Strategic Thinking & Strategic Action

What's it called?

I'm sitting on a conference call with fellow strategic planners under the imprimatur of the Association for Strategic Planning discussing a survey to learn about successful strategic planning practices among not-for-profit 501(c)3 organizations and strategic planning consultants who work with these organizations.

You'd think that asking "what works" for your organization or your clients and "what doesn't work" for your organization or your clients would be simple.

It's not that simple.

Two big hurdles need to be dealt with before we can finish creating a meaningful survey to learn about successful strategic planning practices from the universe of U.S. based 501(c)3 non-for-profit organizations.

• First, we need to address the very obvious issue of respondent bias - organizational leaders thinking their planning processes and organizations are perhaps more successful than they really are or could be, and strategic planning consultants thinking their processes and clients are similarly more successful than they are or laying lack of planning process success not the process but on client failure.
• Second and perhaps harder to deal with is the hurdle of properly sorting out what is included in the respondent's strategic planning process because there is no agreement about what various planning elements are called.

The nomenclature issue has vexed me throughout my planning career, most recently as I prepared to sit for the Strategic Management Professional certification examination.  The study materials and references covered the gamut of planning practices, systems and approaches.  It was obvious that no standard language exists in strategic planning.  (The CPAs and CFOs have it easy, with accounting organizations and governmental bodies promulgating accounting standards.  As long as you know what set of accounting standards you are following, you can look up the term and know what it means!)

Here's an incomplete list of terms used in various planning systems, approaches and processes:

• Mission, Purpose
• Vision, Shared Vision
• Gaps
• Values, Core Values
• Critical Success Factors, Strengths, Core Competencies, Competitive Advantage, Customer Value Proposition 
• Weaknesses, Opportunities, Threats
• Strategies, Goals, Aims, Objectives, Priorities
• Scenarios
• Tactics, Actions, Action Steps
• Initiatives, Programs, Projects
• Timelines, Milestones
• Measurements, Success Measures
• Outcomes, Outputs, Results, Accomplishments
• Assessment, Planning Update, Re-Planning

For our survey we need to ask questions that recognize that differrent processes use different terms for the same thing, as well as realize that not all processes do the same thing.  This is a challenge!

Anyone have a strategic planning dictionary or better yet a translator so we all are speaking the same planning language?  Anyone have the same thought that I do, that people may be unecessarily complicating the process, perhaps because by tossing in different terms one gains advantage as process author or consultant?

Maybe it's time for for an Association for Strategic Planning initiative to standardize or at least align planning language so it's easier to talk about what works in strategic planning and what does not work. 

In the meantime, since one person's objective can be another's goal, I suggest that when speaking about planning processes, systems and procedures, be sure the meaning of the descriptive words used are made clear to everyone up front.  

Otherwise, do you reallly know what I mean when I talk about assuring your organization improves dramatically and achieves much greater success through effective, facilitated strategic planning using a process that addresses vision, gaps, strategies and action steps to close the gaps, implementation, measurement, assessment and re-planning?

 

Focus, people!

Over the past month I have been interviewing stakeholders for a client's strategic planning process.  The interviews have sought feedback on strategic options open to the client.  The options range from "keep on being whatever the client wants us to be" to "identify a few big opportunities and really commit to tackling them."  

The feedback I am getting from these interviews is that most stakeholders believe the organization will grow much faster and have much greater impact and success if it opts to focus on a few big opportunities rather than continue to "be what the client wants us to be."  

Is that a surprise?  Maybe not, but in thinking about most of my client work over the years I recognize that lack of focus has been a big issue.  In fact, I think lack of focus is a bigger barrier to greater success than often recognized. Surely it's a continuing challenge that most of us grapple with. 

