Wednesday, March 28, 2012

Pitfalls and misdirection in strategic planning

A strategic plan is just a plan particularly related to strategy. Thus it expresses intentions and gives directives, optimized based on the best information available. To function well, it must understand all of its limitations as well as possible. The fundamental character of the future as uncertainty means that planners must consider contingencies. Any type of forecasting involves assumptions about the future. Planning should include considering as wide a range of alternative assumptions as possible. Each potential scenario flowing out of this sort of analysis should be evaluated for the appropriateness of the strategy, and of particular tactical moves in furtherance of the strategy, in the context of the scenario.
Such scenario analysis does two extremely important things. The first is that it forces thorough questioning of every assumption. Deliberately questioning assumptions and considering alternatives is necessary to have a good chance of identifying flaws in logic models from which conclusions will flow. Identifying logic flaws, or simply improvement opportunities, will enable better scenarios to win as the core of the plan. The other function of the scenario analysis is to increase organizational dynamism by preparing for change.
When the assumptions underlying a model are well understood, it is easy to test new information against them to learn whether it undermines or corroborates them. This informs whether reaction is necessary. Further, if the planning process included analysis of alternative scenarios, the organization may already have an appropriate response defined. Assumptions which have panned out in the past should be re-reviewed on a regular basis.
A planning process, then, should be designed to maximally solicit insights about the assumptions underlying predictions, and consider a wide array of alternatives to each. In the case of strategic planning, this means particularly looking at issues related to how an organization understands its strengths and capabilities and how it is positioned relative to the environment and competitors.
A strategic planning process should not spend time analyzing organizational execution or other short-term issues, except to the extent that there may be a deep organizational strength or weakness associated with execution. A strategic planning process should not be a review of past performance, except to the extent that that study reveals learnings relevant to understanding assumptions and making better predictions about the future. Assessing the performance of various portions of an organization separately is particularly misdirected, as it focuses each in different directions and leads the organization as a whole away from coherence. It is also critical to have the right data to understand the assumptions being made and the potential impact of those assumptions being wrong. According to http://www.biztimes.com/article/20120328/BLOGS/120329717/-1/SMALLBUSINESS/ a lack of true focus on strategy is the top reason for failure in strategic planning endeavors. How can an organization with a weak culture for strategy ensure that when undertaking a strategic plan it does not fall into one of these traps?

Strategy and Our Health Care System


As an HCPM, I can’t help but relate this week’s readings to the health care reforms currently up for debate by the Supreme Court. Overall, these reforms are strategic initiatives for our entire health care system.

I came across an interesting article in the New England Journal of Medicine that touches on the strategy for health care reform. The author, Dr. Michael Porter, points out that the overall goal of reform needs to focus on “increasing value for patients.”[1] Dr. Porter’s proposed focus mirrors a key topic in the “Reinventing Your Business Model,” reading: “It’s not possible to invent or reinvent a business model without first identifying a clear customer value proposition.”[2] The nation’s health care system is itself a business, with patients serving as customers of the system.

Our health care system is a unique creature for a multitude of reasons. Everyone serves as a customer or potential customer to the system. It is created of a unique mix of private and not-for-profit hospital and health systems. Payment is collected from individuals, private insurance companies, or government sponsored insurance programs. Or, payment may go uncollected, leaving hospitals to account for costs associated with unreimbursed medical care. The fact that all individuals are customers of the health care system raises the point that there needs to be some national strategy to address concerns in the system, even though each individual hospital and health care system have their own strategic initiatives to address.

Overall, in light of the current health care debate, how should individual hospitals and health care systems align their strategic goals with that of the nation, and how to they get there? This means drastic and expensive changes need to be made.  Is there any benefit in health systems remaining focused on their current strategic initiatives, while also addressing that of the nation?

[1] Porter, Michael E. (2009). A Strategy for Health Care Reform – Toward a Value-Based System. New
                England Journal of Medicine, 361. Retrieved from
                http://www.nejm.org/doi/full/10.1056/NEJMp0904131
[2] Johnson, Mark W., & Christensen, Clayton M. (2008). Reinventing Your Business Model. Harvard
                Business Review December 2008. Print.

Strategic Planning for Health IT Firms

As the health IT world is ever growing and more competitive, each company is trying to develop the most innovative strategic initiatives to provide the best IT services to their consumers.  With health care reform, changing delivery models, new forms of payment, and quality performance indicators and incentives, health care entities must continually realign their strategy plans.

According the article "Practical Techniques for Strategic Planning in Healthcare Organizations", a company with over 3,000 employees spends an average of $3.1M to produce a strategic plan, with little or no return. As in the readings, it says that strategic planning is ultimately the responsibility of the senior management team. In fact, 87% of healthcare leaders indicate strong alignment between their organizational and IT strategic plans. Successful strategic planning improvement techniques involve creating a sense or urgency and a vision, perform a strategic analysis and strategy formulation, and finally implementation planning.

