Now that you have an annual plan, do you really have a strategy?

New Year, New Strategy

It’s the holiday season, a time of parties and good cheer and for many companies a time to negotiate and finalize budgets going into the new year.

If you are like many of our clients, you may have thought about strategy and long-term goals sometime in the late summer/early fall and probably presented something to your leadership and/or your board at that time. But then the pressures of the end of year set in and you have jumped into the more urgent process of annual financial planning and managing an overloaded calendar as you grapple with the dual challenge of making the year’s numbers and negotiating the right set of resources and goals for next year.

For some of you this process is nearing completion. For many these goals are still being negotiated, reviewed and revised as well as being coordinated across departments. For others the budget has already been presented and sent back for more revenue growth or further cost cuts. With the holidays coming up it is often the case that it will not be until January that this process is compete and everyone knows their targets and budget expectations for next year.

But while all this necessary and important work is going on, where is your strategy?  If it is gathering dust on a bookshelf, then how is it impacting this process?  If your strategy is not reflected in the objectives and goals being set for the organization, then what do you think will change and how will the strategy be achieved? If you are asking yourself these questions then it’s probably a good time to to dust off your strategy and re-frame this end of year frenzy of activity by focusing on what you really need to do to make that strategy real and win in 2020 and beyond.  To do so, you might start with a series of questions that are frequently overlooked:

1. Is your ‘strategy’ really a strategy? A strategy must reflect a logic for how the business intends to win against its competition, the core capabilities that will enable it to win, and a business model that will allow it to grow and profit into the future. Goals, slogans and mission statements may have their place, but they are not a substitute for strategy.  Nearly all the strategic plans we have reviewed over the years have a long-term financial projection and a list of action plans.  These are necessary to run your business, but not sufficient to define a strategy.  Strategy is found in the ‘why?’ questions behind these actions and forecasts; for example: ‘of all the things we could have done with our resources, why did we choose this list?’ and ‘why do we think it will work?’  If you can’t answer these questions, and do so in a way that is concise and credible when communicated to your organization, then you don’t have a strategy.

2. Does your strategy frame the key trade-offs your organization has to make? The difficult part of implementing a strategy is not deciding what is good (more revenue, more profit, happier customers, etc.), but rather deciding how to approach issues where two ‘goods’ come into conflict.  Years ago, one of our clients paid another consultant to develop a new strategy for them following the merger of two companies.  What they summarized and presented to the organization was: “We aim to have the most satisfied customers, most engaged employees and most productive operations.”  Although these are all great ideas, they fail to help when the organization in making real trade-offs; for example, I can do extra work to make this customer more satisfied, but that will take time away from other activities and hinder productivity.  Or, I can give every employee two weeks of training per year to improve their engagement, but that means two weeks that they are not available to respond to their customers and might impact satisfaction.  If your ‘strategy’ does not help make real world decisions about priorities and resource allocation, then you still have some work to do.

3. Is your organization aligned with the strategy? Peter Drucker famously said, “Culture eats strategy for breakfast,” and that is still true today.  If your organizational structure and culture are not a fit with your strategy, strategy will lose. Every time.  One of our clients built a new strategy around the differentiator that they were the only truly global supplier in a business characterized by mostly smaller, regional (single continent) companies.  The strategy made sense and passed most of our tests for a good strategy. But they quickly recognized that the organization was not ready, and further the structure was in the way.  For years they had operated with region (US, Europe, Asia) as the first break in the organization chart. In fact, there was not a single function that was organized globally, and regional leaders interacted only sporadically often just around annual functional meetings.  So, while it was technically true that they were the largest global supplier, they effectively ran as three regional suppliers.  Changing the organization was a necessary prerequisite for implementing and seeing the benefits of the new strategy

4. Are you prepared to publicly make decisions based on the strategy? Your organization is not the philosopher’s tabula rasa or blank slate.  Anyone who has been around awhile has seen lots of announcements about new visions, directions and yes, strategies, but then nothing really changed about their jobs.  So, it is rational for these people to take a wait and see attitude.  Until they see a consistent set of decisions and actions visibly linked to the strategy (and demonstrably different than the past), they are likely to perceive this as more of the same.  As a leader, you should be conscious that whatever the strategy is on paper, your actions and decisions are building ‘case law,’ the set of precedents that over time shed light on the gray area between what is consistent with the strategy and what is not.  If your leaders are just using the strategy to justify whatever they would have done anyway, then you can bet that the rest of your organization is doing the same.

A thoughtful and coherent strategy should be the foundation for not just annual planning, but ultimately execution. If your goal-setting and budgeting has become disconnected from your strategy then now is a good time to ask whether or not you really have a strategy at all.  If you are going through the motions of goal-setting and budgeting without a refresh of your strategy and without reference to your strategy, then you may be building on shaky ground and at some point your results are likely to pay the price.  Finding, articulating and then utilizing a coherent strategy in the sweet-spot intersection between customer needs and your unique capabilities is the only way out. If the planning cycle is coming to an end and you have a budget and a set of goals for 2020 but you don’t have a strategy or a real plan, now would be a great time to finish the work to make that strategy real, positioning your business for success in the upcoming year and maybe taking some of the pain out of this annual ritual in the future.

Jeff shares more about building a strategy through this 5 minute video, if you have questions feel free to contact us via email.

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