Business Planning for Success - 5 Essential Steps

Business Planning for
Success

Five Essential Steps
By Walter Adamson
Principal, Digital Investor

September 2005
adamson@digitalinvestor.com.au
www.digitalinvestor.com.au

The Opportunity

Develop a sustainable and effective plan:

Clear link from actions to strategy
Aligned with structure and culture
Clear and consistent themes
Focus attention and effort where needed

Slide 2
Enhancing alignment and value for IT investments
©2005 Walter Adamson

What we will do

There are five stages:

1. ABCD Planning
2. Mission, Objectives, Strategies, Actions
3. The Balance of Loose and Tight
4. Monitoring Key Projects
5. Organisational Alignment
Slide 3

Phase 1 – ABCD Planning

Understand today and envisage tomorrow:

A. Acknowledge today
B. Plot the intent
ABCD Planning process
C. Manage within means
D. Understand the risks
ABCD planning has to start with an authentic view of
the current situation - obtaining that clarity is often the
most difficult part.
Slide 4

Phase 1 – ABCD Process

The ABCD Planning
process helps cross the
gap and bridge the
company to the new
strategic intent, while
managing the risk of
transition.

Slide 5

Phase 1 – ABCD Steps

The steps:

A is the AS IS – today
B is the STRATEGIC INTENT
C are CONTRAINTS and CRITERIA, and
D is the DESIGN of Pilots (prototypes of
the new business model – used to test the
feasibility of the Plan).
Slide 6

Phase 1 – ABCD Key Points

A and B are the hard parts:

A - Confronting the genuine status and
capabilities and strengths and weaknesses
today is often threatening
B - Developing the Strategic Intent, which
requires clarity of vision and purpose is
challenging and requires effort

Slide 7

Phase 1 – ABCD The Intent

The Strategic Intent must be clear:

Which drives the Mission and its
Objectives, Strategies and Actions,

Which in turn require judgments about what
is Loose and what is Tight, and the Tight are
reported through the Scorecard.
Slide 8

Phase 1 – ABCD Challenge

The biggest challenge is for successful
companies that have grown to a certain point
and now need to take the next step:

How to move from A to B?
What constraints are there?
How to manage the risk?

Slide 9

Phase 1 – ABCD Capabilities

Understanding capabilities:

What capabilities exist today (point A)
What capabilities are needed (point B)

The capabilities encompass organisational
competencies and individual competencies,
and the means to deliver these competencies.
Slide 10

Phase 1 – ABCD Output

The output from Phase 1 includes:

B – Strategic Intent
A – As Is
Vision
SWOT
Values
Capabilities
Mission

C – Constraints
D – Prototypes
Money
Manage Risk
People
Competencies

Slide 11

Next – Phase 2


1. ABCD Planning
2. Mission, Objectives, Strategies,
Actions
Slide 12

Phase 2 – MOSA

Developing, executing and maintaining a
clear Mission, and set of Objectives,
Strategies and Actions is vital:
The Mission is why we exist
Objectives are where you want to be
Strategies are what you’ll do to get there
Actions are how you’ll achieve the strategies
Names may change but there is no substitute for
these components in an effective Business Plan.

Slide 13

Phase 2 – MOSA - Mission

The Mission is why we exist:
Our products and services
Our markets and standards
Our preferences
“Our mission is to be the world's most
dynamic science company, creating
sustainable solutions essential to a better,
safer and healthier life for people
everywhere.”
Slide 14


Guidelines for Mission statements:
The Mission statement must “work” not only today
but for the intended life of the strategic plan of
which the mission statement is a part.
Focus is a primary benefit of the Mission
statement.
It should be broad enough to allow for the diversity
(new products, new services, new markets)
required of your business. And it must also be
specific enough to provide the focus necessary to
the success of the business.
Slide 15


Examples of Mission statements:
Become the company most known for changing
the worldwide poor-quality image of Japanese
products.
FedEx is committed to our People-Service-Profit
Philosophy. We will produce outstanding financial
returns by providing totally reliable, competitively
superior, global, air-ground transportation of high-
priority goods and documents that require rapid,
time-certain delivery.
To develop, design and deliver great
communications solutions to every customer.

