Organizational Change

There are many books and theories on the subject of organizational change management. These will typically surround subjects such as communication, alignment, metrics, persistence, buy-in, leadership, "WIIFM" (what's in it for me), engagement, top-down/bottom-up and so on, ad infinitum.

Rarely, however, do we see discussions of change capacity.

Change capacity is the ability of an organization to absorb change. Companies that have a high change capacity have typically earned that ability by going through many change initiatives. There is a certain point at which any organization has reached its limit and staff will declare "enough!" This limit is the change capacity of the organization.

While some organizations cannot absorb even one minor change in a year, others can easily absorb three, four or more of varying degrees of severity.

What are the factors that lead to increased change capacity?

1) Organizational "fitness". Ability to change is an ability that, like long distance running, is gained only by doing it. Organizations that are constantly improving and asking tough questions are those that are likely to be able to easily absorb change.

2) Leadership ability. Change capacity is driven by the organization's leaders. Their ability to conceive of change (vision) and to communicate it effectively (best to communicate via metaphor or story), develop a reasonable implementation plan with all resources accounted for and finally the persistence to keep on communicating, reinforcing, measuring, adjusting and correcting as the process ensues.

3) Organizational culture. A culture that easily absorbs change is one that is used to thinking in the big picture, is aligned with organizational objectives and strategies and is comfortable with the threats and benefits of a rigorous measurement system. A culture of measurement is one which is clearly focused on its outcomes and which typically rewards teams for achieving targets and milestones.

The message is that organizations that do not currently have a high change quotient, need to start small, gain easy wins, and build up change capacity over time. Just like a long distance runner does not begin their training by running a marathon on the first day, organizations need to start slowly and build competence over time. The returns on this investment will compound as the organization becomes change-friendly.

Useful Metrics that have nothing to do with measurement.

There are many ways that metrics tie organizational strategy to execution including organizational alignment, clear outcomes, refined action plans, employee motivation, compensation benefits and more, but one of the most powerful applications of metrics has nothing to do with measurement at all.

One of the top ten reasons for failure in a strategic planning process is that the plan is written, then it gets placed on a shelf where it collects dust. Certainly communicating the plan immediately after its preparation is important, but without constant reinforcement, the strategic plan's message grows stale and its message becomes forgotten.

The powerful thing about metrics is that measurement must be continuous. Just as an organization needs to turn out monthly financials (financial metrics), a well-executing organization will track key metrics on a monthly basis as well. Ideally these metrics will be on a dashboard and shared across the organization.

One of the greatest strengths of metrics, then, is that they serve to continuously reinforce the strategic plan to all team members on an ongoing basis. They keep the organization focused on the few Most Important things that need to be done and help to maintain organizational focus against the threat of day to day entropy that takes over daily activities.

So, by all means measure for measurement's sake, but also remember to measure for communications' sake.

Metrics: Right or Left Brain Activity?

I was reviewing one of my favorite books, Daniel Pink's A Whole New Mind: Why Right-Brainers Will Rule the Future and thinking about metrics and whether they are a right brain or left brain activity.

The initial response, of course, is that metrics are a numbers-based, quanitification-oriented activity that must be a left brain function. These are logical, step-by-step activities if they are taken at face value. Who are the primary metricians in a corporation? The accountants - who, by definition are left-brainers.

The reason Daniel Pink got me thinking about this is that when properly deployed, metrics are not about measuring routine activities, but rather they are about conceptualization, systems-level thinking and big-picture approaches to problem solving in business.

Metrics are borne of big ideas. Sam Walton is well known for saying "you get what you measure." The question about "what do you want to get" in a company is typically a board level/executive level function that includes setting the company's vision and mission, clarifying its values and setting its goals.

Metrics are how you go about achieving the vision, mission, values and goals. There is a lot of creativity involved in translating those high level objectives into specific, measurable actions that are carried out by each and every member of the organization. When you have a goal such as "Provide world class customer service." there is not much for your staff to dig their teeth into in how they carry out their day-to-day activities.

Hermes is the greek figure who served as the messenger of the gods. His job was to translate the deities' messages into a form that was understood by the mortals. The job of creating organizational metrics is no less challenging than this. Abstract concepts such as "world class customer service" consist of many critical tasks and projects that must be carried out, each of which has measurable outcomes. By focusing on these measurable outcomes we empower teams to use their creativity and to gain ownership in how the outcomes are achieved, while creating a crystal-clear description of what specifically needs to happen.

