Category: strategy

15
Apr

Business Planning Without Business Plans

I recently ran a couple of business planning seminars at the 5th Annual Inventing the Future Conference put on by Young Inventors. Since it was a no Powerpoint affair (yeah!) I have no slides to share but here is a quick summary:

Business Plans DO NOT EQUAL Business Planning

By The Scott (Creative Commons)

By The Scott (Creative Commons)

It’s amazing how much stock we put in business plans considering they are works of fiction. Few startups really know their precise target market, product, pricing or cost structure. How could they? I guess writing a business plan is a good exercise in research and discipline but only if it doesn’t distract you from real business planning. My personal favorite is figuring out the size of a market. Any time there is 3rd party research on market size your product is probably too late. You can’t really size a market you’re creating from scratch so don’t sweat the details. Just show an intelligent attempt and that will be impressive enough. A recent WSJ article claims that Business Plans Don’t Matter to VCs (though not all agree).

All Customers Are Not Created Equal

There’s not much I can write about targeting specific customers that hasn’t been covered by Geoffrey A. Moore in Crossing the Chasm. If you haven’t read it please stop reading this blog and buy the book! If you have, a re-read will remind you how it still holds true in so many cases. Startups should realize that there is no such thing as a generic customer. When you’re planning, it’s important to find a niche where you can find customers with specific pain points. Even within this niche you have to figure out how to target early adopters, i.e. people who are willing to take a risk on a startup. Targeting the early majority (i.e. more practically-minded people who need proof before they buy) is a waste of time until you have bona fides with early adopters.

From Wikimedia Commons

From Wikimedia Commons

Real-world planning tip: Create fictional caricatures of your customers (e.g. “Joe the plumber”, or more precisely “Joe the small residential plumber looking for ways to level the playing field against bigger rivals”). You should have one caricature for each of your customer types. Then keep these ‘people’ in mind every time you make a strategic decision in your company.

Find The Value

Business plans make us believe that commercializing new products is a linear progress of steps leading outwards from the original idea. Reality is a lot less linear. Sure you may have a breakthrough technology or a wonderful idea and have a great plan to push it to market, but it has to pass the “Who Cares?” test first. It’s easy to convince yourself that people (especially generic people…) will buy your product. It’s a lot harder to go out and talk to them. I always ask entrepreneurs if they’ve talked to 100 prospective customers of their products. This actually takes less time than writing a business plan!

Real-world planning tip: Get to the core of your idea by figuring out if you have a vitamin or a painkiller. The good news is that this early in the game it’s not expensive to start over.

Real-world planning tip: Since Frederick Winslow Taylor invented time and motion studies people have been measuring and analyzing user behavior. Though I’m not recommending startups take up cameras and stopwatches, I am recommending you quantify the value you purportedly add. Think your solution saves time? Detail exactly how much time, in minutes or seconds. This presumes you know what your customers were doing before they bought your product. Once you have a convincing argument bring it to a customer and try to convince them. Then on to 99 more.

Write Once, Don’t-Survive-Battlefield Everywhere

To summarize, I’m not saying that business plans are evil. Sometimes it’s good for entrepreneurs to work out ideas on paper before committing time and capital to them. Other times you have no choice, e.g. for banks or VCs. But don’t confuse writing a plan with real business planning. A plan is something you write, print, file away and celebrate with a pint. Business planning is a continuous discpline you’ll use throughout the life of your business.

03
Feb

Translating Strategy Into Action

In previous posts I talked about how to create a simple, strategic plan without falling down the rabbit hole of arguing about mission, vision, objectives, goals, strategies etc. I also talked about how to actually get a group of people to agree on a set of goals which is always fun and never easy.

cc Fenris Photography

cc Fenris Photography

This post talks about the crucial last step: translating your strategy into real action.

1. Follow-through – Once you have your plan finished, schedule monthly or quarterly review sessions right away and make sure people know in advance that they will be expected to report on their performance vs. the goal set in the plan. Send a meeting invite for a specific date and time along with an agenda right away. This tells people this is not a drill.

2. Make people uncomfortable when they don’t deliver – There have to be consequences when people do not deliver. For most companies, having to stand up among colleagues and say either “I didn’t deliver” or “My forecast sucked” is a powerful enough consequence. Don’t be afraid to be tough on people who don’t deliver, including yourself!

3. Reward people when they do deliver – Make a point of congratulating people when they deliver what they promise. It sends a signal that this is important to your company. It seems like common sense but most companies only focus on fixing the negative while taking the positive for granted.

4. Reward people when they deliver part 2 – Put your money where your mouth is. Tie bonuses and option grants to good forecasting and good delivery. If you have compensation tied to anything else you are sending mixed signals.

5. Be prepared for naysayers – People who were cooperative during your planning sessions will become less cooperative when the rubber meets the road and they have to explain why they missed their targets. They will question the planning process, claim that the strategy has changed, and blame external factors (e.g. The Downturn). You need to shut these people down quickly. Decide if you want to be a company with great performance or great excuses.

6. Get the whole company on board – Make the plan (and all the brainstorming materials) available to everyone in your company. After every review cycle, publish the results (good or bad) so they can be seen by all. Apply the same planning discipline to departments, your Board of Directors, and individual employees.

It’s probably fair to say that there’s no such thing as Really Simple Strategy Planning (sorry). In reality it’s a time-consuming process that’s bound to create some conflicts within your startup. But the payoff is huge if you can create a company culture that encourages thoughtful strategy development and hard-nosed dedication to performance. If you don’t have this mindset in your company it may be time to ask why not.

