your employees and building long-term relationships with
them (Principle 7 `Enthusiastic People')
- building long-term relationships with your alliance partners and
suppliers (Principle 4 `To Improve the Outcome, Improve the System')
- developing and maintaining your company's core competencies (Principle
3 `Customers')
- fulfilling your public responsibilities (Principle 9 `Value to
the Community')
- developing long-term relationships with key customers (Principle
3 `Customers')
When the market is moving quickly and it is not usually clear what
will work, excellent companies throw a lot of strategies and good ideas
at keeping moving towards their Goal. When should you stop? Probably
never.
For every change: what worked before the change probably did not work
after and huge numbers of opportunities suddenly open on the other side.
Options close off behind you and open in front.
Of the thousands of possible options, what should you take on? Whatever
you can afford to do.
Your company is faced with the same problems of choice (and it may
be facing the same life and death decisions). Many classes of strategy
have proponents who say they have the true and only way. You cannot
afford to choose one and not the rest. The one you choose might not
work for you. Similarly, you cannot afford to do them all.
Lewis Carroll's "Through the Looking-glass" has a wonderful
story about Alice and the Queen running as fast as they can go - just
to be able to stay in the same place. The business world today is like
that. You have to keep moving as fast as you can just to be able to
keep up. Staying still, or thinking that your success from yesterday
will see you through today is dangerous fantasy. Be agile and flexible.
Develop lots and lots of options. Keep moving!
Strategies and good ideas that worked last year may not work any more
— because of technical innovation by your competitors, changes
in demands from the market. There are thousands of examples of changes
that required major changes in strategy. Here are some obvious examples.
In warfare, think of the strategies that worked before and no longer
worked after such obvious technical changes as: stirrups on horses,
gunpowder, rifles, aircraft. In transport, before and after: automobiles,
aircraft. In communications, before and after: telephone, radio, television,
word processors, e-mail, the Internet, mobile phones, faxes, WAP. In
what customer saw as normal for their lives before and after electricity,
television, microwave ovens, washing machines, refrigerators, automobiles.
In every type of thing that humans do, the rate of change is enormous
– in sport, commerce. We take for granted today what we could not
do last decade.
These are examples of big jumps. There are even more examples of smaller
jumps that result for example from a change of staff, a change of CEO,
a takeover, a competitor rapidly growing in size or collapsing.
Agility and flexibility may seem strange words to use about companies.
However, being agile and flexible is essential. Just as you cannot remain
complacent about ideas that have worked in the past, you must be adaptable
to new ideas, technology and learnings and responsive to the demands
of your stakeholders and changes in the market. A company's agility
and flexibility is expressed by its thirst for knowledge and learning,
its dissatisfaction with being where it is, its drive and initiative.
It is about overcoming the inertia of the past in order to respond to
the needs of today and tomorrow.
Strategic planning activities should be scheduled at least once and
preferably twice a year. In rapidly moving or start-up markets, strategic
planning could be as often as weekly.
Nothing stays the same.
You want to `position' your company for its place in the future.
To do that, you need to be able to anticipate the future.
And continue to increase your ability to anticipate the future.
People who are good at this, know everything that is happening in their
marketplace – everything. This is a very big ask. However, the
better you are at knowing everything that is going on, the more successful
you will be.
You might call this `reading the market'. Those who get good at it
know it is more art than science – trying to work out what the
market will look like and want in one, two, five, ten or twenty years.
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