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Why Strategic Planning is Even More Important Now

Amelia Young, CFA
Amelia Young, CFA

Strategic planning is often misinterpreted as an academic exercise that distracts leaders from the goal of producing clear business results. In fact, creating strategic alignment and focus to your activities is even more critical when competition is intensifying and resources are constrained. Deepen your strategic planning acumen with new tools that will help maximize value in a challenging economic climate.

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Using Strategic Planning to Unlock New Value in a Downturn Amelia Young, CFA Upside Consulting Group Inc.
Objectives for this session Explain why focus and alignment are critical to creating value in a challenging economic climate Demonstrate h ow strategic planning is a critical element to choosing a focus and executing it Provide a framework for identifying what a strong focus could look like in your organization Offer suggestions for strengthen ing focus and alignment in your organization A goal without a plan is just a wish
Index Diagnosing the problem Developing a focused plan
Sources of misalignment When they lose the course we find various areas of misalignment: Company-to-market Function -to-function Division-to-division Company-to-supplier(s) Compensation- to- objectives Others Organizations typically do a pretty good job of keeping their eye on the ball
Quantifying the opportunity Company-to-Market We know intuitively that focus enhances profitability, but tend not to think about the specifics Function- to-Function Division- to-Division Gap Challenge Result Customer and competitive insights are not proactively shared Services are not developed to meet a clear market need Customers focus on price because offers are uncompelling Complaints are high Operations planning, processes and systems unaligned with marketing goals P roduct launche s are not executed consistently Time to market is slow, c ashflows are deferred and risk is increased Services used by the same customer are managed completely separately Customer insight and relationships are not leveraged The whole is not worth more than the sum of its parts
Company / Market Mismatch Relative Importance of Factors Driving Provider Choice Management perceptions of purchase criteria are often inconsistent with true customer priorities Price of entry Opportunity for differentiation Current marketing theme
Function / Function Mismatch ILLUSTRATIVE Different functional disciplines typically measure different things Priority Metrics Sales Marketing Operations Finance HR IT Staff Turnover Customer Attrition Customer Satisfaction Price per Unit Market Share Gross Margin Cost to Acquire Cost to Serve Overhead
There is minimal overlap of capabilities Overlap that does exist is not structured to: Deepen customer intimacy Accelerate innovation Reduce cost Manufacturing firms tend to do a better job of this because the assets are more tangible It is more challenging for services firms because their assets are intangible Division / Division Mismatch Capability B Capability C Capability A Division 1 The whole should be more valuable than the sum of its parts Capability C Capability D Capability E Division 2
Index Diagnosing the problem Developing a focused plan
What makes a sound strategic plan? ` Objectives Capabilities Competitors Customer Needs Planning starts from a comprehensive factbase that incorporates insight on internal and external value drivers This perspective is developed by asking insightful questions and consulting with all key stakeholders This factbase provides a touchstone with which to remain aligned as adjustments are made during implementation Factbase The difference between a budget and a plan is information, analysis and insight
Ask the right questions Who What When Where Why How B2B - Specific industries, geographies or functional roles within an organization? Are there primary targets as well as influencers? B2C - Specific demographic, attitudinal or psychographic segments? Are the needs of your target segment aligned with what youre selling? Do the features that differentiate your service matter to the target audience? What do you expect those needs to be in the future? When in the purchase cycle are services introduced to the target client? Are there specific catalysts that drive customers to seek you out? Are competitors exploiting gaps in your coverage of the sales cycle? Are you approaching customers in the manner and location that aligns with their decision-making processes? Are your channels aligned with the target customers needs? Is your service the best use of the clients dollar right now relative to competing priorities? Why is your company the best choice for them in this category? Do you have unique capabilities/assets that provide a competitive advantage? Are capability gaps impairing your ability to execute? How does your organization ensure alignment between functions, units etc?
Build cross-functional perspective The answers to these questions must be developed by and shared with all stakeholders Marketing IT HR Sales Customer Care Finance
Sample B2B Market Segmentation Analyzing these inputs reveals market segments with distinct attributes Commodity Specialty Focus Custom Solution Industry Profile Very mature Low growth Mass product focus Approaching maturity Moderate growth Niche products Transitioning industry New customer segment Client Profile Large, experienced, conservative Medium/Large Moderate experience Small/Medium Inexperienced Provider Role Execution Strategic advisor Creative innovator Project Impact Maintain status quo Reduce cost Drive growth Support transition with infrastructure, expertise Relevant Capabilities Scale Infrastructure Low cost Specialty expertise Specialty technology Specialized processes Creativity Project design Managing complexity Provider Differentiators Limited Many benchmarks Moderate/High Few benchmarks Moderate/High No benchmarks Lead Sources RFPs Industry referrals Proactive pitches
Prioritizing Capabilities You cant be everything to everyone. Capability Definition Product Dev elopment and Mgmt Leveraging experience for better decision-making and continuous improvement Project Management Processes Develop repeatable processes to ensure high quality execution with minimal variance Channel Development Consistently communicate and execute the same value proposition across channels Data Collection & Reporting Leveraging infrastructure to minimize marginal cost of data collection and produce insight Account Management Relationships based on insight into business goals and challenges Marketing Getting the word out about your services amongst all stakeholders Customer Segment Custom Solution Commodity Specialty Focus Low Importance Moderate Importance High Importance
Making the whole more valuable than the sum of its parts Capability B Capability C Capability A Capability C Capability D Capability E Division 1 Division 2 Capability A Division 1 Division 2 Capability B Capability C Capability D Capability E
Expansion does not equate to profit growth Economies of scale and/or scope are needed P&L Item Revenue Direct Costs/ COGS Customer Acquisition Cost Cost to Serve (call centres, billing) Overhead Economies of Scope Loyalty may rise with multi-service purchase Labour can occasionally be leveraged for multiple services The right to solicit existing clients reduces CTA for additional services Handle multiple service needs in a single interaction Management can be leveraged across a larger customer base Caveats Multi-service clients raise: E xpectations of discounts Cost of attrition Eroded by broad geographic scope Scope synergies only exist if client is the same for both services and is actively engaged G eographic and service scope can require double infrastructure Multiple services can create integration challenges Only yields economies where skills are transferable and time can be split effectively Economies of Scale Willingness-to-pay increases with brand strength Capacity utilization often increases with size Brand strength creates pull with referrals, success stories etc. Infrastructure is amortized across more customers Management can be leveraged across a larger customer base
Prioritizing Opportunities New Types of customers New services Existing customers Existing services High Priority/ Low Risk Moderate Risk and Priority Low Priority/ High Risk Prioritize opportunities that are closest to the core Develop new services for existing customers Develop new services for new customers of same type Develop new services for greenfield customer opportunities Repackage existing capabilities into new services for existing customers Repackage existing capabilities to attract new customers of the same type Repackage existing capabilities to attract new types of customers Consolidate existing customer base, focusing on retention satisfaction Grow share by selling existing services to more of the same type of customer Enter new market (segments) by targeting different types of customers
Whats missing? Time to think and reflect Its difficult and often unpopular to turn the lens inward Cross-functional, cross-discipline interaction among middle managers Sources of new perspective
Key Takeaways Significant value leakage occurs as a result of misalignment This is particularly true in services firms, given the intangible nature of their services There is an urgency to proactively seek new perspectives in this challenging marketplace Organizations have a tremendous opportunity to enhance their value through improved collaboration You can start small by: Collaborate with unlikely people Testing these principles with a specific customer segment Focusing on a particular area of misalignment Having the courage to say no

