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The Real Value of Strategic Planning

by Rick Johnson

I know some of you are so involved in fighting fires that you believe there isn’t time to develop a strategic plan. Some of you may consider long term planning a waste of time. Some believe long term planning is what you are going to do after lunch and some may even believe there is no value in strategic planning because as the owner/CEO you know what it takes to be successful and all your employees need to do is listen to you.

Hello, you may be wrong! You may need to join this century. Times have changed, leadership has evolved. The days of the “Lone Wolf” leader at the top who dominates with power are gone. Successful privately held organizations have gone through the leadership evolutionary process. They understand that today’s leader must create change in the organization to meet the needs of their customers, to meet the needs of their employees and to meet the needs of their vendor partners. It involves a particular life cycle change.

Strategic Planning is a Platform for Change

Strategic planning is a key process that adjusts an organization’s direction in response to a changing environment. It supports the fundamental decisions and actions that shape and guide an organization. A sound strategic plan can help define and focus a distributor’s efforts to move the company in the right direction, using the best methods. Show Me the Value

I cannot emphasize enough that the true value of a strategic plan is not in the document itself. It is in the process of creating it, involving many of your employees from the bottom up. This empowers them to be more effective and better-informed leaders, managers and decision makers. Creating a culture that embraces empowerment and working together as a team is probably the most effective way to create success. The more people work together and take ownership of the long term objectives the more unity and teamwork become a direct route to success.

Time after time I am told by prior clients that the real value they received from the strategic planning process was in the personal development of the strategy team members and the involvement of the entire company working together as a team in a team atmosphere. The results seemed almost automatic.

You are Handicapped Without Unity, a Common Shared Vision and Ownership of the Plan

Strategic planning creates a team culture that is necessary for success. Working together effectively is not automatic. It takes a specific effort and the development of a culture that is supported by executive management. Shared experiences create unity and value. Knowledge transfer is essential for an organization to grow. Without knowledge transfer and the sharing of the planning experience it is difficult for the group to share the vision and work toward common goals. More importantly, without the strategic planning experience it is much more difficult for employees to function together in such a manner that brings out the best in each other and the entire management team.

Create a Dynamic Force

It is not a natural occurrence for employees to stop thinking of each other as competitors and start working as a team. It is much more difficult to accomplish than it sounds. However, it is a natural by-product of the strategic planning process itself. More importantly, it fills a vital need if you want to create or maintain competitive advantage in your business.

The Strategic Planning Value Includes:

1. More direct success in executing action plans and initiatives. Ownership of action items are imperative with timelines and defined desired results allowing the team to tackle more complex projects more efficiently than just individual managers.

2. The strategic planning process allows the development of more creative solutions because it leverages the creativity and innovation of all the strategy team members. When team members bounce ideas off of each other, they arrive at solutions that may never have emerged alone. Seeing things from different perspectives is invaluable when it comes to personal leadership development.

3. Commitment to ideas and plans become an exciting part of the process as employees take ownership of the initiatives. When employees are involved in a project from the start, they are more likely to be committed to the ideals it represents. They also develop the unique ability to pass that excitement, that commitment and that ownership on to the entire organization.

4. Strategic planning utilizing CEO Strategists proprietary team process that starts with the Owners/CEO End Game and empowers the team to develop the roadmap without being intimidated by the presence of the CEO creates empowerment throughout the group that encompasses focus, process, discipline and accountability for the achievement of the “End Game – Vision for the Future.” That ownership not only challenges the team to be creative but it releases discretionary energy throughout the organization.