Aspen Advisors, a health IT consulting firm, has been recently successful in improving their strategies to maintain the highest levels of optimization.  They have created 9 different sectors in their strategy department, including planning and visioning, meaningful use analysis, system selection and procurement, IT performance assessment, in/outsourcing feasability and planning, new and expansion facility technology planning, hospital/physician affiliate strategy, HIE planning, and health reform/ACO planning.  With these 9 very specific sectors, Aspen strives to maintain improvements for any issue at hand and for diverse health care settings to adapt to any organization's needs.  They strive to bring the right people together with the skill set and knowledge base to achieve optimal results.

In the article "Information Technology Planning Approach and Concepts" from The Healthcare Information Technology Planning Fieldbook: Tactics, Tools and Templates for Building Your IT Plan, they state that a best practice planning approach for IT firms is that of beginning with the end in mind.  Firms need to start with an ultimate goal at hand in order to successfully plan and implement their strategies for each different business.


Arianna Huffington - News Dominatrix and Biz Model Innovatress

Buzzwords and catchphrases this week: strategic planning, performance evaluation, “prepared minds”, strategy review, top management, long term goals and short term budgets, business unit reviews, strategic performance management, balanced scorecard use to build consensus, linking rewards to scorecards, double-loop learning/strategic learning/"learning by doing", radical business model innovation, breaking the rules (established enterprise confines), innovation = small scale but aggressive timetable, business value proposition precision, business model packaging vs. focus on new technologies


Article: http://nymag.com/news/media/arianna-huffington-2011-11/ / November 20, 2011

"The domination of news is clearly her goal, even news as defined as a mix of aggregation, original content, and unapologetic linkbait (stories like “What Time Does the Super Bowl Start?” or “Sex With Animals Can Lead to Penis Cancer: Study”)"

"Reinventing Your Business Model" by Johnson et al. outlines the elements of a successful business model (a core Customer Value Proposition fueled by interplay of profit formula, key processes, and key resources) and identifies when a new model becomes necessary for a company or industry. Of course, the article brings in "the Apple example" which simplifies but also exemplifies business value proposition: what matters is not the iPod technology, but rather the business model that is packaged with the iPod (namely the iTunes platform). 
This week I want to feature Arianna Huffington, the woman responsible for innovating a successful new business model with her half-blog half-news site the Huffinton Post. Though AOL's falling stock price seemed to signify the end of the company, Huffington came at just the right time to breathe some new life in the company: "AOL had nothing to believe in for a decade, so it made sense to believe in Arianna, with her narrative abilities and her hypnotic, cult-leader power." She has redefined the news industry in more ways than one, recognizing various innovation needs:

  • Meeting unmet customer need by focusing on news aggregation from various sources, "becoming an online tabloid that was a kind of cousin of The Daily Show"
  • Tapping into a mature business for leverage: “For our macro, go-forward AOL corporate strategy and the future of where we think the Internet’s going, the Huffington Post was a plug-in that fit multiple strategy points for us” - AOL CEO on the acquisition of the Huffington Post
  • Reaching for new customers previously deterred by boring news format: design-focused, colorful blog site with catchy headlines (this links back to Arianna Huffington's past when she was known as a socialite. What better way to grab attention than through scandalous headlines?)
  • BHAG: "Huffington’s five-year plan, she told employees, was to become a competitor with the New York Times"
  • Pursuing domination: " Huffington has just about absorbed AOL—these days, you can barely see its outline"
Just as Apple's iProducts revolutionized the music industry, Arianna Huffington's new approach to news revolutionized the way we interact with the thousands of news "bytes" uploaded every minute of every day. How did she do it? Her CVP was definitely there, offering a tool for consumers to get a job done. Her profit formula relied mostly on the absorption of HuffPost by AOL. Her key processes build from a core demand for more productivity from AOL staff composed of new and old reporters and editors, as well as a plethora of news "specialists" in different areas (politics, current affairs, fashion, food...).

Some questions come to mind:
- Why did no one else do this before her? Did others attempt? If so why did they fail?
- How much do networking and connections help in getting a new business model off the ground?
- Is the Huffington Post falling into a spiral of "being all things to all people"? Shouldn't Arianna Huffington focus on developing specialty areas? Or does this no longer matter in an era of horizontal skill sets in an information age?
- The article "Reinventing Your Business Model" covers case studies of Tata Motors and Hilti power tools. Is the space different for web start-ups/ventures? (i.e. It seems that Arianna Huffington was able to get traction for her new business model and growth much faster than Hilti or Tata)

Nevertheless: She disrupted competitors. Nailed the job with a focused CVP. Utilized the "confusion" of mass media/internet aggregation to her advantage, funneling it into an aggregated, user-friendly news source.






Why does an American old grandpa run so fast in China?

---Brief discussion on strategies of KFC in China

American fast food has been prevailing in China nowadays, especially in big cities like Beijing, Shanghai, Hong Kong and Guangzhou. KFC was very successful in China, which was expected to make 36% of an estimated $2 billion operating profit from 3700 restaurants and had a 40% market share among fast-food chains compared with 16% for McDonald's until 2010, according to Euro monitor International, a London-based market research firm.

Why this American old grandpa runs so fast in China?