Too often we are like children in a toy store, with every shiny thing attracting us.  We are helter-skelter, scattered, all over the map.  Especially in this age when we are continually barraged by communications on all sorts of topics, we are easily diverted and distracted.  But the dysfunction extends beyond us as individuals: Our businesses like ourselves typically chase too many opportunities and get diverted from the best follow-through.  (Organizational ADHD, anyone?  National Institutes of Health: "ADHD is a problem with inattentiveness, over-activity, impulsivity, or a combination.") 

The salient question, whether about ourselves or our businesses, is, how many opportunities can we chase fully and well when we are trying to go down many roads at once?

That's why I see beauty in a well-run strategic planning and implementation process.  Run right, it forces identification of and continuing focus on acting on a tight set of specific strategies designed to offer the highest likelihood of moving the organization forward in the most favorable direction, to the shared vision of future success.  The process lays down roads and puts up fences to keep the organization and those charged with its success from easily straying. 

Backing up a bit more, I can even speculate that many organizations do not recognize and especially do not act on strategic planning as a fundamental priority because they are so distracted by day-to-day activity and all sorts of communications and seeming opportunities to chase.

Focus, people!  Get a process - what I endorse is effective strategic planning and strategic management - and escape from being diverted by so many communications and opportunities.  Focus and act on what will move you to your vision of greater success.

Let's ask the crowd

"None of us is as smart as all of us." - Japanese proverb.

A key aspect of developing transformational strategies is understanding the landscape that needs to be traversed by the organization on the way to greater success.  Strategic planners develop an environmental scan to identify the external factors that are likely to have a large impact on the organization as it goes down the road. Factors to be considered in an external environmental scan might include but are hardly limited to economic indicators and forecasts, legislative and governmental trends, technological developments, energy and ecological factors, social trends and values, agricultural and food forecasts, labor concerns and trends, transportation forecasts, and much more.

The question arises:  Where does one get this information on a timely and comprehensive basis? One source is obvious: Organizations typically look all the time at data that can be instrumental in building the environmental scan.  For instance, talking with a potential client earlier this week, a very successful commercial printing company (yes, there are some that are prospering despite the tough economy and move away from ink on paper), the CEO referenced industry data to which they had access that would be very helpful should we move to developing an environmental scan for this organization.

Likewise, experienced planners have favored sources as starting points.  Here, gratis, are several resources that we use to gain a thought-provoking global overview of the possible future:

World Future Society

The United Nations Millennium Project

Future/Wikia.com

The last link is to a wiki whose premise is that collectively we can pool our knowledge to come up with useful future scenarios.  Whether that is effective is unclear, but the Japanese quote at the top of this post suggests it might be useful.  (No, don't remind me of lemmings blindly following one another off the edge of the cliff.  Let's hope that in this case we are seeing diversity in thinking rather than group think!)  

In any case, it seems that crowd sourcing on a less ambitious scale might be very useful when one is trying to develop an environmental scan so that strategies subsequently adopted are more informed and the organization's plan is more resilient than it would be otherwise.

So here's the question, crowd:  What are your "go-to" resources when you want to try to gain an understanding of the possibilities of the future for an organization?  And, more specifically, how about resources that would be especially applicable to the future for important external factors that are likely to be encountered by high-end sheet-fed printers and packagers? (Fingers crossed that we get the printing company assignment!)

Think before stretching

Talking this morning with a serial entrepreneur whom I highly respect, the question of business scale came up.  What's the right size for your business?  Should you stretch to grow?

In his case, his accountant, spouse and others have been after him to ramp up the size of his Internet-based consumer business.  "No way," he said.  He has steadfastly resisted the lure of "getting really big" because his calculus is that by going for size he would diminish or lose profitability.  "I could quickly be three or four times larger" - this from someone whose annual Google Adwords bill is already $120,000 - "but it could put me out of business."  For his current investment he gets the Google page ranking he needs and quality leads and conversion through his keywords.  Pouring more money into this channel would increase activity but not profitable sales.

My entrepreneur friend understands from his background in face-to-face sales and marketing to support sales that a key factor is the cost of acquiring a customer.  Through long and hard effort and testing he seems to have optimized his yield of quality business from Google search.  If he is going to grow beyond the organic rate that Google is delivering, it will be through other channels and methods.

