Rethink Strategic Planning
Strategy, Execution, and Innovation are the growth disciplines for any company. These disciplines are usually practiced in an ad-hoc and disjointed way at great potential loss, but when practiced as a system, they can deliver over two times the growth performance when measured over a five-year period. That’s because the incremental value year-over-year compounds.
Let’s assume you are working at the business unit level. There are several strategic options to consider:
1. Do you want to sell the business? This is a great option when you fill the needs of a portfolio play from the outside. For example, if a PE firm or conglomerate is driving a vertical strategy and you fill a gap, they will pay handsomely as a strategic buyer.
2. Do you want to pivot the business? This is about applying strategy on the business and is a great option if you have low margins or you spot emerging trends that you can capitalize on. For example, Kimberly-Clark was 100 years old in 1970 when Darwin Smith was elected CEO. He decided to withdraw from the coated and commodity printing papers’ markets. That decision led to the sale of their mills and the introduction of highly successful consumer products, beginning with Huggies disposable diapers.
3. Do you want to grow the business? This is about applying strategy within the business and where most businesses design strategy. We will focus on applying strategy within your business here.
Setting the Growth Goal
You need to ask, does our strategy discussion lead or lag our financial growth target? Some entities, like Singularity University, promote having a massively transformative purpose (MTP), but these wild statements without linkage to “what can I do now” are hollow.
While it is very important to determine a company’s purpose, vision, mission, and values (PVMV), once core PVMV are in place, growth leaders launch strategic planning with financial growth targets as the future state guide. It really is that simple.
Many companies continue to use the Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis matrix at the beginning of their strategic planning process and before the growth target is set. This puts the cart before the horse. When conducted once a year, it also fosters time situational bias and a low-quality understanding of your environment.
After your financial growth targets are established, you now want market, channel, and product insight. However, it’s advantageous and more cost effective to have an insight process that simultaneously harvests understanding from your macro, micro, external, and internal environments. Do you leverage scenario planning for your major strategies? And, what happens when your environment changes?
Evidence shows that organizations that tighten their Insight-Action loop outperform their peers. There are many ways to do this, but it requires a shift from the traditional Strengths, Weaknesses, Opportunities, and Threats analysis matrix. One simple approach is to assign the responsibility to the function leaders to synthesize their understanding of the various aspects of your relevant environment on a quarterly basis.
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With your growth goal and market insight determined, it’s time to allocate where the growth will come from and the investment required. Using an enhanced Ansoff Matrix is helpful for allocating your revenue and gross margin growth targets shown in Figure 1: Growth Allocation.