After all this has happened, it falls to someone to collect, organize and present the metrics data. And "yes", I suppose this is a left-brain activity, but this collection and presentation of data is not what metrics is about any more than cleaning paint brushes is what an artist does when he is creating a painting. Cleaning the brushes is an integral part of the process, but comes well after the creativity has occurred.

Metrics: Focus on the Future or the Past?

Are Metrics Based in the Future or the Past?

When you hear the word “metrics” what do you think of? Measurement of results and outcomes of a process? Or do you think of metrics tied to strategic initiatives with future outcomes?

Your perception of metrics as future or past based will have a lot to do with how you use metrics and what you can get out of them.

A good example of this distinction is the way that W. Edwards Deming approached quality management. One of Deming’s “Fourteen Points for Management” as described in his book Out of the Crisis (p. 23-24), was that companies need to “cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.” Thus, Deming’s approach was not to use metrics in the past (dependence on inspection), but rather in the future (building quality into the product in the first place.)

Metrics is at its most powerful when it is coupled with the strategic planning process. Ultimately it becomes cyclical so that it drives process in the beginning of a change and then measures results as they become available. Organizations then practice continuous process improvement by taking the resulting metrics into account when fine tuning their strategic plans, until ultimately the desired results are achieved.

Six Dilemmas Challenging Organizational Execution

Strategic planning commonly involves establishing a vision and mission for an organization. From there, objectives are determined and sometimes an action plan is created to help achieve the objectives. Unfortunately, many organizations stop there and the plan goes on the shelf with little more than lip service when it comes to execution.

Why do organizations so often drop the ball when it comes to carrying out their most important goals? There are many reasons and, to be sure, achieving change is difficult. The strategic use of metrics can help with this challenge. Some of the ways that metrics can be applied to organizational change include:

1) Dilemma: Everyone is on board with the action plan, but the goals appear to be intangible and it is not clearly understood how they will be achieved.

Metrics force an organization to define what it is that they REALLY want in terms of outcomes and behaviors. There is nothing so difficult that it cannot be measured, although finding the right measures requires special skills.

2) Dilemma: There is organizational resistance to change.

Metrics help an organization to clearly understand "who is on board" and who is not. Reward systems built around clear metrics provide inducement to team members to get on board and disincentives to those who passively or actively resist the change.

3) Dilemma: Everyone is excited about achieving the new goals, but different groups within the organization have different ideas about how to achieve those goals.

Use clear metrics to align your teams together with an agreed upon action plan that focuses everyone's actions on the same goals. Metrics alone will not ensure alignment because there may be many ways to achieve agreed upon measures. In this case, the important thing is to understand that metrics can be deployed at many levels of specificity. You may measure a very low level of specificity by setting a goal of increasing organizational profits, for example. There are virtually infinite ways that teams may work to achieve this goal. If your metrics have very high levels of specificity, however, then tasks are more easily aligned. So, instead of saying that your goal is to increase organizational profits, an organization may say that it will increase sales by 5% by engaging in a Search Engine Marketing campaign with a budget of $50,000. Within this specific goal, there should be a host of metrics such as cost per click, click through ratios, conversion rates, cost per sale, etc. There may be many such specific goals that all support the more general goal.

4) Dilemma: The problem with metrics is that "you might just get what you asked for."

Someone actually told me this at a conference earlier this year. Of course, the powerful thing about metrics is that you might just get what you asked for. Anything that is powerful requires special handling and forethought. If you choose the wrong metrics, you may get the wrong outcomes. For this reason, a rigorous process, complete with risk analysis and feedback from key stakeholders is critical. Also, organizations need to be flexible. If you don't get your metrics right the first time, by all means, come back and adjust them until they are right.

5) Dilemma: Our organization can't get perfect measurement data, so there is no point in measuring anything.

It is true that perfect measurement data is rarely, if ever, available. The goal of using metrics is not to achieve perfect measurement, it is to drive organizational behaviors aligned towards agreed upon outcomes that help to achieve the organization's mission and vision. Your metrics must be chosen carefully so that they not only support the desired outcomes, but so that when compensation is tied to metrics, the system is perceived as being fair and just by those who are participating.

6) Dilemma: Sometimes the cost to collecting the data can exceed the benefit of the behavior that is measured.

An organization should never use data collection methodologies where the cost of collecting the data exceeds the benefit. Organizations are often surprised with just how many metrics they may already have at their fingertips where the cost of collecting them is close to zero. Every organization is experienced with metrics and invests in them. Financial metrics are a requirement and entire teams of people are deployed to collect these metrics so that income statements and balance sheets may be prepared, taxes paid, payroll met, etc. The most expensive metrics to gather are those that are in the past. Transactions need to be researched and reports prepared. It is always easiest and most cost effective if metrics can be built into the day-to-day processes that an organization conducts, so that at the end of each period, the measures are easily available.