I think its success in China is closely associated with its analysis on environment, industry and company, which is the important step in the framework to conduct a strategic planning process.

Grandpa: I knew myself and where I am going.
Grandpa: I knew how to love and win the Chinese young” kids” hearts.

KFC knew clearly its strengths, weaknesses, opportunities and threats of the potential market in China, which laid a solid foundation for its market positioning.

KFC’s first strength should be the strong brand in the fast food industry. It has been more widely accepted and recognized in China than any other fast food brand like McDonald, Burger King, and Pizza Hut and so on. High quality of food should be his second advantage. KFC announced that their food quality was controlled by the local franchise. Their third strength should be their fast speed service and short processing time, which helped distinguish them from traditional Chinese food when they first entered China market. However, these operational advantages cannot guarantee whether the fried chicken could be successfully accepted by Chinese people and how to compete with local restaurants remained KFC’s two weaknesses.

Grandpa knows his strengths and weaknesses, and he knew which potential market he would target. Here come the opportunities and treats.

Without a large number of fast food restaurants at that time, KFC seized the opportunities to grow and expand. Until recent years, the number of KFC’s stores has been 2-3 times that of McDonald. The basic thing is to cover more customers and show its advantages of high quality, convenience and strong brand.

However, with people paying more attention to health trends, KFC has to face new challenges to develop their market and maintain the current market share when the friend chicken and potato chips were regarded as junk food. Besides, how an American company can survive under the legislative and policy of a foreign country remained a big problem.

Based on the analysis above, I really appreciated three strategies that KFC adopted under such circumstances. The strategies fully reflected that KFC knew how to love and win the Chinese young “kids” hearts.

-Localization

In order to compete with local companies that possessed the local resources and understood the local markets, KFC chose the right joint-venture partners and employed local management team and gave them decision making power. The local employees helped open up supply line and tap the local market potential.

What impressed people the most was its strategy of localizing its menu. KFC customers can purchase a bowl of congee, a rice porridge that can feature pork, pickles, mushrooms and preserved egg, which is traditional Chinese food. Besides hamburger, sandwiches, milk and hot chocolate, KFC promoted its new nutritious breakfast deep-fried dough sticks, porridge, and soy-bean milk. Afterwards, KFC also provided a chicken, bacon and mushroom rice dish. It was very unique to Chinese customers that you can find traditional Chinese food in an American fast food chain. KFC cared more about what the real customers’ need was and how to integrate their strengths into the needs. Localization without losing its uniqueness in friend chicken and other fast food was an outstanding feature of
KFC in China.

-Innovation


I also was impressed by KFC’s innovation and the speed of creating new trends. Not only did KFC focus on new types of services but also it developed new food types. KFC had diverse types of set meals for individuals, couples, families with children and also a group of friends with reasonable prices, which provided a different convenience from the short processing time.

Also, KFC offered new dishes with fish, shrimp, and other seafood that you would not combine with friend chicken. Combined with local features, KFC had specialized menu terms like a Sichuan cuisine influenced wrap. These new items together with special gifts and meanings mentioned in the attractive advertising and promotion always caused a series of consumption trends.Grandpa really knew what the young customers need and like.

-CSR

Another thing I want to mention is its Corporate Social Responsibility strategy. Its attention on charity such as Red Ribbon activity gradually got the government's recognition and improved its public relationship. Also customers would like to buy more when they knew 1% of their money spent in KFC would be contributed to charity issues.

After knowing the KFC's case, I better understand how a good strategic planning process could help a company develop faster and more successful.

However, with more and more entrants and new substitutions, KFC needs to develop more strategies to maintain its dominant position in the market.

Also, as Liu mentioned, who was the author of KFC in China: Secret Recipe for Success, how much reliance on a single market should a company have no matter how financially attractive that market is?

-Xin Wan

March 28, 2012

References:

http://www.bloomberg.com/news/2011-01-26/mcdonald-s-no-match-for-kfc-in-china-where-colonel-sanders-rules-fast-food.html

http://www.thechinaexpat.com/kfc-in-china-4-reasons-why-kfc-kills-mcdonalds/

http://www.slideshare.net/blakefelson/kfc-in-china


The "Two-in-a-Box" model for strategic planning

This week's reading concentrates on the planning process for strategy. The article 'Real Value of Strategic Planning' [1] talks about preparing individuals to make strategic decisions rather than preparing a general strategy. One of my previous employers, Cognizant Technology Solutions, uses a unique "Two-in-a-Box" (TIB) [2] model for strategic planning that I felt was really effective. It uses both the concepts of preparing a stand alone strategy as well as relying on your gut feeling to take run time decisions.

The TIB model basically states that two people will be responsible for every client. In most companies, especially ones dealing with the offshore software development model, the delivery manager is responsible for keeping the client happy as well as making sure that the offshore product delivery is according to schedule (notice how these things are related to each other). In Cognizant, each client had two delivery managers. One was "onsite" and interacted with the client while the other one was "offshore" and handled the product delivery and schedule. The benefit of this methodology was that it used both aspects of strategic planning as discussed in the article [1]. The overall strategy was decided at the Business Unit level and all the delivery managers were involved in it. However, the client interaction and the offshore team management were different from each other and required a seperate strategy for day to day management which was decided by the individual delivery managers based on their experiences and gut feeling.