Many times I have seen organizations stretch for growth, with the customers gained being less profitable and more marginal, and the business negatively affected by the greater level of activity.  Other times I have seen organizations "settle" for their current scale when ripe opportunities for growth are ignored and are instead picked off by competitors.

As a strategist, my role includes helping leaders size up opportunities and whether to stretch for growth.  Multiple factors need to be considered to make the best decision, including organizational capacity, effect on product/service quality, potential diversion of attention from more important considerations, effect on margins, new doors that can be opened through growth, and comfort with being larger.

Here are some questions to address when looking at whether to stretch for more volume. 

When it suddenly changes

Disruption.  Is it good or bad?

While listening to Michael Raynor of Deliotte make a presentation on his great new book, The Innovator's Manifesto, I got to thinking about the two-sided nature of disruption in markets.

One can easily argue that it's bad because it dramatically changes the landscape and the likely outcomes of strategies in place.  MF Global fails and trading accounts are frozen.  If you are a trader, that's bad news!  Child abuse is revealed at Penn State and the college president and worshipped football coach are canned.  If you are a Penn State board member, that's bad news! Greek political turmoil causes Italian borrowing costs to soar.  If you are the prime minister or finance minister of Italy, that's bad news!

But that same sudden shift in landscape and effect on embedded strategies can also be good.  The competitors of the trader with the frozen MF Global account may see new customers.  Incoming students who might have chosen Penn State suddenly favor another school with their acceptance.  Speculators who sold Italian bonds short make a killing.

And then there is the opportunity for "planned disruption," where the strategy is to cause the sudden landscape change to a gain a competitive advantage.  Innovation of this type is difficult to achieve but holds the potential for great competitive success and differentiation.  Think 3D television or carbon fiber airplanes or gene therapy or LinkedIn or the iPad.

So where do my musings lead?  To thoughts of scenario planning, that's where.  Organizational strategists are wise to consider how their major assumptions and strategies can be disrupted and what they might do in advance to mitigate the damage and when disrupted for quickest recovery or new advantage.  They are wise to look at what might disrupt market leaders and offer a new opportunity for competitors.  And if they can find innovation strategies that disrupt the leader's strategies, so much the better!

 

Customer abandonment

What happens when you abandon a customer?

As I was copying a Florentine recipe from a Williams-Sonoma cookbook I purchased at the local company store a number of years ago, I mused that the company had "abandoned" me, a great customer, when it closed its store about a year ago.  I had been a regular shopper.  Now I buy nothing from the company, whose products I still think are great.  

(For those that are interested, the cookbook is Florence: Authentic Recipes Celebrating the Foods of the World and the recipe is for Stracatto al Peppoli, which is Florentine braised beef with Peppoli wine.  It is how they cook it at the Antinori winemaking family's Cantinetta Antinori on Via de' Tourbuoni in Florence.)

I have received a few Williams-Sonoma catalogues since its store was closed, but, otherwise, it does not seem as though the company has tried to embrace me and keep me shopping for its goods.

I don't remember a personalized "reach out" to hold on to me when the store was closing.  I could have been sent a letter or email or even received a call, but I remember none of the above.  There is another not-as-close store in the area: I have not been invited to shop there.  I have not seen a "we have missed you" or "special offer for a former customer" communication, either.

My object is not to kcock Williams-Sonoma, but to caution that you need to be thoughtful when you change your distribution channels, outlets or other customer facing aspects and disrupt relationships with good customers.  You ought to be doing everything possible to hold them in the fold.  After all, we know it is much harder to win a new customer than to keep an old one.

Do you have examples of viable companies leaving customers high and dry and not working on maintaining or re-establishing relationships with them?  What do you think the company should have done?

Beneath the visible iceberg

Last weekend I took the exam for the Association for Strategic Planning's top certification, Strategic Management Professional. (I don't have the results yet - let's hope I passed!)

