Learning Point BUSINESS POLICY The Planning Process

1. Learning PointBUSINESS POLICYThe Planning Process Planning is not about future decisions but the future of present decisions Peter Drucker

2. The Four Fatal Flaws of Planning Skipping rigorous analysis 2. Believing strategy can be built in a day 3. Failing to link strategic planning with strategy execution 4. Dodging strategy review meetings Learning Point

3. Models of Strategic ManagementThe Management System Principles There must be a system to balance the tensions between strategy and operations. 2. The application of the model is very situational. 3.Strategic Management is usually messy and iterative. 4. Keep it simple, but no simpler than it is.” – Albert Einstein 5. Strategic Management should be an ongoing process, not an event Learning Point

4. Dynamic Rolling Plans versus Static Fixed Period Plans The Rolling Plan Year 1 2 3 4 5 First Plan x x x Second Plan x x x Third Plan x x x Year 1 2 3 4 5 6 A Fixed 5 Year Plan First Plan x Second Plan x Learning Point

5. PlanningA Planning Calendar • 1st Quarter: Assessment and Learning • 2nd Quarter: Strategic Thinking: Update the Strategic Plan • 3rd Quarter: Update the Business Plan • 4th Quarter: Prepare the Annual Plan Learning Point

6. Process Outline – Phase I: Preparation • Stage 1: Defining the Need for Change • Stage 2: Management Understanding of and Commitment to the Strategic Management System • Stage 3: Planning to Plan Learning Point

7. Models of Strategic ManagementThe Management System Process Outline – Phase I: Preparation Stage 1: Defining the Need for Change • Triage: “The Quick Assessment” - The Goal: Get a feeling for the situation • Sample Questions • What is our need for strategic change? • Understand the current situation, both current and prospective • Is there a “Big Idea” creating a compelling opportunity? • What is the readiness of the organization for strategic change of the kind that might be considered or needed? • The decision: • There is or is not a need for strategic change. • There is a need but the effort must be deferred • If deferred, identify issues requiring immediate attention Learning Point

8. Models of Strategic ManagementThe Management System Process Outline – Phase I: Preparation • Stage 2: Management Understanding of and Commitment to the Strategic Management System • The Steps • Assess management team’s experience with strategic management • If inexperienced, select a consultant or course for training and/or research how others have approached the process • Train • When there is understanding, ask for the team to commit to undertaking a strategic management process • If commitment is not given, defer beginning the process until you resolve the issue with the team • If commitment is given, design the process Learning Point

9. Models of Strategic ManagementThe Management System Process Outline – Phase I: Preparation • Stage 3: Planning to Plan Sample Questions • Where is the strategy on the maturity curve? • What is the logical starting point? • What are realistic goals for the process • What is the appropriate level of effort given the type, scale and timing of the required change? • What information will be required? • How will the work be organized? • How will lower levels of management be trained in strategic management? • What will be the Planning Calendar? Learning Point

10. Models of Strategic Management The Management System Ref: The Execution Premium By Kaplan and Norton Harvard Business Press, 2008 Strategic Analysis Mission, Vision (Goals), Values , Strategies and Strategic Issues Strategic Plan Initiatives Business Plan New Knowledge Initiative Action Plans Budgets Dashboards Information Performance Metrics (Operating & Strategic) Learning Point

11. Models of Strategic ManagementThe Management System Applies primarily to established operating businesses Exceptions • Holding Companies • More of a portfolio management challenge • In what kinds of programs do we invest? • The level of integration between programs • How do we manage them • Centralization versus De-centralization • Start-ups • Do not have an execution history • How much time and investment to get to cash flow positive? Learning Point

12. Stage 1: Monitor and Learn • The key drivers of success must be identified, monitored and reported in a timely and accurate manner so that managers have the information they need when and where they need it so they can take action as indicated. • Utilize the Balanced Score Dashboards • Effective MIS and Knowledge Management Key Questions: • What are the key indicators of drivers of success? • What metrics can be used to measure them? • What are the appropriate standards or goals? • How is information to be collected and managed? • How is performance to be reported? Learning Point

13. Learning • It is important that all levels learn from experience at every stage of the process – before, while and after doing. • Hold Operation Reviews • Hold Strategic Reviews • Become a Learning Organization which requires effective Knowledge Management – the collection, processing and distribution, when and where needed, of information Key Questions: • What does performance evaluation tell you? • How does this information feed back into ongoing situation assessment? • Should the Mission be re-visited? • Should the strategies be refined or changed? • Does execution need to be improved? Learning Point

14. MEETING TYPE Learning Point

15. Stage 2: Test and Adapt the Strategy • This is the diagnosis step that is so important to understanding the situation • Based on the reviews the strategy is tested and adapted as required. • Operations or infrastructure may need to be improved. • Numbers need to be disaggregated by segment – market, customer, location, division, cost center, etc. • Make Mid-course corrections (Steering) Key Questions • Test and adapt strategy, based on causal analytics, product-line and channel profitability, changing external environment, emergent strategies, and new technology developments Learning Point

16. Stage 3: Develop The Strategy • Conduct Strategic Analysis • Deep Assessment of the Current Situation • What are the issues that we must address? • Scanning the Future • What assumptions are we making about the future? • What are the issues we must address? • Formulate Strategy • Develop coherent actions to address the issues and the obstacles - feasible, coordinated policies, resource commitments and actions to carry out the guiding policy • Review the Mission, Vision and Values Learning Point

