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Minnesota Technology Magazine - Fall 2004

Have a Plan
By Andrew Bacskai

Done right, strategic planning can dramatically sharpen your firm's competitive edge. Here's what you need to know about this powerful but often-overlooked management tool.

A decade ago, Plastic Products was, essentially, a distribution company. The Eagan-based firm sold plastic cards, including phone and gift cards, customer-loyalty cards, and identification cards, through suppliers—straight-ahead supply and demand. Then, the industry began to change. Customers started requesting greater levels of card customization—in terms of both design and functionality. Turnaround times shrank from upwards of six to eight weeks for mere production to two weeks for delivery. Plastic cards became commodities as big retailers adopted gift-card programs, and throngs of new competitors were lured into the marketplace. “The industry changed dramatically,” says Tom Murphy, owner and CEO of Plastic Products. At the time, Murphy reports, the firm’s revenues were robust. But he feared that complacency would ultimately cripple his company. “As we started looking out five years or more, we could see that middle players like us were going to have a tougher time, and that we would have to carve out a niche. So we started changing our business mix; we concentrated less on selling plastic cards and more on personalizing them,” he says. “We invested heavily in equipment and technology, and we moved from doing a lot of distribution to a manufacturing situation.” As a result, he adds, “we’ve totally transformed our organization.”

Murphy attributes his company’s shape-shifting survival and success in part to the strict regimen of strategic planning he first instituted in 1993. At least once a year, he pulls his leadership team off site to assess the state of the market, the state of the business, the company’s projected direction, and its ability to achieve a set of targeted goals.
“I’m really enthusiastic about [strategic planning],” says Murphy, who last year included his entire 35-person staff in the planning process. “I think the biggest thing it’s done is bring us together as a group and get us playing out of the same playbook.”

Straight to the heart

In fact, business strategists generally contend that improved teamwork, greater workplace satisfaction, and a heightened sense of direction are among the key benefits of disciplined strategic planning. Yet they also would argue that most companies simply don’t do what amounts to true strategic planning. “Only about 10 percent of companies actually do strategic planning,” claims Robb Hiller, CEO and founder of Performance SolutionsMN Inc., an Eden Prairie-based business-strategy consulting firm. “Most do what I would call business planning. They think that by getting together for a day and having a nice conversation about the upcoming year and what they need to be doing, that they’re engaged in strategic planning. But what they don’t address is: Do they have a true longer-term vision of who they want and need to be?

The costs of not planning can be steep. “The market will take care of you—it always does,” Hiller says. “You’ll lose profits and sales. You could even lose people, because, eventually, companies that don’t have a clear-cut direction and a clear set of defined values and aren’t working to develop the right kind of culture will not keep great people. Great people do not want to work for average companies. So those are all pretty big losses.”

Done right, however, strategic plans answer key questions: Where does our company stand in the marketplace? Who is our competition? What are our organizational strengths and weaknesses—and what must we do to exploit the good and eradicate the bad? Where do we want to be in one year, three years, five years? What, specifically, must we do to achieve those goals? And do we have the talent necessary to drive our long-term plans?

By aligning the whole of an organization—from operations to production to distribution and beyond—strategic planning can have a profound positive impact. “The goal, broadly, is to double your profits in two years,” says Don Hayward, an MTI business services consultant. “Regardless of what your profitability is now, it will typically double if you facilitate a strategic plan.”

Here are some tips to make sure you do it right:

Get help

“I don’t believe in home-grown strategic planning,” says Mary Connor, an MTI business services consultant. “You need to have someone who’s objective facilitate the process.”

Here’s why: Strategic plans are built on business intelligence that’s acquired through objective market research and internal data analysis, as well as through subjective interviews with clients, vendors, and employees. That said, the effectiveness of any business plan depends on the quality of the information that supports it. Trouble is, many company leaders often don’t like hearing the truth, so they simply won’t seek it out. Or if they do, those queried typically aren’t too eager to offer straight answers. “Sometimes, the best information is going to come from the rank and file,” says Connor. “But people in executive positions are generally given the information that they want to hear, not the real information.”

By enlisting an outside consultant to facilitate the process, she adds, companies can provide a comfort zone for strategic-planning participants. “If done correctly, strategic planning can bring up some dirty laundry,” she says. “It can be a little brutal, but it has to be fearlessly honest.”

Validate your competition

In addition to composing a realistic organizational self-portrait, you also must develop a clear picture of who you’re up against. But identifying competitors has become an increasingly challenging task, especially since the dawn of globalization. “The marketplace has gotten tremendously more broad over the last 15 years,” Hayward says. “It used to be that most of your competition was regional, so if you knew who the other players in the state of Minnesota were, then you pretty much knew who your competition was. That’s not true anymore. Because of changes in transportation, you now probably compete with people in California and Ohio and China and you might not even know it. So validating your understanding of the marketplace is critical.”