The body of knowledge for this exam is very comprehensive, covering both strategic planning and strategic management. At the start of this process I wondered how much a seasoned planner, senior executive and Chicago Booth MBA would learn. I can now say, a lot.

I have long understood that strategic planning and strategic management are about successfully adapting to change. A new construct I was exposed to that addresses the difficulties of change management is Stephen Haines' Iceberg Theory of Change. It states that while the focus of change management is almost always on on "what to do" - the 13% of the iceberg that is visible, which Haines calls "content" - the success of adapting to change depends critically on what's not visible.

Haines says what's unseen are:

• "Processes" - how you determine what to do it and then implement it successfully.
• "Structures" - how you are organized to plan and implement the resulting strategies.
• "Culture/commitment" - what your organization believes that may inhibit or embrace change and how the organization will respond to change efforts.

Using Haines' Iceberg Theory of Change, it become more apparent why many organizations do a poor job of strategic planning and implementation, if they plan their response to change at all.

It may be apparent that the environment in which the organization operates is changing. Organizational leaders may have good ideas for how to respond, whether it be increasing competitive advantage, adding customer value, adding products/services, entering new businesses, or any of many other possible actions.

But without an effective strategic planning and strategic management process, organizational structures to support the planning and successful implementation, and people that support the change, the results will likely be poor.

Get on the right road

We once teamed up with a major accounting firm to help rescue a publishing and market information company that was in perilous shape, with rapidly worsening financials and competitors aggressively chasing its long-time customers.

While many things were wrong with this organization, the major issue was that senior management and the Board continued with "business as usual" for many, many years while markets, customer needs, competitors, technology and everything else changed around them.

The company's long-time winning formula became less and less effective and market share in key segments was silently slipping away. But with the focus almost exclusively on "the way we do things around here and always have, thank you," the deterioration was only addressed when the return to ownership went to zero and it could no longer be ignored.

The tale of our one-time client may be extreme, but it demonstrates that not being strategic can only lead to bad ends.

In fact, the more we learn about strategic planning, organizations and organizational leaders, the more we understand two things.

1. Interrupting "normal business" to engage in planning is a big commitment that leaders most of the time are not willing to entertain.
   
   
2. Interrupting "normal business" to plan is almost always exactly the right thing to do.

In business, we think in months, quarters and annual cycles. We are operationally driven by the calendar and the routine and immediate demands of the marketplace, our workforce and all the other stakeholders with whom we must interact.

So where does strategic planning fit into this picture? For most, it represents a big interruption, a diversion from all the normal, important work of serving customers and other stakeholders.

In the normal business cycle, strategic planning is typically given a "tip o' the hat" when entering into the annual budget process. "Gee, we need to refresh our plan." Maybe you do refresh it or maybe you don't but know you should. There just isn't the time and will to do it right.

We contend that you always need to be strategic in your decisions and operations, that the key things you do must be driven by carefully crafted strategies that are moving you to a compelling vision of an ideal future for your organization.

If you don't have a fresh vision and current strategies in place that are moving you to it, our counsel is to take the time NOW to engage in a planning process to articulate that compelling vision, find a set of dynamic strategies that will move you toward the vision and get to work implementing the strategies. We further counsel that you put a strategic management system in place that assures that you are implementing your strategies and that you re-engage in planning on an on-going basis as you move forward.


Otherwise, you may unknowingly be on the road to oblivion. In the case of our former client, that wrong road led to management being dismissed, sale of the company, and little value remaining for the former ownership. Had they been strategic the outcome could have been so much better!

Avoiding strategic error

Do you know the story of the frog who is placed a pot of nice cool water, gets comfy, does not notice the water is slowly heating up and eventually boils to death?

Do you also know the story of the lemming who is, as always, running with the pack, has little warning that those ahead are plummeting off an unseen cliff edge and, just like the others, plummets as well?