Slide 16

Phase 2 – MOSA - Objectives

The Objectives are specific outcomes:
Where we will be
By when
And perhaps how measured
“No less than 30% of our customers will be
ASX 200 by end-2006 and have an average
annual revenue of greater than $1m each.”

Slide 17

Phase 2 – MOSA - Objectives

The Objectives have time-deliverables:
Mission

By end-May 2006
Objective 1

By end-2006
Objective 2

Objective 3 By end-December 2005

Slide 18

Phase 2 – MOSA - Strategies

The Strategies are “the how and who”:
Objective

What
Strategy 1
How
Action 1, by when, by WHOM

Slide 19


Strategies are WHAT we will do:
To deliver the Objectives, by
Breaking down the Strategies into Waves
Providing focus on Key Result Areas
And incremented in Actions
“Develop a skilled and empowered workforce with a
‘can do’ attitude.”
“Enhance our KPIs and benchmark, and use them
to drive the business.”

Slide 20


$64 question – how to design Strategies:
Nominate Key Result Areas (above Objectives)
Develop Strategies for each Objective
And a series of “Waves” each lasting 1 year
Develop Waves for each Strategy
The Waves provide a basis to keep the
transformation initiatives, budgets and financial
targets knitted together – and this keeps the results
visible on an annual basis.
Slide 21

Phase 2 – MOSA - KRAs

The KRAs are designed to:
Embrace the objectives and priorities for the year
Consists of Strategies and Waves
Each Wave owned by a senior executive
Waves contain Actions
The executive is the Project Director for the
collection of Actions within each Wave
The Waves become part of the responsibility of the
people running the day-to-day business.

Slide 22


KRAs can be grouped into different types:
Performance – improving today
Transformation – leading to tomorrow
Mandatory – compliance and governance
For example:
KRAs - Performance / People / Products
Can be grouped as above
Contain multiple projects

Slide 23


Each KRA has an Objective:
Key Result Area & Objective

What
Strategy 1
How
Wave 1, by when, by WHOM

Slide 24

Phase 2 – MOSA - Actions

HOW we will implement Strategies:
Contained within Waves
With measures
And targets
“Document customer delivery efficiency KPIs
in Account Plans. Responsibility: BM. By
March 2006.”

Slide 25

Phase 2 – MOSA + Vision

The Vision is the “light on the hill”:
How a Vision is used
The impact of Vision
The process of creating a Vision
Having a clear Vision helps in times of
change and in implementing change.

Slide 26


A Vision statement is important:
A Vision is a guiding image of success
It can drive behaviours
It drives shared commitment
Starts from values, intuition and dreaming
Best drafted by one or two people and come
back to the group for discussion.

Slide 27


Examples of Vision statements:
We try harder
Crush Reebok
We make people happy
An Apple on every desk
First Choice through Excellence
The way to think of this is that the VALUES drive
the VISION which in turn drives the MISSION.

Slide 28

Phase 2 – MOSA + Values

Knowing what you value is important:
It drives behaviours
It enhances empowerment
It drives the Vision, and Mission
It’s about the means not the end
Ask yourself what you aspire to, in the way
that your people behave and treat each
other and your clients and partners.
Slide 29

Next – Phase 3


1. ABCD Planning
Slide 30

Phase 3 – Loose and Tight

The balance of what is loose and what is
tight is often the most critical structural and
operational key to success.
Failures occur when:
A local unit has all loose and no tight;
Key Result Areas are not tight;
Excessive “tight” kills responsiveness.

Slide 31


Some of the most common causes of failure
result from an inappropriate balance.
Failures occur when:
Too tight – bureaucratic, slow,
unresponsive, ineffective
Too loose – fast but wrong, inefficient,
lack of governance and corporate cohesion

Slide 32


Despite the simple nature of the concept, it
needs investment in terms of money and
time to enable effective implementation.
The CEO should be the champion
The project should never be a project for
the human resources department!
Needs a coordinated effort to find out how
value is created in the organisation.
Slide 33


The scorecard directly relates to the Key Result Areas
of strategy, by analyzing the Vision and Mission:

Requires alignment of the vision and the objectives
Much more than financials and operational efficiency
Include “the customer”, and
Internal learning and growth perspectives

Long term sustainability of the organisation is found in
the customer, internal business process and the
learning and growth perspectives (not in profit and
shareholder focus!).
Slide 34