17. Current Situation Assessment • Planning from the Present. • Often a SWOT process • Understand the current situation – • The Business Model (Guiding Policy) • Internal: Condition and Momentum • Operational • Infrastructure • Financial • External Environment • Often a “bottoms up” process. Key Questions: • What is the business? Why are we in it? • What is the purpose (Mission)? • Who are the customers and what are their needs? • What is the Value Proposition? • How well do we meet those needs? • The existing strategies • The Value Chain • The critical skills • What is the current environment? • PESTAL analysis • Political, Economic, Social, Technological, Environmental and Legal • Industry or niche Analysis • Company’s relative position • Customers’ situation Learning Point

18. Scan the Future • Planning from the future • The Merlin Factor • Develop a Guiding Policy rooted in the reality of the situation that sets the direction, toward what you want to be. • It must have some sense of the opportunities and threats emerging in the environment. • Use of Scenario Thinking • Examine emerging strategies • It is essentially a top down exercise Key Questions: • What is changing? • Driving Forces of change • Trends and forecasts • What assumptions are you making about the future? • What are the O/T’s? • 1-3 years • 3-5 years • > 5 years • What is the potential impact of the changes you foresee? Learning Point

19. Strategy Formulation • The information generated needs to be analyzed. • Strategies need to be formulated • Create a Strategic Map to communicate objectives and measures, organized in themes of related objectives • Issues requiring action need to be identified and prioritized, focusing on those that are pivotal or crucial • Obstacles to addressing the issues need to be identified and analyzed Key Questions: • Is the business an attractive one in which to be? • Are the results today acceptable? • If the business continues as is, are the results likely to be acceptable in the future? • What should our directional strategy (Our Guiding Policy) be? • How can we best compete in our business? • Decide on, test or adapt the Mission, The Vision and/or the Values • What are the pivotal issues, current and future, raised by the analysis and the strategies. Learning Point

20. Mission, Vision and Values • Mission: The purpose of the business: • Who its customers are, and what it does for them • The Value Proposition that meets their needs • The Vision: An aspirational statement that defines mid to long-term goals of the organization • Values: Prescribe the attitudes, behaviors and character of the organization that shapes the culture Learning Point

21. Stage 4: Translate The Strategy • The Strategic Plan - Directional • The Business Plan • The Strategic Initiatives for each Issue • The Strategy Map • 3-5 Year Resource Planning • The StratEx Budget • The Capital Budget • The Manpower Plan • The Operating Budget • The Annual Plan: • Action Plans to implement the desired changes • Quarterly Line of Sight (LOS) Plan Learning Point

22. Plan Structure Strategic Plan Level 1 Quarterly Line of Sight Plan 3-Year Business Plan Strategic Road Map Level 2 1-Year Strategic Framework Level 3 Level 4 Daily Execution Level 5 Learning Point

23. The Strategic Plan Outline Key Questions: • Describe the business we want to be in (Mission/Purpose) • Describe the Values • Describe the direction (Guiding Policy) we want to head? • Describe the Vision or Goal • Describe the Competitive and Functional Strategies • Describe the pivotal issues that are to be addressed and the goals for each issue Learning Point

24. Mission and Vision Mission Statement Vision Strategies (Strategic Issues) to achieve goals Initiatives to execute the strategies Learning Point

25. Plan OperationsThe Business Plan - Part A Implementing Strategy • Generally a 3 to 5 Year Planning Horizon • The Strategic Map • Links Strategic Goals and issues to Initiatives that drive action. • Identify and prioritize Strategic Initiatives for each Strategic Issue • Identify and prioritize Process Improvement Initiatives • Create organization to manage the implementation • Senior executives to manage themes • Project Strategic Expenditures (StratEx) for the initiatives Learning Point

26. The Strategy Map THEMES PERSPECTIVES CUSTOMER PROCESS LEARNING & GROWTH Create a High- Performing Culture Learning Point

27. Plan OperationsThe Business Plan - Part B • A Resource Plan • The planning period defined by the lead times required to obtain the resources – for most organizations 3 years works. • The plan must be effectively communicated to all constituencies. Key Questions: • Describe the scale (Sales Targets) and scope of operations, projected on a time line • Develop a Sales Plan • Translate Sales Plan to a Capacity Plan • Develop plan to acquire the necessary resources • Develop Talent Management Plan • Project Financial Statements Learning Point

28. The Annual Operating Plan • Action Planning • Includes both operating plans and budgets and the initiative plans that address Strategic Issues. • The plan must be effectively communicated to all constituencies. Key Questions: • What are the Strategic Action Plans/Objectives • What are the Sales Targets? • Broken down to products and impact on activities • What is the Marketing Plan to achieve the targets? • Translate Sales Targets to resource requirements • Develop the Dashboards • Cascade down to operating units • Develop the Capital Budget • Develop the Manpower Plan • Develop the Operating Budget Learning Point

29. Line of Sight (LOS) • Selected key managers develop and own an annual Strategic Framework (aka Key Priorities) • Each key manager (and others, if appropriate) develops and owns a quarterly Line of Sight (LOS) Plan – helps drive empowerment and ownership • LOS plans are reviewed on a routine basis – communication and accountability Policy deployment tool – links strategy to tactics Learning Point

30. The Document Outlines Learning Point

31. Execution • Strategies, to be realized, must be executed effectively. • Disciplined People, Thought and Action • Culture alignment with goals • Organization alignment with goals • Effectively manage change Key Questions: • How to manage the talent • How is excellence in each of the functional areas to be achieved? • How is fiscal integrity maintained? • Does the execution achieve the strategic goals? Learning Point