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The Most Important Thing In Business

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I was talking to a good friend of mine, Bob Fetterman, who is the manager of the performing arts center at our local college, when he turned me and said, “In one word, what is the most important thing in business?”

I thought about it for just a few seconds and then confidently answer, “Talent.” Bob looked back at me and said, “It’s the same in the theater.”

The truth of the matter is it’s the same in just about every organization. If you’ve done a truly good job of finding highly talented people you have built the foundation for a sustainably successful organization. Because no matter what’s wrong in your business; if you have great people they can figure out a way to fix it. On the other side of the coin, no matter what’s wrong in your business, if you have bad people they will make it worse.

In the class I teach on strategy at Wharton I tell my students that we are entering an era where there is very little opportunity to create sustainable competitive advantage. Your competitor can copy your products, they can put a location right across the street, they can spend ten times what you do on marketing, they can drop their price, they can offer free shipping, they can do lots of different things to try to win in the marketplace, but if you have superior talent, your people will figure out how to win against the competition. To me, two of the only sustainable competitive advantages left to most businesses are:

The quality of the people that you can get, grow and keep on your team

 

The relationships they create with your customers

 

Which means that talent acquisition, talent development and talent retention should be a major strategic imperative in your business. In addition, you will need to create a winning culture of highly engaged, satisfied and loyal employees who are fanatical about delivering only the highest quality products and services and having only superior customer relationships and will tolerate nothing less.

Years ago I had lunch with a gentleman who built his business from one acre on the edge of a dairy farm, to a multibillion-dollar enterprise and I asked him what he felt the most important thing in running a successful business, he didn’t hesitate, he looked at me and said, “John, you can kid yourself about a lot of things in business but at the end of the day it’s always people, people, people.”

 

If you have 5 seconds I would deeply appreciate your vote as a top small business influencer…


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Thoughts on Strategic Planning

In this video I share some of my thinking around strategic planning, strategic planning retreats, execution of the plan and keeping your people focused and engaged around the plan. I hope you find this of value and will share it with your colleagues.

 

Some Thoughts on Strategic Planning

For the past eleven years I have been teaching a class at the Wharton School of Business on strategic thinking/planning, and in preparation for my return in a few weeks for year number twelve, I decided to take a hard look at where the practice of strategic thinking and creating organizational strategy stands today.

During the past decade the velocity of change, hyper-fast technological shifts, globalization and turbulence in the global economy has dramatically impacted the way organizations create strategies. I have some very strong opinions about this, which I will share with you at the end of this article, but I thought this wonderful blog from the Harvard Business Review would be a good place to start a discussion on strategy, strategic thinking and strategic planning.

 

Don’t Let Strategy Become Planning   By Roger Martin

I must have heard the words “we need to create a strategic plan” at least an order of magnitude more times than I have heard “we need to create a strategy.” This is because most people see strategy as an exercise in producing a planning document. In this conception, strategy is manifested as a long list of initiatives with timeframes associated and resources assigned. Somewhat intriguingly, at least to me, the initiatives are themselves often called “strategies.” That is, each different initiative is a strategy and the plan is an organized list of the strategies. But how does a strategic plan of this sort differ from a budget? Many people with whom I work find it hard to distinguish between the two and wonder why a company needs to have both. And I think they are right to wonder. The vast majority of strategic plans that I have seen over 30 years of working in the strategy realm are simply budgets with lots of explanatory words attached. This may be the case because the finance function is deeply involved in the strategy process in most organizations. But it is also the cause of the deep antipathy I see, especially amongst line executives, toward strategic planning. I know very few who look forward with joy to the commencement of the next strategic planning cycle.

To make strategy more interesting — and different from a budget — we need to break free of this obsession with planning. Strategy is not planning — it is the making of an integrated set of choices that collectively position the firm in its industry so as to create sustainable advantage relative to competition and deliver superior financial returns. I find that once this is made clear to line managers they recognize that strategy is not just fancily-worded budgeting and they get much more interested in it.

Obviously you can’t execute a strategy without initiatives, investments, and budgeting. But what you need to get managers focused on before you start on those things is the strategy that will make these initiatives coherent. That strategy is a singular thing; there is one strategy for a given business — not a set of strategies. It is one integrated set of choices: what is our winning aspiration; where will we play; how will we win; what capabilities need to be in place; and what management systems must be instituted? That strategy tells you what initiatives actually make sense and are likely to produce the result you actually want. Such a strategy actually makes planning easy. There are fewer fights about which initiatives should and should not make the list, because the strategy enables discernment of what is critical and what is not.

