Last updated on May 13th, 2019 at 02:36 pm
In my role as a management consultant, I have the opportunity to review numerous strategic plans. The one thing that I find that these plans have in common is that they are mainly operational in nature, rather than strategic.
The planning team has concentrated on short-term operational matters and has ignored longe-term strategies for sales and profit. In many cases, this shortfall is due to the organization’s vision.
It is natural that strategic plans should include operational components. They are the basis of any organization. But the key to continued growth are the strategic elements of the plan, because they are the sign posts on the road to success.
In order to gain an insight into formulating a plan that is truly strategic, we first must discuss the concept of strategic thinking whose ultimate aim is to find a way to differentiate your organization from its competition.
There are four possible states that your business can be in: the Eagle, the Fort, Slim Down or Circled Wagons. Let’s take a detailed look at each of these states.
An eagle is looking for new places to build his nest, a new business, a new market or a new industry to invest their resources in.
An existing business can determine in the planning process to spin off a product line and create a new entity that would compete more effectively in a market segment or geographical area. They could also develop a number of strategies that would permit them to use their expertise and resources to penetrate a new industry. Their resources and expertise could be directed toward developing an entirely new business using technology transferred from their existing business.
Using Starbucks as an example, they began as a coffee roaster, expanded into serving coffee drinks and now offer a limited food menu and are recognized for the amount of music and coffee related products they sell in their stores. From their solid base in the United States, they have expanded into Europe and Asia. As an Eagle, they are continuing to soar.
A fort has a different set of strategies, and a CEO who is determined to maintain and improve their current business.
Their strategies would likely be more conservative and less risky than the eagle. They would concentrate on broadening their customer base with marketing initiatives and sales strategies. They would focus on improving customer service and building a stable of loyal customers. In their marketing they would develop additional products that build on their core competencies.
An example would be the number of varieties of diet soda that are offered by the major soft drink companies. Diet cola, caffeine free diet cola and flavored diet colas are marketed in the grocery stores and quick marts in every community. In this manner, they expand the product line to their loyal base and increase the frequency of purchase, and prevent potential cannibalization. Plans developed by forts tend to have a great number of operational strategies that lead to improved efficiencies, agility, quality, acuity and, ultimately, productivity.
When a business enters into the slim down state they are adopting a constriction strategy. They are trimming down product lines, closing plants and pulling out of unprofitable or marginally profitable markets.
This state is the direct opposite of the eagle who is looking to expand their business. An example of a firm currently in this state is the Ford Motor Co. They recently announced plans to close a number of plants in the United States and lay off of a great number of white and blue collar workers. Previously, General Motors Corp. trimmed down their product lines by combining divisions and eliminating the Oldsmobile nameplate. Northwest Airlines recently reduced the number of cities served directly out of Milwaukee and returned to routing their passengers through Detroit and Minneapolis.
These are all examples of firms that have adopted the slim down state into their strategic planning process. One key to survival is to concentrate on your KFS (key factors of success) and how they can be tailored to this new business model.
The final state to be explored is circled wagons. The firm that adopts this state is in crisis and is trying to save the entity.
Circled wagons could be in response to a cut in funding for a government entity or the loss of a major client. The attack on the Twin Towers in New York on Sept. 11, 2001, caused the airline industry in the United States to circle their wagons. Due to a sudden drop in passenger traffic and the public’s perception that flying was no longer safe, airlines cancelled orders for new aircraft and had to lay off pilots, flight attendants and support personnel. In a number of cases, they entered into Chapter 11 and began to reorganize.
The difference between slim down and circled wagons is that you elect the slim down state, while circled wagons usually occur because of an event that could not be foreseen. Many organizations retreat into their niche, one that could be easily defended.
Each of these states requires a great deal of strategic thinking and the development of longer-term strategies. We recognize that operational strategies will be developed, but they must support the longer term vision of the entity. In the case of Starbucks, we see that their long-term vision was to be a global company. This vision was achieved by developing strategies that gained them entry into the European and Asian markets. Their strategies caused the Japanese to change their buying habits and perception of coffee in a tea drinking culture. As Starbucks matures their product offerings through operational strategies in the United States, they transfer that learning to their new markets.
The next time you sit down to assemble your strategic plan, you need to determine if your strategies are operational or strategic. Multi-year strategic plans should have a balance of operational and strategic strategies. It is no longer enough to "think out of the box." Now you need to think creatively and strategically in order to outperform your competition.