The Denial of Uncertainty

Probably the biggest challenge to good strategic planning is those who are in denial of uncertainty. Regardless of what they may say, these people's actions indicate that they do not believe in uncertainty. They deal with the uncertainty and unpredictability of the future by creating concrete action plans, along with detailed task lists designed to achieve success. Their belief in the certainty of the future is reinforced by the coincidence that the future does, in fact, often behave like the past.

Where this belief falls apart is when the future is complex or long term horizons must be considered. In these circumstances, the risks of unpredictability become greater and more robust planning methodologies need to be employed in order to avoid surprises.

Scenario planning is one way of anticipating the future's surprises and developing a response for MANY possible future worlds instead of just one fixed view of the future. By anticipating many possible futures, we can understand commonalities between them, assess risks more realistically, and when liklihood and impact of a possible future is great, we can take actions to either mitigate or take advantage of that future state.

Those who are in denial of uncertainty are guilty of either oversimplifying the planning process, or of the false belief that when there is uncertainty, there is nothing we can do about it, so we may just as well ignore it. Good strategic planning always embraces uncertainty and builds plans that are robust enough to address multiple possible outcomes.

Retorts to "That's Not Measurable"

Here's a great list from Stacey Barr, the performance measurement expert at www.staceybarr.com

So when someone tells me something’s not measurable, here are seven of my favourite retorts:

1. If that goal were happening now, what would be different?
2. How would you know if you’ve reached that goal or not?
3. How would anyone else be convinced whether or not you’ve reached this goal?
4. Imagine you’ve already reached that goal – what would you be looking at to convince you of this?
5. What exactly is this goal trying to change or improve?
6. What problem is this goal going to solve or fix?
7. If you don’t have this goal, are your or others going to miss out on?

Now you’ve got some more productive alternatives to giving up, next time you here those words, “That’s not measurable!”

Seven Lenses of Innovation

There are a lot of ways to innovate and coming up with the latest 3D computer mouse does not have to be the only way to achieve competitive advantage through innovation.

Some will have you think that innovation is something that just "happens" or is a rare thing like getting struck by lightning. If you want to create a culture of innovation in which innovation is a regular and expected part of doing business, then you will want to think about what kind of process will create continual innovation and what spheres in your organization are most ripe for innovation.

One way to systematically think innovatively is to apply "lenses" of innovation to your organization. Lenses are ways of looking at something in order to find opportunity. I like the lens metaphor because innovation rarely occurs in just one area of an organization. You may find that your innovation encompasses two or more of the lenses listed below by the time you have successfully implemented it.

Think of each of these seven lenses of innovation as a "question" that you ask yourself about how your organization operates. Do the homework and study internal and external trends in a rigorous way in order to determine if these lenses show you strengths or weaknesses, opportunities or threats for your organization.

Brand Innovative ways of creating an experience and message around your product or service. The brand encompasses everything else the organization does. Starbucks created a new experience around coffee that became its brand.

Process Innovative ways of doing things to increase competitive advantage. Provide faster, stronger, cheaper goods and services by applying process changes. Ford Motors' invention of the assembly line forever changed the manufacturing process.

Supply Chain Innovate in how products are sourced and produced. Dell innovated in the supply chain by creating a "mass customization" model that allowed customers to order a custom computer that was rapidly manufactured and delivered.

Distribution Chain Innovation in how products are sold. Redbox innovated in video DVD delivery by creating automated vending machines with a low cost $1.00 per day model vs. using high cost, outdated stores.

Product: Innovation in product or services, hybridizing or finding new ways to use existing products, incremental or total innovation of product or features within products. Apple reinvented the cell phone with its iPhone product.

Market Innovation in finding new markets for new or existing products or services. Demographic shifts create shifts in demand due to new economic conditions (think consumerism in China), age (think retirement communities in the U.S.), environmental issues (think water conservation in Africa). GE used a combination of product and market innovation to create a low cost electrocardiogram (ECG) machines to open new markets for healthcare product in India.

Business Model Innovation in one or more Types such that the entire business model is new. Southwest Airlines simplified their process and reduced prices to gain competitive advantage with a new and unique business model

When Scenarios Don't Go Far Enough

Scenario planning can take on many forms. In its simplest state, scenario planning may include multiple outcomes, but only under certain circumstances. Because we cannot develop scenarios for the infinite number of possible futures, we need to be able to evaluate our scenarios constantly in order to understand when they are no longer effective.