This conception of strategy also helps define the length of your strategic plan. The five questions can easily be answered on one page and if they take more than five pages (i.e. one page per question) then your strategy is probably morphing unhelpfully into a more classical strategic plan. This definition of strategy can be disconcerting to those who have spent a lifetime generating traditional strategic plans. Not long ago I facilitated a day long strategy session with the senior team of a very successful $10 billion company with an outstanding CEO. By the end of the day (in part thanks to a goodly amount of pre-work by the head of strategy), we got to a nice set of integrated choices. I congratulated the group on its great thinking and working and affirmed what I judged to be an excellent strategy.

My enthusiasm notwithstanding, the CEO was troubled. I asked him why. “Is that all we have to do?” he asked, as if he thought he had cheated on an exam. I am sure he expected that he had to fill binders and long lists of initiatives to feel that he had been thorough in this year’s strategic planning process. I reassured him that he had given strategy anything but short shrift. And that day strategy prevailed over planning. I suspect that CEO will never go back.

So if you pass the five-page mark is time to ask: Are we answering the five key questions or are we doing something else and calling it strategy? If it is the latter: eject, eject!

Roger Martin (www.rogerlmartin.com) is the Dean of the Rotman School of Management at the University of Toronto in Canada.

 

Five questions, five pages, not a budget… I agree completely with all of these, I very much like the way Roger Morton approaches the idea of strategy and strategic planning. Let me share with you some other fantastic thoughts from a gentleman named Max McKewon who wrote a superb book called: “The Strategy Book” (super creative title!!). Here are a few samples of what resonated with me out of Max’s book…

“There are strategy tools and processes that can help, but the real heart of strategy is the strategist. It’s what you know, how you think, and how you get people to care enough about what you’re doing to achieve your goals.”

“There is no guarantee that the future will turn out the way you want. Just writing a plan does not mean that the plan will happen. The world is more complex than our ability to plan, but that’s part of what an effective strategist learns to accept. You learn that reacting and responding to events is just as important as planning.”

“Strategy is about the shortest route between means and ends. It’s either about out-thinking the competition – or – even better – about finding new, even greater opportunities. Opportunities that the competition hasn’t found yet, or opportunities the competition doesn’t understand because it hasn’t been doing the kind of thinking that you have.”

“It’s possible to be a strategic thinker without using any strategy tools, but it’s not possible to create brilliant strategy without being a strategic thinker. There is an important difference between creating strategy documents and creating strategy to get you where you want to be. There’s also a valuable difference between managerial thinking and strategic thinking.”

“It’s difficult for some people to accept that reacting (not just planning) is a good thing. Managers have been taught the value of being (or looking!) organized. They have learned that being “proactive” is what the business world wants. They have been told that being reactive is a bad thing. It’s good to plan but it’s bad to think that you can plan for everything. You need a prepared mind ready to recognize unplanned opportunities.”

Reactive as well as proactive – being a strong strategic thinker- understanding that the complexity of today’s business world is too great to plan long-term – yet that it is still imperative that you make a plan… again, I find myself in very close agreement.

Here are a few things that I’ve learned in more than a decade of thinking about and teaching strategic thinking/strategic planning and conducting hundreds of strategic planning retreats…

 

Effective strategy = valued differentiation x disciplined execution

 

Please reread the equation I just presented, it is deceptively simple and extremely powerful.

 

One of the main talents of a great strategic leader is figuring out what NOT to do.

 

Again, please reread the idea I just presented, it is deceptively simple and extremely powerful.

 

Max said in his book, but I will reiterate it here, it is impossible to create great strategy without being a great strategic thinker – unfortunately the vast majority of managers/leaders that I work with do not invest an adequate amount of time in building their business acumen and exposing themselves to great/unique/different/new ideas – which is exactly what they must do if they endeavor to become a strong strategic thinker. The first step of being a superior strategic thinker is being a lifelong student of business, strategy, marketing, positioning, branding… all the elements that create differentiation.

This is exceedingly simplistic, but I basically see the entire process of creating an effective strategic plan as six core steps:

  1. Investing time and real effort in “strategic learning.”
  2. Combining strategic learning with your actual industry and organizational experience.
  3. Looking for patterns/anomalies/trends that would point to a potential strategic competitive advantage.
  4. Creating a dynamic strategic plan that offers true valued differentiation to your target customers.
  5. Creating a very specific, measurable and binary strategic execution plan that ensures your great ideas will turn into effectively executed actions that can be tracked, measured, coached, improved and amended as changes occur in the marketplace/competition.
  6. Review and evaluate the effectiveness of the plan often – return to step one and start the process again.

