Marketing Expert's Corner

This article written in 2005


"We don't have a strategy.  What we have is a series of very quickly executed tactics."
      - Eric Schmidt, then VP of Sun Microsystems

Companies large and small sometimes don't seem to value strategic planning -- but what could be more important?  How do you know which "hill to take?"

"Strategy is for amateurs.  Logistics is for professionals." 
      - General Norman Schwartzkopf

That said, a brilliant strategy by itself is meaningless.  The key is to be able to execute and deliver on the right objectives in a coordinated way.  So what is the best way to see what's coming, choose the right objective, have a plan of attack and defense, and think your way through so that you win the war before it even starts?

Strategic Planning 

The hard reality of high tech is that it thrives on big changes that invalidate the established leaders.  New competitors introduce disruptive technologies and business models to change the rules of the game on the big players.  As soon as the market rules stabilize, smaller companies doesn't have a chance.

Given that level of ongoing change, how do you plan for anything?  And if the rules are destined to keep changing, what can you really learn from past mistakes?  

Indeed, in the really early days of any company, a strategic plan may not be worth the effort.  But once the revenues start flowing, you must have a plan of attack for the next product rev or merger or major market assault.  If you don't, every new move puts the revenue base at risk and the business becomes too disorganized, too much of a gamble.

Classic Strategic Planning

There are three classic strategic planning methodologies.  The first is to have the CEO and a couple of confidants get together and simply dictate where the company is going.  Sometimes the plan is explicit and easy for the company follow, but more often the plan is hard for underlings to discover.  This autocratic style of "planning" is common in small companies, but is surprisingly popular in big ones too.

The second methodology is the favorite of large companies, particularly with lots of divisions and bureaucracies.  They use an annual strategic planning exercise, producing a document with a 2-5 year time horizon (except for the Japanese, where the plan may be 40 years or more).  It's got tables and two-by-two matrixes and idea maps -- all the goodies from the latest graduate schools and business books.  It's a big writing exercise, yet nobody really has time to read it.  It is more often shredded than acted upon.

The final classic methodology is to bring in a Management Consulting company to lead the executive staff through a long strategic offsite.  While some of the exercises they take you through are good for bonding and forging common assumptions, the resulting plan usually feels more like theory than a concrete, actionable plan.  Usually, it sits on the shelf and doesn't drive the priorities of the business.

The Better Way

A strategic planning process shouldn't produce a big document:  it should create a concise model of how the company will fit into its market -- its economic "ecosystem."  The document should include one slide for the action plan of each major functional area of the company.  Keep it to maybe 10 pages, almost entirely diagrams and tables -- invest the time to keep it short and meaningful.

This isn't to say the strategic plan should be lightweight or glib.  In fact, it's a statement of your identity and what you stand for.  Your executive team will need to work together for at least a couple of days, and they'll engage in vigorous arguments and a measure of politics.  There is no substitute for a meeting here.

This style of strategic planning is not about exploring giant economic trends or Michael Porter-style competitive analysis.  It's about setting coherent goals and milestones for all parts of the company, setting criteria and metrics so progress can be scored on a quarterly basis.

Finally, the best way to do a strategic plan is as a dynamic process, with iterations and "mid-course corrections" on a regular basis.  Things change too fast to use only an annual cycle, so a quarterly refresh of your strategic agenda is the way to go.  Here's an outline of the process:

  1. Set up a couple of days at the beginning of each quarter for a series of strategic planning meetings.  They should be offsite, but near to your corporate headquarters so staffers can come in quickly as needed.

  2. Before the meeting starts, every major VP has a homework assignment:  to describe what they think the world will look like in 18 months.  This "environmental forecast" should cover their area of expertise (e.g., new technologies for the CTO, new labor regulations for the head of HR).  The forecast should be in the form of bullets and simple charts, limited to 4 pages per department.  To the degree possible, leave out the immediate crises and firedrills (e.g., shareholder lawsuit!) unless they are going to be an ongoing part of your world.  These domain forecasts should be circulated to all participants for reading in advance of the offsite, so that everyone is starting with common information.