To generalize the strategy on a company level, the "onsite" person is the Client Partner (CP) [3] who is part of the relationship management team. He [4] generally has an MBA and is responsible for communicating the needs of the client to the offshore team. The Global Delivery Manager (GDM) is the other person in the TIB model who is technically inclined and has experience leading large technical teams. The GDM changes the strategy for delivery schedules, product features, etc. based on inputs from the CP and the offshore Project Managers. While he is involved in and keeps in mind the overall strategy for the Business Unit when taking these decisions, he is not binded by the strategic model for the smaller day to day decisions. For example, if the overall strategy of the BU is to increase revenue by $3 Million for 2012, then the decision to postpone internal product delivery by 1 week will not be affected. This lets each manager in the TIB model have the independence to make run time decisions without the need to consult additional people.One of the benefits of TIB is that each manager develops expertise in his own field and prepares himself to take strategic decisions based on past experiences rather than depending on the overall BU strategy as in most organizations. This prepares resources within the organization that are specialized in their fields and can be tapped for global projects in the future based on their expertise rather than local availability (The Cognizant 2.0 or C2 project).

From my experiences, I could see this is an effective model for a technology based firm with an offshore office. However, whether this will work for firms that are localized (have their clients in the same country) or are smaller in size (the cost associated with duplication of resources in the TIB model) is something that is open to discussion.



[1] The Real Value of Strategic Planning (Kaplan and Beinhocker, MIT Sloan Management Review, Winter 2003)
[2] http://hbr.org/product/cognizant-technology-solutions/an/408099-PDF-ENG
[3] http://www.cognizant.com/two-in-a-box
[4] 'He' used as a representative pronoun throughout the article

The History of Strategy--The Lords of Strategy

Talking about the roots of business strategy and the development of tactics from warfare to modern-day strategy is something that I was very interested in during the first class. Professor Zak had mentioned that the underpinnings of modern business strategy and the idea of strategy as part of a business unit really took off during the 1960s and 1970s, but he only touched on the founders of that strategy in one short slide.

I wanted to learn more about the men who had pioneered modern organizational strategy. Bruce Henderson, Bill Bain--who are these guys and how did they become the thought leaders in business strategy? There is a suggested correlation between operational strategy (stemming from post-Second World War learnings about operational organization in conflict), but I think that business strategy as we use it today and as we colloquially refer to it (including the entire lexicon of words we use to describe business situations) is developed from the confluence of military strategy and economics.

In this video interview with Walter Kiechel, author of the book "The Lords of Strategy," Kiechel mentions the beginnings of business strategy in the repeated observation and imitation of successful patterns in business cycles. Fundamentally, as suggested by Michael Porter's article "What Is Strategy?," success in business is all about the preservation of competitive advantage against other firms.

How is this done? Kiechel mentions a certain Alfred D. Chandler, a professor of Business History at Harvard and Johns Hopkins. Kiechel wrote a book called "The Visible Hand: The Managerial Revolution in Business", which began the emphasis of "strategy" on the functional units of a business. Chandler's book details 8 different propositions arising from the shift from small business to multi-functional conglomerates. Part of the emphasis is on the units within the business--one of the key tenets of his thesis is that managers arose out of the business units to command them, and that the hierarchy itself is a source of "power, permanence, and continued growth." In another work, Strategy and Structure: Chapters in the History of Industrial Enterprise, Chandler states that "structure follows strategy." (Chandler 1962).

From here we can see there is a natural want to interpret military maxims and apply them to business situations. Clearly, the interpretation is up to the reader, but there is value to be gleaned in thinking about the way organizational units are deployed.

So where does this leave Henderson and Bain? Their experiences shaped the development of business strategy because they were able to create frameworks that are ubiquitous in strategy today (particularly Henderson and the BCG growth-share matrix). Henderson in particular did more to make strategy attractive to business by creating the Boston Consulting group, and I think that the allure in strategy comes from this mystique that there is an analytical way to derive the costs and benefits of each avenue of approach and organization, just as in military strategy.

Conducting beneficial strategy planning process

Many corporate executives come out dissatisfied and disappointed after annual strategy meetings. They feel like they have not created an impact on the strategic plans of the company. Many people feel that this is due to the formal setting of the meetings. But i disagree and say its due to the lack of prepared minds attending the meetings. When people are not aware of the issues the company is facing, the competition out there and the future direction the company envisions for itself, they cannot make effective contributions to the strategic plans of the company.