This circumstance happened to me during the recession of 2007-2010. I had developed a scenario based recession plan for a firm with the foresight to see a downturn coming and to prepare itself for the worst.

We developed a set of leading indicators that were both external (interest rates, capital availability, new housing starts, etc.) and internal (profitability, staff utilization rates, new business won, etc.) A dashboard was created and monthly updates were reported to the board.

Targets: For each leading indicator we had targets. If a particular office was hitting its targets, then it would show as green. If it was below the target, within a range we had specified, then it would show as yellow, and if it was far below the target, then it would show as red. This system allowed managers to see which offices were performing and how the firm was doing overall with just a glance.

Because a good scenario plan should be action oriented, there were actions related to each of the three levels. When yellow ranges were hit, then certain costs such as travel would be cut. When red levels were consistently hit, then staff reductions were recommended. After a certain amount of time, consistent "red" performance led to the closure of an office.

This system worked great during the first portion of the recession. It made sense to limit costs and to reduce staff in order to match resources to workload. After three or four rounds of layoffs, however, the company had closed several offices and lost key people along with their knowledge and business contacts. Within two years the firm was down to half its original size.

You can say that the recession scenario plan worked because the company is still solvent and in business today. The downturn has leveled off and staff are optimistic about new business on the horizon as the economy recovers.

The critical point of view would say that at a certain point, cutting costs was no longer effective. Had the scenario analysis been fully fleshed out, there may have been triggers for taking time out to reinvent the firm. This could entail analyzing the new competitive environment and understanding the changing needs of clients. Studying social, technical, economic, environmental, political and legal trends would have revealed new opportunities and threats. Re-engineering processes in order to be able to do more work for lower costs would have improved the company's competitive position and positioned it to come out of the recession stronger than it was when it went in.

The lesson learned is that scenarios must be continuously reevaluated and redeveloped as situations change. Sometimes drastic innovation is easier in times of crisis than when everything is working well and people have the "if it ain't broke, don't fix it" attitude.

The Uncertainty Paradox

When we're talking about planning for the future, we are always dealing with uncertainty. We have positive uncertainty about opportunities as well as concerns about risks. There are several ways we can approach the challenges of uncertainty.

The first approach is usually to try to minimize uncertainty as much as possible. This involves research into trends, similar situations other industries have faced, learning more about competitive pressures, etc. But, because the variables are infinite and the future is unknowable, this method quickly becomes frustrating.

The second approach is to create the future.

"The future never just happened. It was created." Will and Ariel Durant, Civilization.

This is essentially the job of strategic planning where execution is integrated into the plan. The process of planning and executing means that we're not just trying to reduce uncertainty by understanding the vectors and trends of the current situation, but that we are intentionally trying to shape the future by our plans and actions.

The third approach is to reduce, rather than increase, the amount of information that we use to describe the future. This is the uncertainty paradox.

Think about the decision making process that the FBI and CIA used to determine whether there was a threat on 9/11. There was a ton of information that said something was going on, but, on the other hand, there is ALWAYS a ton of information. At any one time there are some 16,000 leads coming into the CIA which cannot possibly be followed-up on. The issue is not that there is not enough information, but rather that there is too much and that so much information presents itself as "noise" instead of coherence. The job of the CIA and the job for us as strategic planners is to develop "stories" and "scenarios" that pick out what is important and filter out the rest.

The process of storytelling is not just a matter of filtering the important from the unimportant. Most of the time we can't tell the difference, which would then make storytelling ineffective. Storytelling does several things for us. It forces us to spot trends and patterns. Stories are essentially ways of making sense out of the patterns we see in the information. Stories may be right or wrong and still be coherent and in agreement with the facts presented. By using scenario analysis we create several stories around similar themes and "test" them against each other and against the patterns and trends we have traced. By telling multiple stories about the "same" situation, we create a sort of "meta-pattern" that may reveal new perspectives by looking at how the disparate stories overlap in some ways and contradict each other in other ways.

The uncertainty paradox helps us to understand our real goals in strategic planning. It is not to predict the future with certainty. It is, rather, to understand the trends and to be able to create a story out of the information that presents us with opportunities. Our plans then contain the actions we need to take in order to actualize the opportunities that present themselves. We do this, not by finding MORE information in order to reduce uncertainty, but by organizing the existing information into scenarios/stories to make sense of things and to create a vision of future success.