More Related Content

Why Strategic Planning is Even More Important Now

  • 1. Using Strategic Planning to Unlock New Value in a Downturn Amelia Young, CFA Upside Consulting Group Inc.
  • 2. Objectives for this session Explain why focus and alignment are critical to creating value in a challenging economic climate Demonstrate h ow strategic planning is a critical element to choosing a focus and executing it Provide a framework for identifying what a strong focus could look like in your organization Offer suggestions for strengthen ing focus and alignment in your organization A goal without a plan is just a wish
  • 3. Index Diagnosing the problem Developing a focused plan
  • 4. Sources of misalignment When they lose the course we find various areas of misalignment: Company-to-market Function -to-function Division-to-division Company-to-supplier(s) Compensation- to- objectives Others Organizations typically do a pretty good job of keeping their eye on the ball
  • 5. Quantifying the opportunity Company-to-Market We know intuitively that focus enhances profitability, but tend not to think about the specifics Function- to-Function Division- to-Division Gap Challenge Result Customer and competitive insights are not proactively shared Services are not developed to meet a clear market need Customers focus on price because offers are uncompelling Complaints are high Operations planning, processes and systems unaligned with marketing goals P roduct launche s are not executed consistently Time to market is slow, c ashflows are deferred and risk is increased Services used by the same customer are managed completely separately Customer insight and relationships are not leveraged The whole is not worth more than the sum of its parts
  • 6. Company / Market Mismatch Relative Importance of Factors Driving Provider Choice Management perceptions of purchase criteria are often inconsistent with true customer priorities Price of entry Opportunity for differentiation Current marketing theme
  • 7. Function / Function Mismatch ILLUSTRATIVE Different functional disciplines typically measure different things Priority Metrics Sales Marketing Operations Finance HR IT Staff Turnover Customer Attrition Customer Satisfaction Price per Unit Market Share Gross Margin Cost to Acquire Cost to Serve Overhead
  • 8. There is minimal overlap of capabilities Overlap that does exist is not structured to: Deepen customer intimacy Accelerate innovation Reduce cost Manufacturing firms tend to do a better job of this because the assets are more tangible It is more challenging for services firms because their assets are intangible Division / Division Mismatch Capability B Capability C Capability A Division 1 The whole should be more valuable than the sum of its parts Capability C Capability D Capability E Division 2
  • 9. Index Diagnosing the problem Developing a focused plan
  • 10. What makes a sound strategic plan? ` Objectives Capabilities Competitors Customer Needs Planning starts from a comprehensive factbase that incorporates insight on internal and external value drivers This perspective is developed by asking insightful questions and consulting with all key stakeholders This factbase provides a touchstone with which to remain aligned as adjustments are made during implementation Factbase The difference between a budget and a plan is information, analysis and insight
  • 11. Ask the right questions Who What When Where Why How B2B - Specific industries, geographies or functional roles within an organization? Are there primary targets as well as influencers? B2C - Specific demographic, attitudinal or psychographic segments? Are the needs of your target segment aligned with what youre selling? Do the features that differentiate your service matter to the target audience? What do you expect those needs to be in the future? When in the purchase cycle are services introduced to the target client? Are there specific catalysts that drive customers to seek you out? Are competitors exploiting gaps in your coverage of the sales cycle? Are you approaching customers in the manner and location that aligns with their decision-making processes? Are your channels aligned with the target customers needs? Is your service the best use of the clients dollar right now relative to competing priorities? Why is your company the best choice for them in this category? Do you have unique capabilities/assets that provide a competitive advantage? Are capability gaps impairing your ability to execute? How does your organization ensure alignment between functions, units etc?
  • 12. Build cross-functional perspective The answers to these questions must be developed by and shared with all stakeholders Marketing IT HR Sales Customer Care Finance
