No business can succeed without a strategic plan. However, based on my 50 years of experience leading companies like Reebok and HBO Video, I’ve come to realize that the biggest hurdle to making a plan is often figuring out what business you’re in. Below is my step-by-step formula for creating a strategic plan that will take your company from good to great.
Determine what business you’re really in: Sometimes it’s not as obvious as you think. For example, when I ran Reebok, it became clear that we weren’t in the sneaker business, we were in the “lifestyle entertainment business.” Less than 30% of sneakers have participated in any form of athletic competition or fitness activity. In the toy industry, we work on child development, especially today’s well-educated millennial moms. In video games, we are in the business of creating habitual behavior.I encourage leaders to identify your business as well no in clarification.
The plan should be highly data-based: Start with an internal and external analysis of your business or the business you want to start. This includes current and expected competition as well as the industry itself. Identifying and speculating on trends is critical in today’s environment. Market and potential customer entry and final consumption trends are changing rapidly. Wherever I work, I insist on an annual review of our strategic plan. : in today’s environment. Plans should be reviewed more frequently.
The plan should stem from a mission statement that includes a set of values and purpose: TreeHouse Foods is the world’s largest private label food company and I served on the board for 16 years with a mission to “create value for our customers and be the manufacturing and distribution partner of choice. . . we are committed to building a performance-based A foundational culture in which we live our values with each other and with our customers to ensure our mutual success and safety.” Then there is an “Own Its” list for all employees, while We have defined our goal of “making high-quality food and beverages affordable for all”.
Consider hiring an outside consultant: I recommend hiring an outside consultant or firm to lead the strategic planning process. Many people within the company were never involved in the development of a strategic plan. They often think that a budget and strategy checklist is a plan, but it’s not.
Early in my career, I was fortunate enough to run companies where Bain, BCG, and McKinsey do strategic planning.Then I hired the Parthenon– Ernst & Young Guide the development of strategic plans in nearly every company I lead. I also created my own syllabus for small companies and start-ups, then hired a smart analytical MBA to develop the database. Ultimately, I work at the Parthenon as a senior partner, developing strategic plans for companies of all types around the world.
The management team and ultimately the entire organization must have a strategic plan. Please understand that this is not a group of smart outsiders or consulting firms dumping management plans. Management must be fully involved in the entire process. However, I keep finding that consulting firms can come up with some exciting insights when they study internal and external data. In a recent study of a holding company I was involved in, an external analysis revealed that several divisions did not earn the cost of capital and never will. Sell or close your position and your profit will increase.
Basic elements of strategic planning: Gather key people in one room and provide all appropriate data and analysis. Alternative strategic directions are then conceived. Make sure to involve really engaged people – this may mean not just senior management. Try to keep the group size small. Stay positive, unbiased, and encourage creativity. If necessary, use a professional facilitator who can solidify ideas, then present to participants who can determine which ideas work best.
Ideas are then detailed and the information needed to evaluate them is determined based on agreed criteria (e.g. size of idea, human and capital resources required to execute, timeline, likelihood of success). Following these steps, using these criteria, is the best way to create a strategic plan that will help your company succeed in today’s competitive, fast-paced business environment.
Written by Frank O’Connell.
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