Intuitive and Analytical Approaches

Strategic Planning ideally is comprised of a combination of intuitive and analytical thinking. Taken individually, these two approaches are useful, but incomplete in addressing the challenges of planning.

At its core, planning is ultimately a creative activity. Planners start with a clean slate, or even from within a context of past performance and established infrastructure, but with a potentially infinite number of possibilities available for future growth. "Analysis" comes from the Greek analyein, meaning to loosen or break up. Analysis often involves taking a difficult problem and breaking it up into its parts in order to better understand how things work and how they fit together. In mathematics an analytical proof is often created by assuming an outcome and then deducing a series of irrefutable steps that lead up to that conclusion. In this way, analysis is tremendously useful in strategic thinking because, once you know what you want to achieve, analysis is a good way to break up that vision into "strategies" that describe how you will achieve that vision.

But how do we achieve that vision in the first place? Vision is something that cannot be deduced or analyzed. The vision is something that forms the fundamental foundation upon which strategic planning is based. The vision is typically arrived at through intuitive thinking. "Intuition" comes from the Latin intuiri, (in + tueri) meaning "to look at" or contemplate. It seems appropriate that our "vision" comes from the kind of thinking that means "to look at." Intuitive and analytical thinking are opposites in that intuitive thinking is non-deductive, non-rational and is more holistic. Intuitive thought is where creativity comes from. Analytical thought can be creative in its approach, but ultimately it is not creating anything, but rather understanding complex things in terms of their parts.

Holistic strategic planning incorporates both intuitive and analytical thinking in its approach. Intuitive thinking is necessary to create the vision and to drive innovation, perhaps by perceiving competitive opportunities that may not fall under an industry's normal way of doing business. Analytical thinking picks up from there and helps us to articulate the objectives and strategies that we will employ to achieve the vision. Analytical thinking is used further in organizational alignment and individual action planning which breaks up the strategies further into action plans for each individual within the organization. Finally, analytical thinking is used in performance measurement to help us measure how well we are achieving our vision and to correct our strategies as they are tested against the realities of the real world.

Intuitive thinking does not just occur at the beginning of the process, when developing the vision statement. It is apparent throughout. The design of the environment scan toolkit is based on exercises that break participants outside of their boxes of preconception and analytical approaches. The toolkit represents different ways of looking at a problem in order to stimulate intuitive thinking and innovation. The toolkit does this by taking the strategic planning challenge and turning it on its head. We approach the problem from close in with an internal analysis of the organization, internal trends, resources, strengths and weaknesses. Our perspective widens when we take on an inspection of Porters' Five Forces of competition. Who, in our immediate sphere of competition, has competitive advantage? What are the threats of substitution, or imbalances of power between suppliers and customers? We then zoom out further to take a 30,000 foot level view of the environment with the STEEPL future trends exercise. This approach has us looking at Social, Technological, Environmental, Economic, Political and Legal trends that affect not only our business, but represent global trends in all areas of human endeavor. Finally, we employ scenario developments which use story telling approaches to break us out of analytical thinking modes. By telling stories about our possible future states, we visualize (intuit) what the world will look like and use free association exercises to ask questions about those future scenarios from a number of different perspectives.

These exercises all push us to use our intuitive thinking to address the challenges we are trying to solve. The exercise then shifts to analytical approaches in which trends are prioritized and put into context. We may apply a "strategy canvas" or "four action framework" to pull the stories apart and understand which components are the most important. Many of our results will be organized into the prioritized SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis which, along with our intuitive exercises will inform our process of developing objectives and strategies.

By looking at things from close-up, far away, sideways and upside down; by tasting, smelling and feeling them; by stretching and bending them; we encourage new ways of thinking and innovative approaches. Analytical thinking cannot do this. We then dive into the process of planning for execution to create those future states by breaking the vision into parts that can be measured, assigned and executed. This process cannot be done through intuitive thinking. By blending intuitive and analytical thinking throughout the process we can achieve the combination of innovation and execution that leads to successful organizations.

Strategic Planning: Rigid or Flexible?

In a recent Wall Street Journal article, Walt Shill, head of the North American Management Consulting Practice for Accenture said that "Strategy as we knew it, is dead." (http://online.wsj.com/article/SB10001424052748703822404575019283591121478.html?mod=dist_smartbrief)

The kind of strategy that Shill is referring to is the kind of strategy that pretends that by dotting every i and crossing every t, and creating monolithic structures, that it will somehow be able to predict the future. Of course, if you could not predict the future, then it would be insane to establish a rigid five year strategic plan and stick to it, regardless of the environmental situation. In this way, one wonders what Shill is referring to, since we have never really been able to predict future events accurately. Was "strategy as we knew it" dead-on-arrival, well before the current economic crisis?