12
Jan

Tips for Running Effective Strategy Sessions

The previous post talked about Really Simple Strategic Planning, a way to cut through the buzzwords and create a practical strategic plan for your company. This post provides some tips about how to organize and run strategic planning sessions.

Getting people together to talk about strategy is a tricky affair. Besides having different opinions about what strategy to pursue, people often differ about what strategy is and the difference between strategy and tactics. Like facilitating productive meetings, running effective strategy sessions is an art form that requires practice. The following recommendations, organized into the Five Ws (and 1 H), will give you a head start:

WHO? – In a small company, be as inclusive as possible, at least in the beginning. Excluding someone tells them you don’t consider their input valuable. On the other hand, it’s difficult to brainstorm in groups of more than 7 or 8, so consider breaking down into smaller groups. Don’t forget to include investors, Board members, outside advisors and (gasp) customers in your strategy sessions.

WHAT? – To be effective, you need to draw some boundaries. It may not be productive to re-strategize everything about your startup from first principles. It’s ok to give people some focus to the discussions by saying “we’re not talking about that”. Show people an example strategy so people know what they’re aiming for.

WHERE? – Don’t hold offsite meetings. Strategizing where you work sends a message that strategy is not a once a year event but fully integrated into your work. That said, you might need to some special equipment such as a cell phone/Wifi jammer, lots of sticky pads, and a timeout corner…

WHEN? – Again, don’t plan strategic retreats once a year. If you’re doing this for the first time you’ll need more sessions up front but discussing strategy should be a regular event. This doesn’t mean you should question your company’s strategy every day. But quarterly checkpoints are crucial for comparing your strategy with your execution, and updating your strategy if necessary.

WHY? – This is not as obvious as it sounds. Some of your staff may think your strategy is self-evident and question why you need to pretend like it’s not. You need to convince everyone on your team (including yourself) that developing strategy as a group is partly an end in itself as it gets everyone to buy into shared goals

by Jacob Botter (CC)

HOW? – The biggest challenge in running successful strategy sessions is to create an environment where people feel they can be creative. Believe me, this is more difficult than it sounds. Your intern might not want to contradict the founder/CEO and non-technical people might assume that the CTO “owns” all the technology strategy. Make sure someone is tasked with being a facilitator, i.e. someone who watches how the conversation goes, ensures everyone has a chance to speak, and gives people timeouts if necessary.

For more information on how to create an environment conducive to good ideas, watch this video about IDEO, a legendary industrial design company who have perfected the art of brainstorming (they designed the 1st mouse). Their GM has also written a number of books on innovation including The Art of Innovation. Although they talk about brainstorming, most of the concepts apply to strategic planning. In fact, if your strategic planning sessions feel less like brainstorming and more like ops meetings, you’re probably not being very strategic!

A lot of what you learn about effective strategic planning boils down to organized chaos. You need organization to make something meaningful out of the process. But you also need the chaos, i.e. the debates, passionate disagreement, kooky ideas, and dead-end discussions. If you can organize the chaos you’ll find it will be easy to create a practical strategy for your firm that people feel motivated to achieve.

07
Jan

Really Simple Strategic Planning

Mark has a great post about 2009 being the year of execution. Great execution doesn’t mean shying away from strategic planning but most people either don’t know how to create a strategic plan or end up doing too much navel gazing. Remember, strategy is not what’s written down on paper but what you and your team implicitly believe is the direction you should go. If you’re wondering what your strategy is, ask your staff to tell you. It’s often an eye-opener.

The question is, how can you proactively create a strategy that’s actually useful and will drive your execution? I now avoid the whole “vision-mission-strategy-goals” method and go for something simple yet effective.

Step 1: Go back to basics

A very simple strategic plan

A very simple strategic plan

The one-line strategy is not as easy as it looks. Choosing one goal (to the exclusion of others) is a challenge and you’ll find that your Board and your executive team may disagree about what’s important. Have those debates now when the strategy is simple. People will also disagree about the timeframe. Your investor think a year is too long to wait for profitability and your operations team thinks it’s not enough time.

Step 2: Translate into key areas

Broken down into sub-goals

Broken down into sub-goals

I breakdown strategies into no more than 4 key areas (you can pick your own). People are at the top because you can’t just set goals and sit back and watch. You have to actively manage to your strategy. I make customers (rather than revenues or clicks) its own category because a lot of companies treat customers like means to an end rather than focusing on creating value for them. Product development is obviously key for any tech company (and I consider services a product). Finally, in 2009 you’d better make your finances a key strategy.

I would avoid making functional areas (like marketing, sales, tech, admin) the categories as this is you-centric rather than stakeholder-centric.

Step 3: Make a quarterly plan

Goals broken down by quarter

Goals broken down by quarter

The last step is to add in a time element to your strategic plan. I’ve chosen quarters because weekly or monthly goal-setting tends to be a to-do list rather than a list of strategies. Adding specific dates to your goals ensures that your company is accountable. Three things I would point out:
  1. Each goal is worded in such a way that it will be easy to measure if you’ve achieved it. Avoid effort-based goals like “work on marketing plan” and “hold weekly meetings”. Focus on deliverables.
  2. Be specific. Some of the goals in the example are actually too vague. Being very specific holds you to a higher standard when it’s time to see if you’ve achieved your goals.
  3. All the strategies should be linked so that moving left to right and top to bottom, you achieve your ultimate goal (which was set in Step 1). This is not easy and the more time you spend setting and synchronizing your goals, the more you’ll learn about how to plan for great execution.
Going through this 3-step process will let you develop a coherent strategy without getting lost in writing strategy documents. The resulting 4X4 grid is simple enough for everyone in your company to understand but sophisticated enough for most businesses. The real test comes after one quarter when you sit down and review your performance vs. your goals.