For any strategic planning process, first the issues that the company is facing should be identified. This is important as we want to develop strategy that can mitigate these issues. Without knowing the issues, the strategic plans developed cannot be effective. The CEO can throw light on these issues. The next step is to call people who can effectively contribute to these meetings. People who are well informed about the issues and challenges facing the company. Along with strategy planners, people who are going to implement the strategy should also be involved in these conversations. Only then can we make strategic plans that can be implemented. Another important aspect is the time and venue for these strategic conversations. A prior date should be set so people can get a chance to look at the issue the company is facing and be prepared with future plans. Its also better to hold meetings at the business unit's site rather than the corporate headquarters. Also the CEO presence at the business unit helps to signify the importance of these meetings. The duration of these meetings should not be more than a day. A one day meeting should be adequate to produce effective strategic plans. Also during these strategic meetings, the topic of discussion should be focussed at overcoming challenges and issues and not on the financial aspects and budgets for the company, these should be held in separate meetings.

By keeping the above in mind, can strategic planning be effective and satisfactory without having prepared minds involved in the conversation?

Burberry's Strategy in a Social World

For the MAMs in this class, this is a familiar corporation. Burberry, the quintessential trench coat maker, has suffered setbacks over the years thanks to a lack of corporate foresight and a loss of relevancy and brand image.

In the readings this week, I was reminded of the initial setback that Burberry faced. The readings also delved into the importance of creating a sound strategy based on particular elements of a strategic process. And that's what Burberry has done.

Forbes.com, in an article dated March 9, 2012, interviewed the new CEO of Burberry, Angela Ahrendts about Burberry's current status as a haute couture name in the fashion world once again. How did they do it? How did Burberry become relevant to young people today—particularly millennials?

By taking innovation hand in hand with tradition. The Forbes article states that, "With a clear and authentic brand identity, Ahrendts has proven that tradition doesn’t preclude innovation but can actually drive it." Ahrendts didn't change Burberry's core purpose and vision, she actually used it to her advantage to create a brand that stands as a beacon for other companies struggling to find relevance in a world driven by social media and technology.

As Collins and Porras' article "Building Your Company's Vision" states, "core purpose is an organization's most fundamental reason for being." The same article in our reading develops purpose further by saying that "the very fact that purpose can never be fully realized means that an organization can never stop stimulating change and progress." Ahrendts recognized that, and built Burberry's image into something more than just the brand. She's been at the forefront of innovation and creativity, and yet she's preserved the core vision of Burberry—marketing innovation and product excellence.

Burberry has also delved deeply into social media, and has engaged millennials in a strong dialogue. As Forbes reports, the Burberry Facebook page has 11.2 million likes. If that isn’t a strategy success story, I don’t know what is!

The Burberry site is also cutting edge and fresh—and couples tradition with innovation. The history of Burberry is one entire section of the website, and there is ample information about Burberry’s current and future goals as well. Burberry under Ahrendts has managed to combine the impossible—and has preserved its vision and purpose along the way.

That's what I think our readings are really telling us—how to build a strategic plan, but also how to preserve the past sufficiently so that the company can emerge stronger than before; buoyed up by its past.

Works Cited:

James C. Collins, Jerry I. Porras. "Building Your Company's Vision." Harvard Business Review September-October 1996. Print.

Forbes, Moira. "Burberry CEO Proves Tradition Doesn't Prevent Innovation." Forbes. Forbes Magazine, 09 Mar. 2012. Web. 28 Mar. 2012. .


The Recession's Impact on Strategic Planning


During this week's assigned reading articles, it was mentioned repeatedly that strategic planning consists of discussing long term trends, opportunities, challenges, and targets. Additionally it was stated that five to seven year financial targets should be tied to the strategic initiatives.

I currently work for a large financial services organization, who was impacted by the recession of recent years (as was everyone in the industry). Since I was not an employee during the heart of the recession, I was curious to how large companies changed their strategic planning and corresponding processes to better react to the recession and difficult financial times.

I found an article on the Wall Street Journal, entitled Strategic Plans Lose Favor, that speaks directly to the changing of strategic plans during the recession. This article begins with stating that faced with the recession, business executives realized that strategic plan and forecasting does not always work. Alternatively these executives learned that it was instead beneficial to plan on the fly and in the moment, rather than seven years into the future. Despite the fact that the financial outlook of the market is improving, the author of the article argues that these new opinions and styles of strategic planning will continue to be used.

Of the many organizations and their leaders discussed in the article, the CEO of Home Depot is the one most heavily mentioned. For instance Home Depot still reviews the budget on a monthly basis instead of quarterly, as they did prior to the recession. Other CEOs were quoted as saying "strategy, as we knew it, is dead" and revealing how they embrace their new "just in time decision making".

Due to the recession, the majority of strategic plans were largely put on hold and instead "bridge plans" were created. Despite brighter financial times, companies say that those previous strategic plans are no longer relevant and useful.

In conclusion, the traditional seven year strategic plans are not gone forever. According to this article, they are just not as in as much favor as they once were. With time, and the recession in the future being the past and not the current times, it is likely the trend will change once again. However, it was interesting reading the impact of the recession on strategic planning.