  • 13. Sample B2B Market Segmentation Analyzing these inputs reveals market segments with distinct attributes Commodity Specialty Focus Custom Solution Industry Profile Very mature Low growth Mass product focus Approaching maturity Moderate growth Niche products Transitioning industry New customer segment Client Profile Large, experienced, conservative Medium/Large Moderate experience Small/Medium Inexperienced Provider Role Execution Strategic advisor Creative innovator Project Impact Maintain status quo Reduce cost Drive growth Support transition with infrastructure, expertise Relevant Capabilities Scale Infrastructure Low cost Specialty expertise Specialty technology Specialized processes Creativity Project design Managing complexity Provider Differentiators Limited Many benchmarks Moderate/High Few benchmarks Moderate/High No benchmarks Lead Sources RFPs Industry referrals Proactive pitches
  • 14. Prioritizing Capabilities You cant be everything to everyone. Capability Definition Product Dev elopment and Mgmt Leveraging experience for better decision-making and continuous improvement Project Management Processes Develop repeatable processes to ensure high quality execution with minimal variance Channel Development Consistently communicate and execute the same value proposition across channels Data Collection & Reporting Leveraging infrastructure to minimize marginal cost of data collection and produce insight Account Management Relationships based on insight into business goals and challenges Marketing Getting the word out about your services amongst all stakeholders Customer Segment Custom Solution Commodity Specialty Focus Low Importance Moderate Importance High Importance
  • 15. Making the whole more valuable than the sum of its parts Capability B Capability C Capability A Capability C Capability D Capability E Division 1 Division 2 Capability A Division 1 Division 2 Capability B Capability C Capability D Capability E
  • 16. Expansion does not equate to profit growth Economies of scale and/or scope are needed P&L Item Revenue Direct Costs/ COGS Customer Acquisition Cost Cost to Serve (call centres, billing) Overhead Economies of Scope Loyalty may rise with multi-service purchase Labour can occasionally be leveraged for multiple services The right to solicit existing clients reduces CTA for additional services Handle multiple service needs in a single interaction Management can be leveraged across a larger customer base Caveats Multi-service clients raise: E xpectations of discounts Cost of attrition Eroded by broad geographic scope Scope synergies only exist if client is the same for both services and is actively engaged G eographic and service scope can require double infrastructure Multiple services can create integration challenges Only yields economies where skills are transferable and time can be split effectively Economies of Scale Willingness-to-pay increases with brand strength Capacity utilization often increases with size Brand strength creates pull with referrals, success stories etc. Infrastructure is amortized across more customers Management can be leveraged across a larger customer base
  • 17. Prioritizing Opportunities New Types of customers New services Existing customers Existing services High Priority/ Low Risk Moderate Risk and Priority Low Priority/ High Risk Prioritize opportunities that are closest to the core Develop new services for existing customers Develop new services for new customers of same type Develop new services for greenfield customer opportunities Repackage existing capabilities into new services for existing customers Repackage existing capabilities to attract new customers of the same type Repackage existing capabilities to attract new types of customers Consolidate existing customer base, focusing on retention satisfaction Grow share by selling existing services to more of the same type of customer Enter new market (segments) by targeting different types of customers
  • 18. Whats missing? Time to think and reflect Its difficult and often unpopular to turn the lens inward Cross-functional, cross-discipline interaction among middle managers Sources of new perspective
  • 19. Key Takeaways Significant value leakage occurs as a result of misalignment This is particularly true in services firms, given the intangible nature of their services There is an urgency to proactively seek new perspectives in this challenging marketplace Organizations have a tremendous opportunity to enhance their value through improved collaboration You can start small by: Collaborate with unlikely people Testing these principles with a specific customer segment Focusing on a particular area of misalignment Having the courage to say no

Editor's Notes

  1. Moving on to our first session I would like to spend the next 30 minutes introducing you to a topic near and dear to me - the scintillating world of Strategic Planning. My talk will address how planning supports higher quality decision-making, how it positions an organization for better execution, and ultimately, how it increases profitability and shareholder value.