As a first pass the Balanced Scorecard can:

Include financial, and sales indicators
Include internal efficiency
Include all the Key Result Areas (as one sector)

In the longer-term, in a full implementation, the
scorecard should be cascaded down into each
operating unit and support unit, with clear linkages
to performance assessment, and to corporate
strategy.
Slide 35

Individual Successes Corporate Successes

e.g. Managed IP
services
Integrated
Business 2 3
Strategy
Expand in Expand
existing into new
markets markets

1
Stand-alone Easy Fixes
Develop core
Operating with Quick
capabilities
Gains
Units

Balanced Strategy
Autonomous Strategy

Slide 36


Once the decision about balance is made then the
key to effective management is the scorecard:

If it is not on the scorecard then
Financial Operational
it is not “tight”, since the
scorecard is the tool for visibility
into all the selected tight
Key Result
variables.
People
Areas

Highlight with “traffic lights”.

Slide 37

Next – Phase 4


1. ABCD Planning
Slide 38

Phase 4 – Project Reviews

Regular review of key projects is essential:

Quarterly at least
Executive Working Group
All business change programs
Report on success
Manage risks going forward
Slide 39


The key global projects that are enabling the
execution of the strategies are always “tight”
and have to be tightly managed through
regular reviews.

Slide 40


Projects in Key Result Areas are a “tight”:

They must be reviewed and reported
Regularly
Independently – including Project Director
Quarterly or better
Summary statistic on Balanced Scorecard
Slide 41


Many companies, especially those expanding
overseas, have floundered when key global
projects have surprised the Board:

Regular reviews are about risk management
Ensure ongoing alignment with the business
Ensure project does not have “a life of its own”
Ensure that good money is not following bad.

Slide 42

Next – Phase 5


1. ABCD Planning
Slide 43

Phase 5 - Alignment

Strategic intent, strategic plans, balanced scorecards
and good project management are all necessary but not
sufficient to achieve success.

Very often, there is a mismatch or a lack of alignment
and synchronisation between the strategy and
execution, and the culture and organisational structure.

This gap restricts the performance of the organisation
and causes friction in the timing and value-realisation of
the intended strategy.

Slide 44

Phase 5 - Alignment

Exceptional performance comes from:

Peak human performance
Peak business performance, and
Relates to clarity, consistency and
commitment

Better aligned organisations perform better.
Slide 45

Phase 5 - Alignment

The most crucial elements of successful
corporate performance, as reported by
CEOs, are:

Strategy
Execution
Structure
Culture

Slide 46

Phase 5 - Alignment

The Structure must align with the Strategy:

The shape of the organisation is important
Clearly linked to Mission and Objectives

Need to know where you want to go and
what shape we need to be to get there.

Slide 47

Phase 5 - Alignment

Once Strategy is right, and the Execution
can be conceived, there must be alignment
of Structure and Culture.

The most effective tuning and alignment of
Structure and Culture will enable the most
effective Execution of Strategy.
Slide 48

Phase 5 - Alignment

The practical steps, start with Strategy:

Build execution capabilities
Begin to convert Structure
Begin to convert Culture
Execute in parallel – in a measured way

Slide 49

Phase 5 - Alignment

Alignment is a verb, not a noun:

It must be maintained, and
Improved, through a feedback loop

Strategy > Execution > Structure > Culture
Alignment – Plan-Do-Check-Act
Slide 50

Summary and Attachments

1. Summary – 5 steps to success
2. Attachment - Example

Slide 51

Summary – 5 Steps to Success

1. Get the Intent clear – and understand how big an
effort and how risky it is to get there.
2. Build the Execution plan – and a clear link from
Strategy to Actions.
3. Judge the Balance – and if it is not on the Scorecard
then it is not “tight”.
4. Watch the Key Projects – since they will determine
your success.
5. Align the Structure and Culture – with the Strategy
and Execution.
This will deliver the most effective and assured platform
for business performance.
Slide 52

Attachments - Example

Key Result Area Customers
Objective To utilise best IT applications
and tools to provide
outstanding customer service.
Strategy Resource IT function to best-in-class.
Talent recruitment and management
Wave
Measure Targets Carriage
Actions
Benchmark salaries
Performance Management

Slide 53

Business Planning for Success - 5 Essential Steps

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