5. Strategic planning activities motivate your employees to deliver their very best effort on behalf of the company. The fundamental benefit of the planning process includes the development of the following:

• A framework and a clearly defined direction with unified support

• A clear vision and purpose owned by all employees

• Enhanced employee commitment to the firm and its goals

• A set of priorities that matches company resources

• A trend analysis that generates the confidence to take risks

• Accountability built in to a control process

Contact Rick below if you need help or want to discuss your strategic planning process. You can also request a complimentary copy of an internal pre-strategy survey.

http://www.ceostrategist.com – Sign up to receive “The Howl” a free monthly newsletter that addresses real world industry issues. – Straight talk about today’s issues. Rick Johnson, expert speaker, wholesale distribution’s “Leadership Strategist”, founder of CEO Strategist, LLC a firm that helps clients create and maintain competitive advantage. Need a speaker for your next event, E-mail rick@ceostrategist.com Don’t forget to check out the Lead Wolf Series that can help you put more profit into your business. E-mail for your special Howl discount order form. Get the CEO Strategist Interview Guide and Conducting an Effective Sales Training Session Guide just for signing up for “The Howl”. Don’t forget to check out the Lead Wolf Series that can help you put more profit into your business. E-mail for your special Howl discount order form.

Building Winning Brands – 6 of 16

By Derrick Daye on Relevant Differentiation

The sixth most important thing to know about building winning brands is that relevant differentiation is the defining aspect of a brand.

It is the most important thing a brand can deliver. Numerous studies have shown that relevant differentiation today is a leading-edge indicator of profitability and market share tomorrow. Does your brand own consumer-relevant, consumer-compelling benefits that are unique and believable?

Price is the worst differentiator because it is easily copied, reduces profits and dilutes brand equity. Product functions and features are also poor differentiators because they also can be easily copied. The most powerful differentiators tend to be one of the following:

•Emotional, experiential and self-expressive benefits
•Other non-rational benefits
•Customer service elements that are invisible to competitors (such as rigorous customer service training followed by customer service employee empowerment)
•The carefully engineered “total brand experience”

Relevant differentiation, a key brand insistence driver.

By Derrick Daye on State Farm

The findings from our comprehensive brand equity study of the insurance industry has implications for many industries. Here is what we found:

•While there are over 100 insurance brands whose names people have heard of, few achieve widespread top-of-mind awareness (first recall).

•The insurance industry is highly fragmented with a low dominance of usage and preference by a few brands.

•Very few companies are aggressively claiming relevant differentiating benefits in consumer communication. The few that are, are rapidly gaining market share (witness GEICO which is claiming price/value leadership in auto insurance with substantial advertising support).

•Prices/rates are cited as one of the top differentiating benefits, suggesting that the category is commodity-like for many consumers.

•While behavioral loyalty is high, attitudinal loyalty is much lower, indicating a consumer’s propensity to switch companies when the switching becomes easier (something the Internet might facilitate).

•Emotional connection to insurance brands is very low. Less than one in five consumers say that their insurance brand has never disappointed them. (The top brand on this measure disappointed two thirds of its customers at some time. All brands below the top eight on this measure disappointed over 90% of their customers.)

•Our analysis of the most powerful differentiating benefits indicate that many of them lie with the way in which insurance agents/representatives and the claims adjusters interact with customers.

•Our data would indicate that the industry is ripe for consolidation or strong niche marketing.

Three opportunity areas emerged for insurance companies:

1.Reinventing the process by which they interact with their consumers.
2.Claiming a highly relevant, unique point of difference (focusing on a product category, a consumer benefit or both).
3.Increasing emotional connection with their consumers.

The study provides the following lessons that are applicable to other industries:

•Strong, recognizable brand names and logos are important, but the brands behind those trademarks must stand for something unique and important in consumer’s eyes. What does your brand stand for?

•When price becomes the major point of difference in an industry, consolidation will occur. The companies that are most likely to succeed in this environment (other than the acquirers) are those that aggressively take ownership of relevant points of difference and redesign themselves to consistently deliver against those points of difference.

•The importance of the customer points of contact to strong brands can not be underestimated. Aligning these with your brand’s promise is critical. This may require redesign of your hiring, training, performance management, recognition and rewards and other HR practices. It may also require a redesign of your customer service processes.

•Companies that are market driven, truly caring about their consumers and constantly changing their products and services to meet changing consumer needs, will succeed at the expense of companies that are purely sales driven.

Is Your Strategy Wrong?