  3. The first part of your executive meeting will be to create a consolidated environmental forecast across the whole company.  This is surprisingly hard, as there will be contradictory trends and healthy disagreements about assumptions.  Do not short-circuit the debates:  masking over fundamental disconnects in the meeting will make for a spastic strategy.

  4. Next, describe the "whole product" that will be the marketplace leader 18 months from now.  Hopefully, this will your product (or service) -- but if your company is not in a position to deliver the "killer" product or service, you still need to know what the marketplace winner will look like.  The goal here is to understand what customers will have available to them.  This should be described in a single slide.

  5. Now you need to decide whether that killer product/service is yours, or somebody else's.  Follow the dictum of Jack Welch:  to be really profitable you have to be #1 (the leader) or #2 (the strong challenger) in a market...otherwise, you should not be in it at all.  There is nothing wrong with going after niche markets or underserved segments.  Just make sure you are set up to be #1 or #2 in that niche, and do it profitably.  Again, this is an area for healthy argument -- be brutally honest. CEOs:  reward realism, not dreaming, overconfidence, and toadying, because the most important discovery you can make at this stage is that you have an unachievable goal. 

  6. Next, fully describe your company's flagship product/service* 18 months from now.  You need to describe the product as it is experienced by customers -- including your services, the products and services provided by your channel, and the related products provided by your partners (e.g., RDBMS or hardware).  This should be described in a single slide, probably an annotated diagram.  You need to have both a unit volume and dollar forecast for your flagship.  Make sure that Operations can actually ship and support that many. Develop a model for sources and uses of funds, and make sure the revenue outlook is realistic!  You can ignore a lot of problems, but not a cashflow shortage. 

  7. Describe what each department needs to be doing now in order to deliver that product or service in 18 months.  This section must have milestones, deliverables, and metrics that can be reviewed.  You will discover some areas where you just can't get there from here -- the required investment is too high, the architecture just won't go that far, the market won't accept your offering because of security and privacy concerns.  As you discover these issues, keep track of them and go through steps 5 and 6 until the "impossibilities" are resolved.  Again, realism is everything here.  

  8. The big issues usually show up in engineering/manufacturing or sales/operations, although they will sometimes be masked as finance (not enough money!) or marketing (not enough leads!).  Make sure to focus on problems and root causes, not symptoms or surface issues.  Sometimes, you'll identify the requirement to OEM a product or merge or make fundamental changes to your channel.  These Big Changes need to be sequestered in the executive-only version of the plan.

  9. At the end of the process, you will have a brief action plan.  Although it's high- level, it should be coherent across all departments and be easy to understand.  The plan needs to be published internally (via an intranet site), and each department's goals should be set around meeting these strategic objectives, as well as the short-term deliverables for the quarter (e.g., product delivery and revenues).  The departmental goals should also be published via your intranet.

  10. At the end of each quarter, score each department's progress on the strategic goals as well as the tactical ones required to satisfy shareholders.  If there are significant shortfalls, the effected VP needs to troubleshoot the problem and factor the causes into the thinking for next quarter's strategic cycle.  Avoid the temptation to blame the affected department:  think of the shortfall as a symptom, and company-wide uncoordination as the real problem to be solved.

*If your strategic advantage is not product or service (e.g., your edge is in business model [think eBay, Yahoo or PriceLine] or logistics [think Dell, Amazon, or WalMart]), your description needs to focus more on how you deliver the goodies than it does on product-level feature/benefit advantages.

Full Disclosure

I have to confess that I spent a year in a strategic planning department straight out of Dilbert.  Literally:  Scott Adams worked right down the hall.  We spent all our time in meetings, talking about things that the company would never actually attempt, let alone accomplish.  The company, which had a billion dollars a year in profit, never really made any strategic moves and was acquired as a commodity player.

Despite what they teach you in business school, strategic planning is hard and not that much fun.  But if you don't have a good plan, the effort of your company, no matter how earnest, just won't get you where you need to go.

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