There have been periods of relatively consistent performance and environmental reactions to industry developments that have made long term static strategic planning successful. While the future was not predictable in absolute terms, it was in many ways, reliable. In a stable economic and social environment it is reasonable to lay out fairly static long range plans without need for regular short term updates. Now, with a rapidly changing economic landscape, new competitive pressures and high degrees of uncertainty in the short and long term, it appears that indeed strategic planning in that old sense is no longer relevant.

But, was it ever a good idea? Early strategic planning was typically employed in warfare. Helmuth von Moltke the Elder, the German military strategist (1800-1891)is well known for his saying "No plan of operations extends with certainty beyond the first encounter with the enemy's main strength." (no plan survives contact with the enemy). Some have taken this to mean that strategic planning is useless, since it will need to be revised as soon as it is engaged. A brief look at von Moltke's career belies this assumption. He was a brilliant field marshall and strategist who used military strategy to gain many military victories. His career is filled with strategies that did not turn out the way that he had initially planned and yet, he was extremely successful because of the way that he approached the variability of circumstances on the battlefield.

The key word in von Moltke's comment is "certainty." It is true that no strategy can be executed with certainty, and this realization is critical for successful strategic execution. Many people tend to believe that certainty is a binary choice - either we are certain or we have no certainty. In fact, certainty is almost always a matter of degree. Good strategic plans take this into account and work within a tolerable range of uncertainty in which the level of uncertainty itself may be quantified in some ways. (For an excellent discussion of uncertainty in measuring organizational performance, read "How to Measure Anything: Finding the Value of Intangibles in Business", by Douglas W. Hubbard, John Wiley & Sons, 2007.)

Successful strategic planning is a balance of risks, probabilities and potential impacts. By quantifying risks as much as possible and understanding degrees of uncertainty, a strategic planner can weigh how much risk is appropriate for any particular strategy. In the binary view of certainty, the only options are blindly moving ahead with the strategy or paralysis due to an inability to accurately predict outcomes.

In some ways, von Moltke was an early proponent of scenario planning. In understanding that there were several possible outcomes to the execution of his military strategies, he often developed detailed alternative scenarios. The development of scenarios allows a planner to take a sophisticated strategic planning approach at a high level that can be deployed under a variety of contingencies. When radically different situations present themselves, scenario planning allows organizations to rapidly redeploy resources and strategies to take advantage of the situation. In some ways scenario planning also allows for more robust development of scenarios even within the single "preferred" scenario because of the give-and-take between understanding similarities and differences between alternate scenarios. The storytelling that is part of scenario development helps teams to visualize and simulate strategic outcomes.

This differs from an alternative which says that uncertainty is dealt with by creating a rigid long term plan and then adjusting the plan with tactics as environmental variables change the battlefield. The difference between these two approaches is significant. Tactics are useful only when deployed within the context of a strategy. In large, complex organizations strategies are the overarching plans to which all tactics must align. If strategies are abandoned when they no longer serve the business environment, resorting to tactics is the worst possible reaction. Tactics without strategy is like trying to steer a boat without a rudder.

In the Wall Street Journal article, it is suggested that organizations need to retreat to a tactical approach during economic upheaval. Nothing could be farther from the truth. What is needed is a holistic strategic planning approach that utilizes a multi-scenario approach that can be rapidly deployed in light of changing conditions. Changing to a tactical approach only subjects organizations to being totally reactive and keeps them from being able to succeed in a downturn by taking strategic advantage over their competitors who may be failing by following a "business-as-usual" playbook.

Strategic Planning: Rigid or Flexible?

Strategic planning should neither be rigid with unbending five and ten year plans, nor should it be entirely flexible, swerving rudderless in the wind of reactive tactics. Furthermore, there is no "correct" amount of rigidity or flexibility that should be attributed to all strategic plans. The relative flexibility will depend on a variety of internal and external factors including stability of economic, environmental, political and social environmental factors as well as the size and complexity of the organization and the lifecycle of the products or services that the organization provides.

The caricature of strategic planning presented by Walt Shill's comments in the Wall Street Journal indicate that there is probably a need for a greater degree of flexibility and responsiveness in strategic planning. Scenario planning is a rarity in many organizations for example. And those organizations that have established Key Performance Indicators often fail to monitor them on a regular and frequent basis in order to be able to respond quickly to both internal performance and market trends.