Well, Bank of America was neither the frog nor the lemming in 2008 at the height of the financial crisis when it purchased Countrywide Financial Corp. for $4.1 billion. No, it was obvious Countrywide was awash with toxic mortgage assets that everyone had been fleeing from.

So why did B of A stab itself in the chest? What led it to make such an egregious strategic error?

How about hubris, ego and lack of respect for the limits of knowledge? With CEO Ken Lewis taking the lead, the bank thought, "We are the big and mighty B of A. We surely can easily fix the problems this institution has, quickly clean up its portfolio and become even bigger and mightier on the cheap." Yes, the federal regulators were encouraging B of A and other major financial institutions to step up and take on Countrywide (as well as Merrill Lynch, which is another chapter in the story of B of A, which we will save for another time), but it was B of A that took the bait. (Here's the Associated Press story from 2008 announcing the acquisition and the bank's logic in making it. Great reading in hindsight!)

Of course, there is the argument that this transaction looked like a once-in-a-lifetime strategic opportunity to vastly grow B of A's mortgage business for a song. Time however, has shown this argument to be flawed.

B of A is struggling to regain profitability and bolster capital. It has just announced it is cutting 30,000 jobs as massive problems in its mortgage business are overwhelming the success of the bank's other five core businesses.

Hmm, maybe B of A is that frog in the pot, and now that the water has gotten mighty hot realizes it should hop out if it only could.

That's how it goes with strategic error. When you bet the ranch on a major strategic move that is based on hubris, ego and/or outside pressure and was not cooly assessed in light of the changing environment and the organization's true capabilities and resources, you can lose in a big way.

The moral is to exercise strategic thinking rather than follow ego and the pack: Better to keep monitoring the water temperature and looking ahead for the cliff edge than assume all is well and no abyss is ahead.

Disclosure: In the 1980s the author was an executive of Continental Bank, Chicago, coming in to help change the corporate culture and communications after the bank was rescued by the FDIC. The bank had nearly failed after it made bad oil and gas loans in Oklahoma and depositors began a run on the institution, whose capital had eroded. In that situation, B of A eventually made a smart acquisition by buying Continental to grow its commercial lending portfolio and extend its presence in the Midwest.

Go from worst to best

What do you do when you gain leadership of the worst organization?

Try this:

• Find and relentlessly push a compelling vision of what the organization at its best can achieve.
  
  
• Tackle the sacred cows that limit the organization.
  
  
• Undo past mistakes even if doing so challenges past orthodoxy.
  
  
• Borrow shamelessly from winning practices in related industries.
  
  
• Hire the best in the front office and on the line.
  
  
• Trust, empower, inspire and expect excellence from your new team.
  
  
• Use potent symbols to signal change.
  
  
• Celebrate, talk intensely with, listen to and respond to your customers.
  
  
• Break down organizational barriers so everyone pulls in the same direction.
  
  
• Tirelessly bolster and boost the brand.
  
  
• Build and reward loyalty.

That and more is what new owner Rocky Wirtz and now-CEO John McDonough did to turn around the Chicago Blackhawks, which was voted “worst sports franchise” by ESPN in 2004. They moved the team from second-to-last in National Hockey League attendance in 2006-2007 to first overall for the past two years.

And, oh yes, with the leadership of coach Joel Quenneville and young players Jonathan Toews and Patrick Kane the team won the Stanley Cup in 2010 after a record 49-year drought.

Forbes called it the greatest turnaround ever in sport's history. (To learn more about the Blackhawks' transformation, check out this Blackhawks' website profile of John McDonough and Daily Herald Business Ledger article about the team's continuing quest for excellence.)

The moral of the story? If you get the chance to help lead a sleepy, ineffective or dysfunctional organization, take heart! You have been handed a wonderful opportunity to drive a transformation. The transformation of the Blackhawks through the leadership and strategic thinking and action of Rocky Wirtz and John McDonough shows it can be done, with style to boot. Find a compelling vision for the organization and then rock and roll!