If you are not using the 80/20 Principle to control your strategy, your strategy is more than likely wrong. You may not have an accurate picture of where you make, and lose, the most money.

Where are you making the most money?

Conduct an 80/20 Analysis of profits by different categories of your business:

by product or product group/type
by customer or customer group/type
by any other split which appears to be relevant for your business
by competitive segment

Look at the sales over a given period and then determine the profit of each after allocating all of the cost for each group/type. Be careful when allocating the cost as each product will be different and have more or less activity from sales, manufacturing, etc.

When correctly allocating the cost to each product, you will usually find that some are making most of the profit and some are accounting for most of the losses, with the rest falling somewhere in between.

After products, go on to look at each customer, some will be willing to pay more but require a higher cost to service. Follow the same analysis for the remaining group/types that you have identified.

Now with all the information at hand divide your business up into segments and what products they use and determine the return on sales for each. Find the closest top 20% and the closest bottom 20%.

What actions should you take on this Analysis?

Before you take any action, know what the results will be. Will reducing the resources for one segment have any affect on another segment that is showing a profit? Discuss the changes with all departments to be sure that everyone is on board and that you have not overlooked anything. If a segment is losing money but improving you may want to give it time before shifting resources to a more profitable segment List each segment and assign a priority, describe the characteristic and the proposed actions for each segment.

Your goal should be to start with an 80/20 profit analysis and determine a segment strategy. Continue to refine your results and redirect your efforts to the areas where you can gain the most benefit. There will always be an 80/20 relationship between the group/types in your business, and there will always be room for improvement. The work will never be complete.

Sugested reading: The 80/20 Principle, by Richard Koch, ISBN 0-385-49174-3

Think of an example from your business where the 80/20 Analysis might result in strategy for improvement in profits.

About the Author: Hubert Crowell, Cave Explorer

After working in service for 23 years with Eastman Kodak Company as a service person, technical support and training specialist, followed by another 13 years working for other companies in the service field, I have decided to share my ideals on improving the service department. I would like to thank Jack Ingram, my supervisor at Eastman Kodak Company for the encouragement and guidance until his retirement. I would also like to thank Barco Projection Systems and all the great employees that worked with me for the last seven years before I retired.

For complete paper on The Service Department, Please visit my web site at: http://hucosystems.com/

I have started writing as a hobby and plan to write about my life, work, hobbies, religion and many other things of interest to me and maybe others will enjoy also.

For a complete viewing of my articles with photos please visit my article web page at:

http://hubertcrowell.name/

Low-Cost Way to Hire and Train Employees

By Anita Campbell on HR

Guide for Low Cost Small Business EmploymentUsing non-profit employment-related organizations in your community can be a low-cost way to hire and train employees, and even provide benefits for them.

The Hitachi Foundation has issued “A Pocket Guide for Business Leaders.” This is a PDF report that outlines why and where to set up strategic alliances with local non-profits where you can find a source of new employees, get training for employees, and get access to subsidized benefit programs:

One of the toughest management challenges for businesses is finding and keeping productive employees. This can be particularly difficult for small- and mid-sized firms with limited human resources management (HR) capabilities. Business-nonprofit partnerships are a means to addressing business needs such as this one.

Businesses in all industries face challenges in finding, training, and retaining the right workers with the right skills. The cost of the resulting turnover is a real drain on productivity and profits.

On the other hand, the seemingly non-stop economic churn is producing a constantly renewed supply of experienced and talented workers ready to meet your needs. Nonprofits are often on the frontline of this churn, providing critical training, placement, and support services to job seekers of all capabilities and with all types of experience.

As the Guide points out there is a lot of economic churn in our society. Translation: people get laid off from jobs. Devastating for those involved — to be sure — yet at the same time there can be a silver lining if your company learns about these out-of-work individuals and hires them. Often these individuals will be excited to work at a smaller business, especially if you can offer them flexible working conditions. It’s an added plus for your business if you can use non-profit (i.e., low cost) sources in your local community to help find this qualified talent, train them and provide benefits for them.

Also read for background: Small Business Employment Trends for 2007.

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