Footnote:

Originally in Moltke, Helmuth, Graf Von, Militarische Werke. vol. 2, part 2., pp. 33-40. Found in Hughes, Daniel J. (ed.) Moltke on the Art of War: selected writings. (1993). Presidio Press: New York, NY. ISBN 0-89141-575-0. p. 45

What is a Strategic Marketing Plan?

When we talk about "strategic planning", there are actually many different types of plans that fall under this rubric. Typically we are speaking of an organizational plan, a "strategic business plan" that is an over-arching plan that supercedes all others. In reality, there may be many strategic plans within an organization and all of them must align with one another. An Information Technology strategic plan, for example, exists to provide detail and departmental responsibility to execution of initiatives that may or may not be listed in the organization's strategic plan.

Depending on the organization, marketing related issues may comprise 78-80% of the master strategic plan. So, why have a specific strategic marketing plan when most of it is covered under the strategic business plan already?

The first reason is that many organizations do not have a strategic business plan and that a strategic marketing plan is all they can muster to complete. Certainly this is better than nothing, but it may leave out critical elements of the organization's operations that are needed to support marketing in some way or another be it manufacturing, quality management, human resources, or information technology.

A second reason for a dedicated strategic marketing plan is that there is a need for greater detail than is appropriate in a strategic business plan. A business plan does not need, for example, to have a detailed media advertising plan as a part of its contents. Rather than high-level objectives, there is a need for specific product research, competitive analysis, research and development, etc. The strategic marketing plan can focus holistically on the Five P's of Marketing: Product, Placement, Price, Promotion and People.

All Strategic Plans have some things in common. All strategic plans need some kind of Mission/Vision/Values statements to define what the purpose of the effort is, what values guide it and what it wants to achieve. Your plan may not call it "mission, vision and values", but it should have these things documented. Often these fundamental elements are assumed, to the detriment of the organization.

Objectives and Strategies: After your MVV, you need to determine your prioritized objectives (what you want to accomplish) and strategies (how you are going to accomplish them.) But before you come up with your objectives and strategies, you need to do some homework. This homework is one of the major differences between a strategic marketing plan and a strategic business plan.

What are the steps to effective performance measurement?

Effective performance measurement is the cornerstone of successfully executing organizational change, and yet, many companies do not have effective performance measurement programs. There are many reasons for this ranging from a lack of buy-in to misperceptions about the use of metrics to the belief that all important factors cannot really be measured.

The first thing to keep in mind is that all measurement is for the purpose of executing change. You want something to happen so you develop a plan and as a part of that plan you decide what the Key Performance Metrics are that demonstrate successful execution of the plan. People struggle with metrics because it is hard work. It's one thing to come up with a set of objectives and strategies in a brainstorming meeting, but quite another to dig down deep and determine what it really means to successfully accomplish what you've set out to do. Typically goals are vague and metrics are specific. It's a lot easier to be vague!

The first step in a performance measurement program is to figure out your "critical questions." Start by asking questions about what you want to accomplish. Try using the Toyota method of "five whys". Keep asking "why" until you get to a root answer. This is what Socrates did in ancient Greece. The effect of his questioning was that he was not often very popular. People were shown to have little understanding of the fundamentals underlying their assumptions. Socratic dialogue is a great way to discover what you really need to measure.

The critical questions ultimately lead to which metrics you will choose for your effort. Remember to measure only the critical elements because each measurement takes time and costs your organization and the more metrics you collect, the more chance you run of diluting the importance of each measure.

The next step is to develop a process for measurement. Who will do the measuring? How often? In what medium will the data be stored? What quality measures will be put into place to ensure the data collection is good? Are there metrics already being captured by other processes or automated systems that can be used? How do your information systems talk to one another? Can the data be updated automatically and fed into a dashboard?

So now you've decided what to measure, how to measure it and where to store it. The next step is to develop a dashboard or other methodology for reporting your metrics. The objectives are to deliver clean information in a format that communicates trends, "normal" ranges and variations, benchmarks, targets and current values. The best dashboards are automatically updated and can present information in real time. For many organizations an Excel spreadsheet posted on an Intranet once a month is sufficient. Part of your reporting process will be to determine how to present your information, to whom the information will be presented and how often it should be updated.

