Strategy Planning and Execution

Lesson – 1 Understand Strategy

Strategy is important at every level in every organization. That's why you and your team need to
understand what strategy is, how to create it, and how to implement it.

What is strategy?

To be successful, your organization needs to set a clear, sound strategy. Strategy is how your
organization chooses to deliver its products or services to meet your customers’ needs. It’s the
unique way that your organization carries out its purpose and separates itself from the competition.
A good strategy consists of two major elements:

 The value proposition—what makes your organization’s products or services distinctive so

customers want to do business with you instead of your rivals
 The value chain—the combination of organizational activities that makes your unique value
proposition possible *

Example:

A large financial services company sees an opportunity to offer financial advice and products to middle-income
individuals—potential clients who can’t afford the fees typically charged for asset management and financial
planning. It creates a strategic plan around serving this group of customers. The company forms a new unit
that offers a combination of activities, including free web-based planning tools to help people budget and save,
access to low-cost phone-based financial advisors, and a streamlined portfolio of inexpensive investment
products.

Cynthia Montgomery — Professor, Harvard Business School

Because the world changes, an organization needs to have a strategy that’s alive and responsive to the
realities of the marketplace.

Why is strategy important?

No matter how good you are at producing products or services, excellent execution is not enough to
remain successful. Eventually, other organizations will be able to offer customers what you provide—
often better or cheaper. Your organization can set itself apart from your competitors by having a
sound strategy and skillfully carrying it out. Strategy provides the information that you and managers
at all levels need to define your work—and help your organization continue to thrive.

Your role

You may play a number of different roles in planning and executing your organization’s strategy:
 You may be asked to analyze information that senior managers then use to develop an
organization-wide strategy. Units hold tremendous knowledge about an organization and can
recommend what it should be doing and where it should be going.
 Example:
The senior management team at a large enterprise software company directs the regional sales groups
to gather data from customers about the new features they anticipate needing over the next two to
three years.

 You and your unit may create and execute action plans aligned with the organization’s
strategy. Units are the implementation centers of an organization. They have the leadership,
people, skills, and money needed to put plans into action.
Example
Senior managers identify a priority issue that focuses on developing a more efficient supply chain. They
delegate this issue to appropriate units, including the Manufacturing division. Manufacturing then
incorporates this priority issue into its planning.

 You may initiate your own strategic planning process—without direction from senior
managers—regarding unit-level priority issues. At times, you might need to develop a
strategy and plan for your unit that aligns with, but is not directly a part of, the organization’s
strategy.
Example

Creating strategy

Strategy is usually developed through a strategic planning process. Strategic planning helps ensure
that:
 A strategy is sound
 All units are aligned with the strategy
 Strategy implementation is effective
The result of the planning process is a strategic plan.
Strategic plans vary, but they usually contain:

 Direction statement—a summary of the organization’s vision, mission, and values that guide
the strategy
 Strategic objectives—goals and outcomes that represent achievement of a strategic vision *
 Priority issues—key issues (weaknesses to be addressed or opportunities to be seized) that the
organization needs to tackle to be successful
 Action plans—specific steps the organization needs to take to accomplish its priority items
and reach its objectives
Your organization may use different terms for these elements of a strategic plan. However, most
organizations document their strategy and, in broad terms, explain how they plan to achieve it.

Bruce Harreld — Senior Lecturer, Harvard Business School

A small shift in the focus of your business can have deep implications for how you define and execute your
strategic plan.

The strategic planning process

Strategic planning involves:
 Understanding what you currently do
 Determining what you want to become
 Planning how to get there

EXAMPLE

A technology company builds proprietary mobile apps for financial services companies. It decides that one of
its top priorities is to extend its brand presence globally. The company’s strategy therefore focuses on
developing a unique way to expand its business in the United States and Asia over the next three to five
years.

