Where does your annual operating plan end and business plan deployment begin?
For many organizations, this is a difficult question to answer. Most are well aware of the importance of a strategic vision focused on improving profitability or competitiveness a few years down the road. Yet the majority are far better at meeting annual plan objectives versus achieving breakthrough strategic change.
Let’s explore some of the reasons that businesses often fall short of achieving strategic objectives and discuss some key considerations to keep in mind as you work through your strategic planning process this year. In this blog we will:
- Discuss the importance of separating ownership between business plan deployment (or strategy deployment) and goal deployment
- Explain how to stay on track toward strategic initiatives
- Provide a real-life scenario highlighting the value of establishing a strategic planning discipline
The importance of task/responsibility divergence to senior leaders
In the simplest terms, goal deployment is generally about working IN the business to deliver on the annual business plan and optimize near-term value for shareholders, while strategy is about working ON the business to achieve breakthrough priorities and/or deliver value for customers. In other words, strategic objectives are all about the big picture. For example, doubling top-line sales in five years, or reducing lead time by 75% and defects by 50%.
When companies are struggling to achieve strategic goals, we usually find that strategic execution and operating plan execution have become muddled. In these situations, members of the senior leadership team are typically caught up in day-to-day management tasks and figuring out how to hit yearly goals related to things like costs of goods sold (COGS) reductions rather than looking out for longer-term goals. In other words, even if there is a strategy the plan doesn’t stand a chance because no one has the time or focus to drive it forward.
How to stay on track
To achieve balance between business plan deployment and goal deployment a clear separation between the plans—and who’s in charge of executing them—is critical to any operations’ success. Yes, there will be some crossover in plans and responsibilities, but generally speaking the executive team should focus the majority of its time on developing and deploying the business strategy. Middle managers should be spending their time figuring out how to hit annual goals and running the day-to-day business.
Dividing key responsibilities is only the beginning of successful business plan deployment, however.
If you’ve been in the tactical weeds, you may not be sure how to successfully implement and manage strategic initiatives. From a high-level, we find that most manufacturers can be very successful using an approach similar to what is outlined in Figure 1.
Seeing the value in strategic planning process
Hubbell Incorporated, an electrical manufacturer that is a client of ours, was able to drive significant strategic planning success using the type of approach/strategic framework outlined above. Hubbell’s efforts began in early 2001 when it created a “2 by 4” strategy. It’s initial strategic goals included:
- 2x inventory turns by ’04
- 2 margin points per year by ’04
- 2% market share improvement
The company surpassed its goals, increasing net sales by 54% and its net income by 320% by 2004. And the continuation of the 2×4 strategic approach has continued to deliver results. For example, it went from a $1.3B business in 2001 to $2.9 in 2011, increasing net income from $48 to $268 million in 10 years. Hubbell also reduced inventory from 93 to 49 days and Generated $240M+ cash in five years, using this approach—and the company is still hard at work on strategic improvements.
A big part of the challenge with successful business plan deployment is adopting the right mindset and approach across the entire organization. The transition will take time and hard work, but as the case study above illustrates it’s well worth the effort. It’s also important to have technology in place, like Dploy Solutions, that can help you convert your strategy into actionable items and monitor KPIs and progress toward goals.
Ultimately business plan deployment needs to be balanced with goal deployment. Even as you work toward a big goal, such as doubling company growth, it’s critical that you are getting your net 6% COGS improvement each year, for example. And that’s a subject we’ll touch on in an upcoming post.
VICE PRESIDENT, SUPPLY CHAIN & TECHNOLOGY
Ken is a 25+ year veteran of manufacturing, operational excellence and supply chain optimization. He believes that it is critical for organizations to address the challenges of strategic planning and use of big data in manufacturing. At TBM, Ken is actively leading the effort to our suite of services to include emerging technologies that improve productivity and convert complex data into information for improved decision making.