Tuesday, March 27, 2012

Revitalizing the Strategic Planning Process for the GAO



As evident by the readings from this week, strategic planning can be a critical tool for achieving success in a company when applied properly. However, the readings also included statistics referencing how often the strategic planning process can be a fruitless and disappointing experience for both senior leadership and employees. As I was reading, I wondered if there were examples of successful strategic planning in federal government institutions-which often carry the reputation (perhaps unfairly) of being bureaucratic wastelands where strategic thinking goes to die. I began my investigation by researching organizations that I was familiar with and had some knowledge of the corporate culture and I found that the U.S General Accounting Office (GAO) not only has a rigorous strategic planning process but the GAO has also leveraged it into a powerful organizational tool for ensuring continued success.


In the GAO report, “Strategic Planning at the U.S General Accounting Organization”, the organization outlines the history of its strategic planning initiatives and how it transitioned a outdated and inefficient planning system into one that is highly effective.[1]This was made possible in part because of a change in senior leadership, that valued strategic planning and recognized an opportunity to revitalize GAO’s. The first change enacted to GAO’s strategic planning process was to shift the focus from a silo approach to planning, where each of the five divisions in GAO planned completely independently of each other. Instead, an integrated agency wide strategy planning process was promoted. The next step was assembling the correct team for strategic planning. As the article “The Real Value of Strategic Planning” stressed, it is extremely important to assemble the right team for any strategic planning session- focusing on capturing the right group mixture of senior leaders and operational managers. One key ingredient to GAO’s successful strategic planning transition was their focus on putting together the right team, by including not only the office of the U.S Comptroller General, the head of the GAO, but also the Assistant Comptroller Generals (ACG), whom are responsible for each of the 5 Divisions. By including the ACGs, the GAO leadership is ensuring that a diversity of opinions, knowledge, and experience are present at the strategic planning sessions.


Another key factor to the GAO’s successful strategic planning initiative was the emphasis on aligning strategic planning with the organization’s mission, core values, and overarching themes. Like many organization referenced in the article “Using the Balanced Scorecard as a Strategic Management System” the GAO suffered from a divorce between the stated mission and how their strategic planning was being conducted. The new Comptroller General wanted to change this by creating a plan as vigorous as the ones that GAO imposes on other organizations. By repositioning the strategic planning process with the company’s mission- the GAO was validating both the company’s mission and the results from the strategic planning session. In addition, the organization focused on creating clear, detailed, and implementable strategic objectives. The result is that after every strategic planning session the leadership compiles a list of these objectives and disseminates it across the organization.


What this article has impressed on me is that any type of organization can have a successful strategic planning process. However, it requires a concerted effort and support by the senior leadership to succeed. Are their other types of federal agencies that have adopted these successful strategic planning measures and how can it be further improved to reflect new economic and budgetary conditions?



[1] Ward, George L, “Strategic Planning at the U.S General Accounting Organization,” http://www.gao.gov/special.pubs/ward.pdf.












.


Revamping the Strategic Planning Process of Presbyterian SeniorCare

This week I had the opportunity to attend a talk by several executives from Presbyterian SeniorCare (PSC) about their organization and its use of metrics.  This talk tied very nicely to the readings from this week about improving the strategic planning process. 
The CEO of PSC told us of the previously ineffective strategic planning process.  He explained that each department would go through an exercise of creating their strategic plan.  These separate plans would then be compiled into a binder which would sit on a shelf collecting dust for the rest of the year.  The organization set out to put a more effective strategic planning process in place. 
The revamped strategic planning  and execution process seemed to coincide with several of the suggestions from “How to improve strategic planning” (Dye and Sibony, 2007), specifically implementing a strategic-performance-management system and integrating human resource systems into the strategic plan, as well as with many concepts in "Using the Balance Scorecard as a Strategic Management System" (Kaplan and Norton, 2007), especially the personal scorecard.  One aspect of this improved process was the use of what they call the “passport” system.  On the back of each employee’s name badge, several performance metrics were listed that tied back to the overarching strategic goals.  These metrics were specific for each job or group of jobs within the organization.  For instance, if a strategic goal was to achieve a certain level of resident satisfaction, the back of a maintenance worker’s name badge may list a certain turnaround time to strive for when attending to work order requests.  The specific performance metrics that were decided upon and placed on the “passport” were then able to be used during employee and manager reviews. 
I found the efforts of PSC to integrate their strategic plan and goals into the daily tasks of all employees very interesting.  It makes me curious about how other organizations choose to execute their strategic plans.  In previous work experience, were you aware of your organization’s strategic plan?  Were aspects of this plan integrated into your day-to-day tasks?  Do you think this type of system would have aided your organization in achieving its strategic goals?

The Strategic Planning of a Rust Belt City

Strategic Plans in Government

As I was reading about corporate strategic planning this week, I couldn’t help but ask: how does this apply to cities? Can cities have strategic plans? Are the processes and best practices the same as in corporate planning? I’d like to write a little about a problem identified in “Using the Balanced Scorecard as a Strategic Management System” (Kaplan and Norton, 2007) for both corporations, but also for cities: “the inability to link…a long-term strategy with short-term [financial] actions.” I'll focus on Youngstown, a medium-sized city in Northeast Ohio (and my hometown), that completed a strategic plan in 2005.


