Marketing

Strategic planning in the back-burner?

Here’s a scenario. You have been just hired as a marketing manager at a small & medium business (SME). You ask for the organization’s strategy. You expect a written document that outlines the company’s objectives, vision, mission, industry analysis, etc. On hearing your question, the CEO launches into a 15 minute monologue of his or her vision and history about the company. Not wanting to rock the boat so soon in your tenure, you make a mental note to ask pointed questions in a one-on-one meeting. But that is the last you hear about strategy. Three months later, you realize your daily activities does not resemble any strategy. You have no idea where the organization is heading.

Sounds familiar? This is not a unique scenario. This plagues most SMEs and is the primary reason for their stagnation or failure. Smart CEOs take the time to plan and manage strategy. One time, when I was just beginning work for a software company. I asked the VP of operations, “Do we have a strategy document that I can look up, to planning marketing activities?”. “Sure, we have one”, was the reply, “it’s in J’s head.” I asked the other managers - product development, QC and sales. Each of them was unable to tell me what the organization’s strategic objectives were and how their daily activities aligned with the organizational strategy. I also learnt that they meet once every year to discuss strategy. But they were not really sure about the outcome of those meetings. All they talked about was their department’s performance and about their future initiatives. Then a document gets created and it gathers dust. I looked at these annual strategy documents for the last three years and found they were so similar: a few numbers were changed, financials were different. But apart from that most of the content was the same. It was like someone had used year one as a template for successive years. And their daily activities? Their work depended on the flavor of the day (read what the CEO wanted done at that moment or which customer is screaming the loudest). Does this sound familiar too?

The CEO once said to me, “It is no point in wasting time on strategic planning. The markets and the business environment is changing so rapidly that planning is a waste! All I know is we need more customers and you generate the leads.” To which I quoted the Chesire Cat from Alice in Wonderland: “If you do not know which direction you are going, it really does not matter which direction you take”. I love that quote.

For all those who think planning is waste, I’ll let you in on one important ingredient for success: You must decide where you want to go. Then you must decide what road to take. Many executives in the dot com boom days decided that strategic planning was useless, either due to rapidly changing market-place or in the new Internet economy. Today we know better. However, today while strategic thinking is back on the menu, it is perceived as vague and without results. That’s because the exercise is taken lightly and not conducted properly. What mental image does the phrase strategic planning evoke for you? Does you see a group of senior executives locked up in your board room talking theory? Or do you see your senior executives taking off to a resort talking about your organization’s performance? But that is not how you develop your strategic plan! It has to be developed keeping in mind a question: What is the very reason for your organization’s existence?

I’ll explain in a moment. But first let us look at what strategy is. Strategy is something that your organization has to act on every day. And strategic plan is nothing but a bunch of objectives you want your organization to achieve. (You also hope that reaching those objectives will help you obtain or sustain your competitive advantage.) The decisions your front line staff makes when dealing with customers impact your organization. If you have been unable to connect the actions of these individuals to your strategy, your organization is going to flounder from one initiative to the next - without success. As a CEO, if your employees are not aware about the organization’s objectives, how will they know what decision to make when dealing with a customer? Placing the vision and mission statement on the walls of your organization will not help. You need to generate that passion in the minds and hearts of your employees. You also need to communicate to everyone your plan to execute that vision. On the other hand, some CEOs just focus on financials meeting investor expectations. The top line and bottom line is all that matters. Companies with this attitude fail to anticipate changes to customer preferences.

The American car companies are a good example. They failed to anticipate changing customer preferences after the oil shocks and to competition from the Japanese car companies. They are still trying to play catch-up and are desperately cutting costs in order to stay profitable. They are resorting to 0% financing and/or no interest no payment deals to move inventory. Quality is still a question in the minds of the consumer.

So what should such strategic meetings accomplish? Or more importantly, what are the most important ingredients to develop your strategy plan? Let us go back to the question I asked earlier. What is the very reason for your organization’s existence? If you have answered customers, kudos to you! Isn’t it simple - your organization exists to fill a need; your customers’ need. You add value by fulfilling that need and are compensated for that value addition. Everything else is secondary. Every company that is successful today did not dream up a winning strategy in a corporate boardroom. Successful strategies were developed and implemented by understanding your customers and how their needs are evolving. I want to emphasize the operative phrase here: understanding your customers and how their needs are changing. Your organization needs to uncover unstated needs; and that is how you identify their changing needs. Traditional market research will not help you uncover these unstated needs.

Let us look at Dell as an example. They trounced the competition by giving customers what they wanted. Customers were able to customize their PC to suit their requirements, get it custom built from Dell and have it delivered within a week and the price was the lowest. They geared their business processes around this need. Dell was able to identify an unstated need and turn their offering into a competitive advantage.

Uncovering unstated needs is not easy. You may want to use sophisticated tools that are available today. However, as a CEO the fundamental thing that you must do is to encourage differences of opinion. If employees cannot question senior management assumptions, for the fear of repercussions, you might as well stop your strategic planning process. This has a lot to do with your organizational culture. If your organization’s culture does not support open frank communications, then you need to change this. This will take time and effort, especially if you are driving a change where such a culture does not exist. At times this will be a painful process. But as the CEO you have to drive this.

Strategy is also about allocating resources that will help you achieve your objectives. All talk about customers and questioning assumptions will come to naught, if you do not choose the right initiatives and allocate the right resources. If you have multiple initiatives on the go, then this is going to be a difficult task. Initiatives may be conflicting, may have no relevance in your strategy and (this is the worst) no one is tracking them. It is useful to connect the outcome of your initiatives with your strategy and with your organizations financials. You will need to prioritize your strategic goals: near term (typically six months to a year), medium term (typically a year to two years) and long term (beyond two years). Prioritizing will enable you to balance your initiatives and in turn your financial resources between your near term, medium term and long term strategic goals.

It is a lot of hard work to move from strategy formulation to implementation. Every organization is different, their operating landscape is different. Strategy is all about building sustainable competitive advantages. With a strong customer focus, disciplined approach to resource allocation and a work culture that inspires open communication, your small and medium business will be well on its way towards growth and profitability.

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