Periodic Review: Strategic plans rarely go exactly as planned. There are infinite environmental variables that will change during the course of plan execution and it is necessary to review results and adjust the plan on a regular basis. This could be daily in some cases, weekly in others, monthly or quarterly. I would recommend at least monthly updates because if too much time elapses between meetings, the initiative can go way off course or worse, momentum can be lost. Regular reporting and review ensures that everyone is aware of accountability and their role in the success of the project.

Iteration: One of the functions of the periodic review is to ensure that targets are being met, but sometimes a mid-course trend analysis might show that the beginning of the year targets are no longer relevant. There may be game-changing events that require immediate strategic revision and iteration of the strategy. The iterative process is a continuous improvement based on execution, test, review, revision and execution of the new strategy. The iterative process acknowledges that information is imperfect during the planning process and that it is impossible to predict the future. Organizations that practice iteration are quick to respond to changes in the situation and adjust to maintain or gain competitive advantage.

Metrics work hand in hand with scenario planning when metrics are used as "triggers" to implement a scenario plan. The time to review scenario plans is during these regular metric review meetings.

Care and Feeding of your SWOT

A SWOT analysis can take many forms. A simple SWOT analysis might be a simple grid with four boxes into which the strategic planners will record the organizations' Strengths, Weaknesses, Opportunities and Threats. This can provide a planning team with a framework to facilitate gathering their impressions and viewpoints on these areas. The SWOT is an activity best accomplished PRIOR to establishment of Objectives and Strategies, so that the results of the SWOT can be taken into account when creating a vision for the organization's future.

The dilemma with using a SWOT in this fashion is that although it can be quick and easy and provides a framework for discussion, it is shallow and may serve to perpetuate organizational myths and assumptions which may themselves be a threat.

A principle of strategic planning is that the process should serve to get people to question assumptions, to broaden their vision and to think outside of the box. If the SWOT is a casual endeavour, then the team does not benefit from new information.

There are several tools which can be used to gather information in advance of the facilitated strategic planning session in order to bring new information that may shock and surprise planners out of complacency. The number of tools and the depth to which they are applied is best decided by the planning team and will depend on time and budget constraints as well as the organizations' overall commitment to the strategic planning process.

Many organizations use these tools as stand-alone tools to gauge market competition, trends and strategic opportunities. When they are used in the context of strategic planning, there is a holistic benefit in that the planning team can benefit from understanding trends and information from many areas of the internal and external operations of the organization.

There are many tools available to strategic planners, many of which are listed below (December 29, 2009 post). Strategic planners often list SWOT as a tool along with the others, but our idea is that SWOT is a framework in which to organize the inputs of the other tools, such that an environment for educated thinking is created.

In general, the tools can be separated into internal and external analysis tools. Similarly, the Strengths and Weaknesses blocks of the SWOT are often considered to be internal and the Opportunities and Threats quadrants are considered external. This distinction can be useful in determining which tools will populate which quadrants of the SWOT analysis.

Existing Conditions: Internal/External

Metrics: profit, sales, retention, staff attitudes

Porters' Five Forces

Benchmarks and benchmark trends

Balanced Scorecard

STEEP, PESTLE, TOWS

Surveys: staff, management, customers, suppliers, competition, channel partners

Six More Barriers to Strategic Plan Execution

The next list from HBR is the six mistakes that can derail your attempts to change. Thanks to Reynolds Consulting for this (and their comments embedded.)

1. Cautious management culture. In my work I have found that the vast majority of things that hold companies back from change is their current business model and belief systems–internal factors within their control. You can change if you want to.
2. Business as ususal process management. If business is at full capacity where do you find the resource to change? Start a stop doing list and keep track of all the things you do that don’t add value–keep it posted and add to it regularly and watch it grow! That alone is a great source of opportunity to re-allocate old to the new!
3. Initiative Gridlock. It is important to identify how many initiatives you can reasonably do with your resources and do a few really well then a whole bunch marginally.
4. Recalcitrant Executives. Nooo! Nobody we know has that problem, right? I have often said if you aren’t part of the solution you are part of the problem. Executives have to manage that aggressively. It is their job to run interference for the people in the organization that have to get the job done so all can be held accountable.
5. Disengaged Employees: Ditto above except…it is really important to ensure they understand what is expected of them, get the chance to have early wins and feel they are doing valuable work. When that happens disengaged employees are rare.
6. Loss of focus during execution. Communication is a tool that can never be underestimated. It is often stated that it takes at least 7 times before someone really hears a message. Executives often think they have communicated until they are blue in the face–but you cannot overcommunicate—keep the end game visible, make the steps clear, help people focus on the current one, make successes important, and keep the conversation lively!