Youngstown 2010 Plan: To shrink

In 2002, Youngstown embarked on a process to create a city-wide plan. For those of you who don’t know the story of Rust Belt cities, I will provide a brief overview: Youngstown, like Pittsburgh, was a steel town. Jobs in steel mills provided a quality income, and people in Youngstown were comfortably in the middle class. In the late 1970s, steel plants closed and moved overseas or to the South where there were fewer regulations and no unions. Left without jobs, more and more people started to move away, and jobs never came back. The City of Youngstown had been left to maintain the infrastructure built for twice the population (and tax revenue) as it has now. In 2002, residents and city leaders finally agreed that the steel mills were not coming back, and something had to be done. I went to one of these community planning meetings (as an excited high school student), and a auditorium full of people gave suggestions, feedback, and a vision for Youngstown in the next few years. After the “2010” plan was completed, Youngstown received great press nationally and even internationally. This article describes the overall strategy upon which Youngstown decided in its plan: to shrink. At this time, no city had really talked about shrinking. The model had always been growth: a city cannot survive unless it grows. But here was a city suggesting its survival depended upon shrinking.

Although there are some differences, the planning of Youngstown 2010 was similar to the best-practices described in “The Real Value of Strategic Planning” (Kaplan & Beinhocker, 2003) and “How to Improve Strategic Planning” (Dye & Sibony, 2007). The process took time. In fact, the Youngstown 2010 plan took over two years to create. Residents, officials, and business owners had an opportunity to let their ideas heard. The plan wasn’t just a template of vague ideas, but an innovative set of objectives to lead the city.


It's Already 2012

I’d love to report that Youngstown has taken this widely-acclaimed plan and has achieved its objectives for 2010. But that’s where the third reading we read this week comes in. One huge problem in Youngstown is that the Youngstown 2010 Plan wasn’t actually tied to the city’s budget. The city hasn’t been able to afford (and in some cases, willing) to take on the strategies laid out in the plan. Without money, a plan is just a plan on a shelf. Yes, some things have been done. But have all day-to-day decisions been made with the plan in mind. I think anyone involved in Youngstown would tell you the answer is "no."


PlanPGH

Pittsburgh is in the midst of creating its very first city-wide plan. It’s called PlanPGH. They are going through each of the core areas separately to get feedback and plan an approach. They are currently soliciting feedback for the transportation portion of the plan. I encourage anyone staying in Pittsburgh to become involved, make your voice heard, and ask if this will actually be tied into the city’s financial plan.

Monday, March 26, 2012

Juiceheads: Starbucks Flexes its Muscles As It Enters the Juice Market


Last November, Starbucks made good on rumors that CEO Howard Schultz was interested in branching out into the premium juice market when it purchased Evolution Juices for $30 million. On March 19, the first Evolution Juice Bar was opened in Bellevue, WA. The company plans to offer its "premium fresh squeezed mixology" through individual stores and through distribution in grocery stores. Similar to its 2007 market strategy as discussed in class, Starbucks will now be entering into a market more commonly known by Odwalla and Jamba Juice.

The company is more likely to be associated with wellness as perceived by creating the third space that promotes coffee's ability to bring people together and a lifestyle of premium customization. Now, that strategy is expanding to include wellness that highlights health benefits and has told its investors it plans to revolutionize the juice industry by focusing on retail footprint, grocery distribution, digital customer engagement, and of course by continuing to focus on the customer.

What is important to note here is why Starbucks focused on Evolution Juices versus other potential market players and how it fits in the future of the company. Evolution touts itself as one of the only true juiceries in the industry in that it peels, cracks, and presses its on fruits and uses a specialized process called HPP to keep nutrients throughout the juicing process. This will be key in the marketing of this new offering as Starbucks has taken the idea of personalized customization and marketed it as a lifestyle enhancer, one that allows you to be able to express yourself and relate to those similar to you. This $1.6 billion premium juice market will only complements the company's position within the $50 billion health and wellness industry. With the weight of Starbuck's global presence, the company sees little competition that will be able to compete with the visibility of the brand. Having learned from the over saturation of its past, the company's biggest competitor is likely to be how it moves forward in branding Evolution to better reflect the pure, natural, premium ingredients that fit into it's larger branding image.

http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-newsArticle_pf&ID=1629169&highlight=
http://www.reuters.com/article/2012/03/20/us-starbucks-juice-idUSBRE82I05Y20120320
http://www.nasdaq.com/article/starbucks-taking-a-shot-at-energy-juice-drinks-20120326-00772

Sunday, March 25, 2012

Dell: Revitalizing the Business of Computer Purchasing

Our readings for this week emphasized the integration of both a company’s strategy and its business model in capitalizing on the long-term profit potential of an industry. In synthesizing a great deal of research on the trends in successful companies’ strategic planning processes, the two articles from the Harvard Business Review1,2 offered specific, tactical suggestions for how others might extend these best practices to their own business. I would like to add to the anecdotal examples of the authors that of one additional company: Dell Computer Corporation.