As I look over this list a few things come to mind:

  1. Far too few leaders spend enough time in strategic learning.
  2. Far too few leaders spend enough time looking for patterns.
  3. Unless you work in a highly stable industry – most strategic plans today only look out about 18 to 24 months.
  4. Most organizations do not revisit their plan often enough to keep it fresh, agile and adaptable.
  5. Far too few organizations invest an equal amount of time in strategic planning – and strategic execution planning. The best ideas in the world are useless if they are not effectively executed, therefore the leaders of the organization should invest a significant amount of time in ensuring that their spectacular strategic plan will be efficiently and effectively executed with high levels of both personal and mutual accountability across the entire organization.
  6. Far too few organizations take the time to do an “after action review” of the strategy from the last year – whether it was successful or unsuccessful – so they never truly learn from their failures or successes.
  7. Far too many organizations, as was mentioned in the blog post above, are basically run on a budget that is called a strategic plan – managed by numbers and financial goals – not by a true strategy that would allow them to create a defendable advantage through offering something unique, differentiated and highly valuable to the marketplace.

Well, I think that’s enough for right now, my main goal in this memo was simply to get you thinking about strategy, strategic thinking, strategic planning and strategic execution.

I very much welcome your questions, comments, thoughts and suggestions – there’s still much to be learned about the art of strategy.

Take good care, and as always if you need anything please do not hesitate to send a note or a call, I’m here to assist in any way I can – John

John Spence has twice been named by Trust Across America as one of the Top 100 Business Thought Leaders in America and has been recognized by that organization as one of the top 100 Thought Leaders in the world in the area of “Trustworthy Business Behavior.” Other recipients of this award include: Sir Richard Branson, CEO of the Virgin Group, Howard Schultz – CEO of Starbucks, Tony Hsieh – CEO of Zappos, acclaimed business consultant Ram Charan, internationally renowned author Thomas L. Friedman, and business authors Patrick Lencioni, Tom Peters, Rosabeth M. Kanter and Jim Kouzes. In 2011 John was also selected as a leading small business influencer in America along with Malcolm Gladwell, Seth Godin and Apple.

Strategies for Life Success

If you have a moment, I’d like to share a story with you.

I graduated from one of the top prep schools in America in 1982 and decided I would stay near home and attend the University of Miami (in Miami Florida), mostly because I had a small fishing skiff and a girlfriend and didn’t want to leave either of them. Let’s just say I did not take college too seriously and soon found myself with a 1.6 GPA and a nice note from the people at the University of Miami indicating that I had been… expelled. As if that weren’t bad enough, my father was one of the top alumni ever to graduate from University of Miami, was on the Board of Directors of their law school and was one of the most well-known and respected people on campus… Ouch. Continue reading “Strategies for Life Success” »

Six Key Strategies for Success in a Challenging Economy

For the past 14 years I have served as an advisor and coach to more than 300 companies worldwide. Recently, I have had a number of clients ask for my advice on how to handle the current business downturn. In some of the industries I work in the numbers look extremely bleak and I am predicting that there is going to be a serious shakeout of any weak players. To make sure you are one of the strong that survive, here are my top recommendations for what you need to focus on to successfully navigate these difficult economic times. Continue reading “Six Key Strategies for Success in a Challenging Economy” »

How to Run an Effective Strategic Planning Retreat

A very close friend asked me to facilitate his organization’s upcoming strategic planning retreat, but unfortunately the days he needed were already booked for another client. The next best thing I could offer was some advice. I have probably facilitated 80 or 90 retreats in the last 20 years, from non-profits to the Fortune 50 – here is how I typically approach a planning retreat… Continue reading “How to Run an Effective Strategic Planning Retreat” »

Strategic Execution Planning – the key to your success!

I was recently invited to return to the University of Pennsylvania’s Wharton School of Business for the fourth year in a row to teach a special class on strategic planning for the Securities Industry Institute. I called my contact a few months before the session to ask if it was possible to shift the class more from “strategic planning” to “strategic thinking” this year, but was surprised to find out that 98 executives had already signed up for the class based on the catalog description of it as “a solid look at how to write an effective strategic plan.” So, I decided to go back and take a hard look at the program and see if I could update it a bit and was surprised to have an epiphany of sorts…

Continue reading “Strategic Execution Planning – the key to your success!” »

Why Business Planning is So Important

Frankly it scares me. In working with literally hundreds of small to medium-sized business over the past decade I have been terrified at how few of them take their business planning seriously. Even more horrifying is that a fair number of them did not even have a business plan at all! Let me make this clear: sustained business success does not come from chance, fate or good luck. To run a successful and profitable company it is critical that you understand, implement and value the process of effective business planning. But rather than just jump up and down on my soap box, let me try to lay out for you a reasoned and well thought out case for why you should invest your time and energy in creating and maintaining a solid business plan. Continue reading “Why Business Planning is So Important” »