Even so, Hayward adds, it’s a step that’s commonly skipped—particularly by business owners who think they already possess all the business intelligence they need. “Entrepreneurs in particular think they know who all their competitors are,” he says. “Then I’ll convince them to test that claim [by having] a marketing person go out and search for the company’s competition. He or she will do some Web searches and call some potential clients and, lo and behold, the competition is usually someone very different than they thought.”

Make sure you’re planning strategically

As Performance Solutions’ Hiller notes, companies often think they’re planning strategically when they’re merely formulating business plans that relate more to day-to-day operations than bigger-picture issues. Even Murphy, a devoted strategic planner, admits to falling into this trap. “Some years,” he says, “we came out of strategic planning with a list of remedial tasks,” such as bulking up staff, shoring up the IT infrastructure, or attending to equipment-maintenance needs. “Sure, it’s important to talk about these things and fix what needs to be fixed, but why would I want to walk away from strategic planning with a list of basic things that we really should be doing all along?

“We let strategic planning take the place of good, strong day-to-day management,” he adds. “I prefer to think of strategic planning as a way to get executives and managers really, truly on board with where the organization’s going. This year, for example, I want them to walk away from the strategic planning session with an understanding of the risks that I as a business owner take every day, and I want them to share in that risk. They need to understand that this is their business to run rather than mine.”

For Murphy, the key to securing such buy-in from the members of his leadership team is to simply listen to them. “It’s easy to walk into a room of managers and give them my vision for the organization—say, ‘Here’s where we’re going to go. How are we going to get there?’ That’s not productive,” he explains. “I’d rather say, ‘Here’s where we are. Where are we going to go?’ If I tell them where we’re going, then that’s my plan. As a manager, I may or may not buy into it. I’d rather see the direction come from the high-level individuals in the organization.”

Don’t wait till it hurts

If you haven’t yet done a strategic plan, the best time to start is right now. “A lot of people say, ‘We’ll start our strategic planning for next year in September or October, because our fiscal year is up December 31.’ That’s folly. It doesn’t matter when your year-end is,” Hiller reports. “The point is to start doing it.”

Not surprisingly, though, many companies don’t revisit or rethink strategy until they’re faced with a problem. Perhaps they lost a major customer. Maybe a competitor introduced a new product to the marketplace, or the cost of raw materials unexpectedly shot sky- high. “Most people don’t find themselves in the position of doing strategic planning until they’re feeling some kind of stress or trauma,” Hayward says.

Which is not to say that companies that aren’t feeling pain should approach strategic planning with less urgency and consistency. In fact, says Hiller, “the ideal time to do it is when you’re doing well, because you can devote more resources to it and do it the right way.”

Plus, progressive companies recognize that proactive planning offers the best shot at sustaining success. “The environment’s always changing and you have to be able to adapt,” Connor says. Yet success often instills a false sense of security in companies, she adds, and that’s when they’re most vulnerable. “For a lot of companies, when things are going well, they’re in a sheltered position. But all at once that shelter goes away, and then they’re in danger, and then they’re gone if they don’t do something about it,” she says. “It’s going to happen to everyone—it’s just a natural progression. I used to work for one of the large computer companies in the Twin Cities. At one time, we enjoyed 10,000 employees—we were assured we were going to retire from that company. Today, there’s grass growing out of those parking lots. The company simply wasn’t agile enough to deal with change.”

Keep it off the shelf

Of course, doing it once isn’t going to be good enough. Strategic planning is a process, not a one-time exercise. “I think of a good strategic plan more as a verb than a noun,” Connor says.

“You can’t do it once, put it in a three-ring binder and keep it on the shelf,” Hiller adds.

For small- to mid-sized technology companies, Hayward says, “we look for strategic plans to happen on a three-year cycle. We look for business plans to be developed annually.” The business plans support the larger strategic plan, he explains. Within each business plan is a set of goals and objectives, along with a set of accompanying action plans. Each action is assigned its own timeline and caretaker, who’s responsible for seeing it through to completion. Leaders regularly report on the status of their action items in, say, monthly or quarterly meetings.

“It’s hard work,” Connor says, adding, however, companies that stay the course will soon see the fruits of their labor.

“Once you get your execution moving through the process and start doing more things that are right rather than just doing things, you’ll start to see some change,” Hiller says. “You start winning some deals. You develop some new products. You have innovation you didn';t have before. People start to feel like they’re important to the company because their roles are defined and they see a bigger picture that gives them hope. Sales begin to go up. Some of the customer complaints go down. You start beating competitors. Your profits, if they’re being managed properly, will go up. And you';ll have a new energy.”

- Andrew Bacskai is a St. Paul-based freelance writer and frequent contributor to Minnesota Technology.

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Minnesota Technology Magazine - Fall 2004

Have a Plan By Andrew Bacskai

Have a Plan
By Andrew Bacskai