Strategic planning is a blend of art and science. It is an art in that it requires creative thought, an
ability to identify different potential outcomes, and strong communication skills to engage those
who will implement it. It is also a science in that it requires managers to collect and analyze
information that they can then turn into action.
A typical strategic planning process looks like this:

Senior managers in your organization generally begin strategic planning by gathering data and
researching the world in which your organization operates. They then narrow in on the top three or
four priority issues that the organization needs to tackle to be successful in the long term.
For each priority issue, units and teams create high-level action plans. Senior managers use these
action plans to further clarify the organization’s strategic objectives. Senior managers and units go
back and forth several times to examine, discuss, and refine the plan. The overall strategy then feeds
into planning at different levels in the organization.
C. Cody Phipps — President and CEO, United Stationers
Involve your people in developing a team strategy. You'll build rapport and strengthen everyone's
commitment to the goals you've defined together.

Lesson 2- Develop a Strategic Plan

Whether you initiate a strategic planning process for your unit or contribute to your organization’s overall
strategic plan, you’ll follow the same steps.

Steps for developing a strategic plan

Analyze external and internal factors

To begin your part of the strategic planning process, with your team, look at factors that affect your
unit. Include external forces such as technology changes and internal factors such as aging business
processes. Your goal is to identify as many of these factors as possible and assess their potential
impact. By looking at the changing environment in which you’re operating, you gain a better idea of
your strategic options—and the effect those choices may have on your organization.

EXAMPLE

An electronic tablet maker has a successful strategy that includes offering premium-priced models with larger
data storage capacity than its competitors. But the company’s managers also note the growth in cloud data
storage options. They begin to analyze how customers’ use of cloud storage could affect the company’s
continued ability to compete based on greater built-in storage capacity.

Roger Martin — Dean, Rotman School of Management

Don’t commit to the first seemingly brilliant strategy that someone thinks up—instead, use a process that
generates a lot of information so you can select the best possible strategy.

Perform SWOT analyses

Based on your exploration of external and internal factors, perform a SWOT analysis. In a SWOT
analysis, you and your unit identify strengths, weaknesses, opportunities, and threats. You may be
asked to do two SWOT analyses—one focused on the organization and another on your unit.
  Strengths—capabilities that enable your organization or unit to perform well. Your
organization needs to leverage these.
 Weaknesses—characteristics that prevent your organization or unit from performing well.
Your organization needs to address these.
 Opportunities—trends, forces, events, and ideas that affect your organization or unit. Your
organization needs to capitalize on these.
 Threats—possible events or forces outside of your control. Your organization needs to plan
for or decide how to lessen these.

Strengths might Strengths might Strengths might Threats might include:

include: include: include:
 Entrance of a new  Leadership  Entrance of a new  Entrance of a new
competitor  Decision-making competitor competitor
 Legislation or abilities  Legislation or  Legislation or
regulations that will  Innovation regulations that will regulations that will
increase costs or  Productivity increase costs or increase costs or
eliminate a product  Quality eliminate a product eliminate a product
 Declining product or  Service  Declining product or  Declining product or
market  Efficiency market market
  Technological
processes

Steps for conducting a SWOT analysis

1. Select an individual to facilitate the SWOT analysis.

2. Review the data collected during the examination of internal and external factors.
3. Brainstorm your organization’s or unit's strengths.

Record all suggestions on an easel chart. Avoid duplicate entries. Some items may appear on more than
one list. For example, customer service may be both a strength and a weakness for your organization.
At this point, the goal is to capture as many ideas as possible.
4. Consolidate and clarify ideas.

Post all easel chart pages on a wall. Ask participants to group like items together. Clarify any items that
participants have questions about. Avoid talking about solutions at this point.
5. Identify the top three strengths.

Have team members pick their top issues individually. Allow each to cast three to five votes (three if
the list of issues is 10 items or fewer, five if it is longer than 10 items). Identify the top three items. If
the first vote is inconclusive, discuss the highly rated items and vote again.
6. Repeat steps 2-5 for weaknesses, opportunities, and threats.

