Monday, November 11, 2013

Strategic Planning Analogy #515: Follow the Recipe

The nice thing about a “To-Do” list is that you can pretty much do anything on the list in any order you want. The individual items on the To-Do list are independent of each other. If I choose to clean the garage first and mow the lawn second, that’s okay. Or if I choose to mow the yard first and clean the garage second, that’s okay, too. Or if I can get a friend to help me and do both at the same time, that’s also okay. All that matters is getting the stuff on the list done.

A recipe doesn’t work that way. Things need to be done in a particular order. You have to measure the ingredients BEFORE you mix them together. You have to mix the ingredients BEFORE you bake them. If you bake before mixing or mix before measuring, you will have a mess on your hands. The recipe will not turn out as desired. Unlike a To-Do list, a recipe needs to be done in the proper order.

This is especially true if you expect me to eat what you make.

There is a long list of activities associated with strategic planning, like coming up with Visions or Mission statements, analyzing the environment, formulating a budget, creating a position, designing KPIs, assigning implementation tasks, and so on. To get it all done in a timely fashion, there is the temptation to treat it all like a To-Do list. Just get every activity assigned to somebody and let them work at—all at the same time.

That may sound efficient at first. But strategic planning is more like a recipe than a To-Do list. Connections and dependencies exist between the tasks. There tends to be a need to do things in a general order. Otherwise, you end up with a mess.

Unfortunately, I see companies skipping steps or doing them in the wrong order. That’s like mixing before measuring and skipping the baking. I wouldn’t accept that in the kitchen, and I won’t accept it in the world of planning.

The principle here is that before embarking on strategic planning, get a good recipe and do the tasks in the proper order. In this blog, I will offer such a recipe. Since most recipe books come with pictures of the recipe, I have one, too—as you can see in Figure 1. Click on it to see a larger version.

I have summarized everything into three major tasks—learning, deciding and doing. These are the planning equivalents of measuring, mixing and baking. The first task is learning—getting smart about understanding the current state and expected future state. This applies to the state of your internal company/brand and the state of the external marketplace where you will compete.

To learn about the external environment, you need to study the consumers, the competition, regulations and other external factors which can impact your success. To learn about your internal environment, you need to look at your strengths and weaknesses and how you get things done.

This learning is a lot like the measuring in a recipe. You are measuring four things—current state, direction, magnitude and speed. This applies to measuring customer segments, competitive positions, technological advancements and internal issues. The four measurements work like this:

  1. Current State: What do things look like today (market share, number of people, size of industry, attitudes, threat of Porter’s Five Forces, internal competitive advantages, etc.)? This is a sort of good or bad measurement.
  2. Direction: In the future, how will the current state measurement change in size? Will it go up or down?
  3. Magnitude: In the future, how massive will those changes in direction be? Will the changes (up or down) be huge or small?
  4. Speed: How fast will the future changes occur? Will it happen almost immediately or will it take some time (fast or slow)?

This is not about making precise measurements. Measuring the future is not that easy and precision takes too long (you have to wait until the future gets here before you can precisely measure it and then it is too late to be useful in planning). For planning purposes, it is usually enough to know good or bad, up or down, huge or small, and fast or slow. I talk about this in more detail here.

Once you become smart via learning, you are ready for step two in the recipe—to make some key decisions about how you want to play the strategic game. This is where you put together your unique mix of attributes and processes that you will stand for and win with.

Without gathering the knowledge first, your decisions for this mix will be little more than guesses, hopes, or wishes. Yet, I often see organizations start with some decision activities as their first act. They want to dive in and create visions and missions from the start. They want to decisions about what they want to be begin the planning process. It’s like mixing before measuring.

The problem is that is somewhat irrelevant what we initially want our mix to be. That’s because we do not operate in a vacuum. We operate in the context of the environment and time. The idea is not to pick a place that is pretty and desirable. The idea is to pick a place where we can succeed. And the best place to succeed depends on everything else going on in the marketplace relative to our strengths. And we won’t know that unless we do the learning first.

I remember going to a franchising seminar and hearing a lecture from a successful franchisee. He said that some of the most successful franchisees ignore the glamorous businesses and enter businesses which are dirty, ugly and risky. Why? Big corporations tend to avoid the dirty, ugly and risky. This makes them more profitable for the little franchisee. The idea here is that analysis and learning may point you to away from your first choice (the glamorous option) and put you somewhere else which will make you far more successful. Remember, nearly everyone in the smartphone business is losing money. It may be glamorous, but not a place where everyone can succeed.

In making decisions for your strategy, keep in mind the context of yourself within the environment. Make sure the position you choose is seen by the marketplace as desirable, sizable, ownable, preferable, achievable, believable, understandable, and profitable. I talk more about these concepts here. And then, once you have made your choice about what you want to be, translate it into an external message (position statement) and an internal business model (how I must operate to make the position a deliverable reality).

The third step is doing—the hard work of making your decisions come to life. This is where you “bake” the strategy. This, by necessity, has to come last. Until you make your decisions, how will you know which actions are the right ones to take? Until you know your way to win, you cannot know which are the winnable actions for your business. 

For example, Aldi and Whole Foods are both grocery retailers. Yet they have decided on radically different positions. Aldi aims for the lowest possible price while Whole Foods aims at health, nutrition, and natural/organic. The right actions for success at Aldi are almost the opposite of the right actions for Whole Foods, and vice versa.

It’s not that some actions are always good and others are always bad. Good and bad is determined by the position. A good action for Aldi can be bad for Whole Foods, and vice versa. So how do you know what the right actions are prior to deciding the position?

Yet, I often see businesses rushing to do the actions first. They claim there is no time to learn (or the future is unlearnable) and that consumers make all the decisions. Therefore all we can do is act quickly and learn from our mistakes. I don’t think it’s quite that simple. I don’t want to stick random ingredients in the oven and then taste them afterwards to learn if it is good. Random actions are not as efficient as making the right action tradeoffs based on a chosen position.

The “doing” actions you choose to prioritize need to address both internal and external challenges. Externally, one needs to convince the customers and the supply chain that you own our position and that it is in their best interests to prefer us. Internally, we need to be sure we have a model capable of delivering the position.

Those who want the “doing” to come first aren’t entirely wrong. There are some things which are best
learned via doing and experimenting. But that doesn’t mean that you skip the traditional learning and deciding steps. It means you use the “doing” actions of your current planning cycle to begin the learning of the next cycle.

You can see this in Figure 2. Planning is a continuous series of cycles. Just as you don’t just eat once and quit eating ever again, you don’t just plan once and quit. The planning process never really stops. When you get to the end of one cycle, you use what you learned to influence the next cycle.

Strategic planning is more like a recipe than a To-Do list. Good planning tends to do things in a particular order, without skipping steps. First you learn by measuring what’s going on (and expected to happen) in the internal and external environments. Then you decide how you want to mix together attributes and processes in order to create a position and business model which optimizes your chances for success in that environment. Third, you “bake” your strategy by doing the implementation actions which make your mix decisions a reality. Finally, you use what you learn from those three steps to do an even better job in your next planning cycle.

This recipe for planning isn’t 100% etched in stone. There is room to experiment with this recipe. But don’t throw it away.

1 comment:

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