As described in an article by Joan Magretta in the March-April 1998 Harvard Business Review,3 Chief Executive Officer Michael S. Dell implemented a business model for his company back in 1984 that considered each of the components laid out by Johnson, et. al in “Reinventing Your Business Model:” the customer value proposition, the profit formula, the key resources, and the key processes. In so doing, Dell took his company from a small enterprise in his parents’ garage to a renowned $12 billion corporation in only 13 years; today, 28 years since its founding, it is worth $61 billion.4 Dell Computer changed the mix of the competitive forces and thrived for a long time in an industry dominated by major players by operating in a unique niche, quite similar to the niche of Southwest Airlines and Apple, Inc. in their respective industries.

Customer Value Proposition (CVP)

Much like Ratan N. Tata of Tata Group, Michael Dell’s inspiration for Dell Computer’s business model stemmed from consumer needs he observed in everyday life. Companies around the world, and government organizations in particular, had a specific need for many highly-customized computers and IT support. Companies needed to order these computers in large quantities, have access to knowledgeable service technicians, and be able to upgrade their system to keep up with changes in technology over time and with little hassle. As Johnson, et. al suggest, Dell Computer found a way to meet these related needs and initially focused on only these needs. The value that Dell Computer brought to the market, then, was the ability to highly customize bulk orders of computers and provide superior IT customer support for businesses. As time progressed, Dell Computer began serving individual computer-savvy customers who were interested in a customized setup. Dell structured his business model so that everything his company did created value for the customer.

Profit Formula

Dell’s “direct business model” had three primary components that affected profit: suppliers were brought in-house to work as partners within Dell Computer’s facilities, the company hyper-segmented its potential market, and products were sold directly to the customer. With the suppliers in-house, the company could keep its inventory low and change orders quickly. This meant that Dell Computer’s resource velocity was quite high, but it made up for this in its revenue model, cost structure, and margin model. All three were positively impacted by Dell’s decision to sell only to high-margin markets in high volume. In 1998, 70% of Dell Computer’s sales were “to very large customers that buy at least $1 million in PCs per year.”3 By selling directly to customers, Dell Computer retained control over its cost structure and avoided fees associated with reseller services. It also kept prices reasonable for the end-user by avoiding reseller markup.

Key Resources

Just as part of Southwest Airlines’ competitive advantage in the airline industry stems from its use of one type of jet, Dell Computer gains its competitive advantage from its unique association with its suppliers. Dell Computer uses suppliers to manufacture each component of a computer, but Dell does not consider this “outsourcing,” as each supplier performs its work in a Dell Computer factory and the company maintains very long-term relationships with many of its suppliers. It ingrains the suppliers in the culture of service to the customer. Another key resource are Dell Computer’s trained “sales-account managers,” who are assigned to each customer and whose job it is to understand that customer’s specialized needs. These managers are tasked with developing a customized package to specifically match that customer and will walk them through the entire order process, from interest to delivery.

Key Processes

Several processes are key to Dell Computer’s business model and differentiate it from other manufacturers. The first is what Dell calls “virtual integration,” which is the term for the coordination between Dell Computer and its suppliers. It also incorporates the focus and specialization that Dell Computer achieves through its supply chain. The second is Dell Computer’s high turnover, for which it is so famous and from which it derives much of its profit: in 2008, it turned over its inventory 30 times per year and had a holding period of only 11 days.3 Dell Computer also offers its business customers specialized intranet sites to re-order computers, purchase additional components, or request technical support. Finally, Dell Computer stays ahead of the curve and fosters innovation in the workplace by hosting “forums to ensure the free flow of information with the customer on a constant basis.”3 This allows businesses to express their needs and work with Dell Computer engineers to formulate a solution for these needs. The meetings are the embodiment of Dell Computer’s commitment to its customers, now and in the future. By listening to its customers, Dell Computer can accurately forecast demand for its product and maintain its profitable inventory turnover.

Today

Michael Dell built his “direct business model” with the core idea that he would integrate the supply chain, “sell directly to consumers,” and “build products to order.”3 But Johnson, et. al state that “business models need to have the flexibility to change.”2 Therefore, Dell is in the process of re-thinking his model. As #41 on the Fortune 500 list and #3 in the “Computers, Office Equipment” industry (behind Hewlett-Packard and Apple), Dell Computer still has room to grow. CNN Money reports that Dell Computer has an interest in “emerging markets.”4 What markets do you think it should tackle? How do you think it should alter its business strategy to accommodate the modern marketplace and still retain its competitive niche, so reminiscent of Southwest Airlines?

1Kaplan, Robert S., and David P. Norton. "Using the Balanced Scorecard as a Strategic Management System." Harvard Business Review July-August (2007): 3-15. Print.

2Johnson, Mark W., Clayton M. Christensen, and Henning Kagermann. "Reinventing Your Business Model." Harvard Business Review December 2008 (2008): 3-13. Print.

3Magretta, Joan. "The Power of Virtual Integration: An Interview with Dell Computer's Michael Dell." Harvard Business Review March-April (2008): 72-84. Vitro. Autodesarrollate, Mar. 1998. Web. 25 Mar. 2012. .

4"Fortune 500 2011." CNN Money. Web. 25 Mar. 2012. .