Identify priority issues

Based on the results of the SWOT analysis, you and your unit can now identify priority issues.
Priority issues generally take advantage of a short window of opportunity and have major, long-
term financial impact. Choose those with the most potential positive effect on your organization’s
future. For example:
 After conducting a SWOT analysis for the organization, you and your unit see an opportunity
to expand your products into developing countries. You identify a priority issue to enter new
markets.
 After conducting a SWOT analysis for the unit, you learn that your unit has a weakness in
developing innovative products or services. You therefore make greater capacity for
innovation a unit priority.
Identify three or four priority issues. Focus on broad issues such as “manufacturing cost structure.”
A narrow item such as “manufacturing reject rate” may be of minor strategic importance.
If you are contributing to your organization’s overall strategic planning process, present the priority
issues to senior managers. The senior management team reviews priority issues submitted by units
as well as ones they have generated themselves. This review takes time and requires back-and-forth
between senior managers and units.
Senior managers typically select three or four key strategic priority issues for the organization to
pursue. They then delegate each priority issue to one or more units or cross-functional teams.
Steps for determining priority issues

1. Identify priority issues from the SWOT analysis.

2. Ask team members to choose their three top priority issues.
3. Discuss the proposed priority issues.
4. Address overlooked priority issues.
5. Decide on priority issues.

Develop high-level action plans

Once units or teams are assigned priority issues (sometimes called “strategic initiatives”), they develop
high-level action plans to address them. These plans list the objectives, tasks, and requirements needed
to address each priority issue. Each priority issue typically generates multiple action plans. For example,
if customer retention is a priority issue, it may lead to two action plans: one for improving customer
service and another for developing a customer loyalty program.

Once you complete your high-level action plans, send them to the senior management team for review
and discussion. Senior managers may ask you to refine your high-level action plans. They will then
approve final plans, assign any cross-functional teams, and allocate the resources needed to carry out
the plans. This step is important in aligning corporate strategy with unit or team action.

Finalize the strategic plan

The last step in the planning process is to finalize the strategic plan. At this point, you and your unit
might choose to draft a direction statement and overall objectives to summarize your intended
contributions to the strategy. During the planning process, you may have also identified unit-level
priority issues and tasks that will move your unit toward fulfilling its own mission and vision.
Donald Sull — Professor, London Business School
Simplify your Startegy
Is the strategy you’ve defined for your team or organization so complex that people can’t understand it? If so,
here’s how to simplify it so people understand it, remember it, and translate it into effective action.

Update the strategic plan

Once a strategic plan is in place, senior managers will regularly review, assess, and adjust it. If external
and internal factors remain the same, it will likely need only minor adjustments. However, if the
environment changes dramatically, then the plan will need to be reevaluated and will likely need major
modifications.

Create Detailed Action Plans

 Your organization has created its strategic plan—now what? Learn how to develop detailed action plans
to put the strategy into action in your unit.

Detailed action plan components

To implement your organization’s strategy within your unit, you need detailed action plans.
Include in each plan:
 Priority issues—the broad area your unit plans to focus on and why they are important
 Objectives and performance measures—long-term and intermediate objectives with metrics
to determine if the objectives are being met
 Steps—four or five high-level tasks that your unit needs to complete
 Resources—people, money, technologies, and so forth needed to carry out the plan
 Roles and responsibilities—the individuals and groups who will be responsible for the
overall effort and each of the steps, and the tasks they will carry out
 Internal partners—collaborations with other units needed to complete the plan
 Impact estimate—anticipated cost and revenue potential of the project

ere's what an action plan for a manufacturing unit of an electronics company might look like:
 Unit: Manufacturing
 Priority issue: Long-range capacity plan
o Description: Design and build new facilities that will increase manufacturing's ability to produce
higher unit volume at lower cost.
o Strategic importance: Our current capacity will not allow us to meet market demand or achieve
our strategic objective of increasing market share.
 Objectives and performance measures: Develop long-range manufacturing facilities that will meet
forecast demand from 2014-2021; accommodate testing and manufacture of new products; and achieve
dramatic improvement in quality, cost, and customer service.
o Year 1: Complete design phase and begin construction by year end
o Year 2: Complete construction and start production by year end
o Year 3: Achieve initial running rate of 177 million units per year at a cost of $.325 per unit
 Steps and Roles and Responsibilities for Year 1 (simplified for purposes of illustration)

 What

Who

When

 Establish design specifications

Manufacturing team; Engineering leads

January 2014

 Approve specs
 Senior management

February 2014

 Flow chart and system design; costing

Manufacturing team; Engineering and Finance lead

June 2014

 Detailed drawings for bid purposes; costing

Manufacturing team; Engineering and Finance lead

August 2014

 Approval

Senior management

August 2014

 Bids

Purchasing and construction

October 2014

 Construction starts

Construction team from Manufacturing and Facilities takes over

November 2014

 Resources: Need to hire one full-time construction manager, two plant managers from groundbreaking
on, and three assistants to support these managers.
 Internal partners (simplified for purposes of illustration):

Sample detailed action plan

POLL

The Balanced Scorecard: Measures That Drive Performance

Read why it's critical to think of your company’s strategy from both financial and non-financial perspectives.

