No business can succeed without a strategic plan. Yet, based on my fifty years of experience leading companies like Reebok and HBO Video, I’ve come to realize that often the biggest hurdle to creating a plan is figuring out exactly what business you’re in. Below is my step-by-step formula for building a strategic plan that will take your company from good to great.
Identify what business you are really in: Sometimes it’s not as obvious as you think. For example, when I was running Reebok it became apparent that we were not in the athletic footwear business but in the “lifestyle entertainment business.” Less than 30% of sneakers ever saw any form of athletic competition or physical fitness routine. In the toy business, we were in child development, especially today with well-educated millennial moms. In video games, we were in the business of creating habitual behavior. I encourage leaders to also identify the businesses you are not in for clarification.
The plan should be highly data-based: Start with an internal and external analysis of your business or one you want to start. This includes current and expected competition and the industry itself. In today’s environment, identifying and speculating on trends is critical. The markets and underlying customer go-to market and ultimate consumer trends are shifting quickly. Wherever I worked, I insisted on a review of our strategic plan annually. :In today’s environment. Reviews of the plan should occur more often.
This plan should stem from a mission statement including a set of values and purpose: At TreeHouse Foods, the largest global, private label food company, where I was on the board for 16 years, the mission is to “create value for our customers, preferred manufacturing and distribution partner. . . We are dedicated to a performance-based culture where we live our values, both with each other and our customers, to ensure our mutual success and safety.” Then there is a list of “Own Its” for all employees, along with defining our purpose, “Making high quality foods and beverages affordable to all.”
Consider hiring an outside consultancy: I suggest hiring an outside consultant or firm to lead the strategic planning process. Many people inside companies have never participated in the development of a strategic plan. Often they think that a budget and a list of tactics is a plan, but it is not.
I was fortunate early in my career to have run companies where Bain, BCG, and McKinsey were doing strategic planning. Later I hired Parthenon-EY to guide the development of strategic plans in almost every company I headed. I have also created my own outline for smaller companies and start-ups and then hired bright analytical MBAs to develop the data bases. Eventually, I worked for Parthenon as a senior partner doing strategic plans for all types of companies globally.
The management team and ultimately the whole organization must own the strategic plan. Please understand that it’s not about a bunch of bright outsiders or a consulting firm dumping a plan on management. Management must be thoroughly involved throughout the process. I have, however, constantly found consulting firms, after studying internal and external data, can come up with some blistering insights. Recently in a study of a holding company with which I was involved, an external analysis revealed that several divisions were not earning their cost of capital and, never would. Sell or close, and your earnings will increase.
The nuts and bolts of strategic planning: Gather key people in a room with all appropriate data and analyses. Then ideate alternative strategic directions. Make sure to involve people who are truly engaged – which probably means including more than just senior management. Try to keep the groups small. Keep it positive, nonjudgmental, encourage idea building. Use a professional facilitator, if necessary, who can consolidate the ideas and then present to the participants who can identify which ones are the best.
Then detail the ideas and decide on the information necessary to evaluate them based on the agreed-to criteria such as size of idea, human and capital resources needed to execute, timeline, probably of success. Following these steps, using these criteria, is the best way to create a strategic plan that will help your company succeed in today’s highly-competitive, fast-paced business environment.
Written by Frank O’Connell.
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