When strategic plans, effectively executed, fail to drive growth a number of root causes are usually at work.
Leaders view strategic planning as the process for achieving next year’s revenue goals. Every organization needs a process for resource allocation to achieve annual financial targets. But when you start strategic planning as that exercise, you end up with largely incremental improvements that get quickly copied by competitors.
True strategic planning is a design process in which you assess the strength of your business models in light of a changing external environment and identify:
• New business model experiments.
• Innovations to existing business models, not merely incremental improvements.
• Strategies to strengthen the competency, process, technology and solution platforms that your business models leverage.
All markets become commoditized. The time to escape is upstream, before the current gets so strong you cannot escape falling into competing largely on price. Strategy-as-design keeps your business in calmer waters.
All markets get commoditized and its happening and its happening at a faster and faster clip. If you don’t want to win on price, innovate your business models before its too late. A strategy-as-design process enables you to do just that.
Leaders organize planning around how their company is structured, rather than around business models and the platforms that they leverage. In large companies, the commercial side of the business is separated from the product side business units housing product management, R&D and manufacturing. Commercial does its planning while the business side does its planning, all in silos. And the individual business units never get together to see how they might collaborate to deliver more customer value. Even worse is the situation in which R&D and manufacturing are centralized and planning is done in these silos, separate from commercial insight and significant involvement of business unit product management.
When you organize planning by how your business is organized, you end up with product, process and operational innovations, but rarely business model innovations. To create new business models and truly innovate the ones you have, you must organize strategic planning with highly cross-functional and cross-business unit teams that engage in creative thinking to innovate the business model(s) for serving their shared target market(s). Platform teams and business units should also do their planning (e.g., a shared manufacturing resource or a business unit defined around a product), but this planning should be informed (and inform) the business model ideation work.
Finance and marketing undermine the process by not providing managerial information. An example from a recent client assignment will make this point. The company’s value promise is to offer the “best experience” to customers in its category. But the leaders (of this large dealership) had no database or insights to answer questions such as these:
• Penetration rate of different services.
• Win rate on repeat purchases.
• Lifetime customer value.
• Elements of the experience that matter most and least to customers.
• Why lost customers bought elsewhere.
• Which marketing approaches were bringing the best leads to the direct sales force.
In essence, the financial information system produced good accounting information but woefully little managerial information and marketing did not dig into the system to pull out whatever insight could be had. (I tried in advance to get the data without success, believe me.) The company was for all intents and purposes driving strategy from a car without any headlights on a pitch-black night with heavy fog.
You can drive in the dark when no one is on the road if you can drive very slowly and the road is empty except for the one car you are following. But that is not today’s economy – customers have fragmented into multiple smaller markets filling the highway and competitors can ram you from any direction unexpectedly at any time. Today, advanced analytics of digital data is a competitive advantage. Tomorrow it will be a requirement to compete.
Are your strategic planning approaches fueling growth? If not, might one of these root causes be dampening your growth rate?
Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. She was an economic advisor for former Wisconsin Gov. Lee Dreyfus.