Read More
Define objectives and performance measures

To be sure you are on track in accomplishing your organization’s strategic initiatives, you and
your team need to come up with objectives and performance measures. Your organization may
use the balanced scorecard for strategic planning. If it doesn’t, you can still use this approach at
the unit level to establish objectives and performance measurements for your unit’s strategic
initiatives.

BSC is a “balanced” approach in that it recognizes that financial performance is just one part of
organizational performance. The balanced scorecard measures performance from four
interconnected perspectives:
 Financial perspective. How are we doing using traditional financial performance measures?
 Customer perspective. How satisfied are our customers?
 Internal perspective. What ways do we, and in what ways should we, excel?
 Innovation and improvement perspective (sometimes called the "Learning and growth
perspective"). How can we continue to improve and create value in the future?
Together, these measures provide a way to clearly link unit performance to the organization’s
overall strategy. They also give you a view of how your organization or unit has been performing
as well as where it’s headed.
STAT

According to bain.com, in 2010, more than 50% of global companies used a balanced
scorecard approach to measure performance.

Write objectives
As a first step, based on your organization’s priority issues, identify objectives for your unit.
Objectives may include:
 Financial gains, such as cost savings or increased sales
  Employee morale
 Customer loyalty
 Process efficiencies
Even if some of your organization’s key objectives are difficult to measure in monetary terms—
such as improved employee satisfaction—include them. List all the key objectives that might be
relevant for each priority issue.
EXAMPLE

An airline defines a strategy of being a low-cost provider. To lower expenses, senior leaders identify reducing
the number of aircraft and flight crews as a priority issue. But the airline can function effectively with a
smaller fleet only if it can reduce the time between when an aircraft arrives at an airport and when it departs.
Managers thus identify “fast ground turnaround” as one of several interrelated objectives. *
Low-cost airline’s objectives

 Objectives
 Financial Perspective
 Profitability
 Grow revenue
 Fewer planes

 Customer Perspective
 Attract and retain more customers
 Flights on time
 Lowest prices

 Internal Perspective
 Fast ground turnaround

 Learning and Growth Perspective

 Develop the necessary skills
 Develop the support system
 Ground crew aligned with strategy
Determine measures for success
The next step is to determine how you will measure success for each objective.
EXAMPLE

To gauge whether the low-cost airline is meeting its objective of “fast ground turnaround,” managers decide to
measure the amount of time each aircraft spends on the ground between flights and the percentage of flights
that depart on time.
Low-cost airline’s measures of success
 Objectives

Measurement

 Financial Perspective
 Profitability
 Grow revenue
 Fewer planes
 Market value
 Seat revenue
 Plane lease cost

 Customer Perspective
 Attract and retain more customers
 Flights on time
 Lowest prices
 # repeat customers

 # customers

 FAA on-time arrival rating

 Customer ranking

 Internal Perspective
 Fast ground turnaround
 On-ground time

 On-time departure

 Learning and Growth Perspective

 Develop the necessary skills
 Develop the support system
 Ground crew aligned with strategy
 Strategic job readiness

 Info system availability

 Strategic awareness

 % ground crew stockholders

Establish targets
Now set targets to tell you whether or not you’re achieving your objectives.
EXAMPLE

Managers at the low-cost airline decide to set the following targets:

 On-ground time—30 minutes between flights
 On-time departure—90% of flights

Low-cost airline’s targets

Objectives Measurement Targets
Profitability Market value
Grow revenue Seat revenue
Fewer planes Plane lease cost
Attract and retain more # repeat customers
customers # customers
Flights on time FAA on-time arrival
Lowest prices rating
Customer ranking
Fast ground On-ground time
turnaround On-time departure
Develop the necessary Strategic job readiness
skills Info system availability
Develop the support Strategic awareness
system % ground crew
Ground crew aligned stockholders
with strategy