
I last wrote about the need for small and medium-sized companies to eventually take the plunge, lose some informality (and maybe even a bit of speed at the onset to allow for more success, alignment, and acceleration later on), and adapt more formal processes and tools to aid in further growth. What does that look like?
I’ve met many entrepreneurs in my career whose vision and innovation were incredible. They could see future trends, customer needs, and technology advances and were highly agile in reacting and implementing those ideas, especially when the organization was in its infancy and more nimble. Things change as an organization grows; you’re not the little kid on the block to have your head patted and politely chuckled at. No, competitors now take you seriously and are prepared to respond and win.
In (re)reading several books and articles on strategy over the last year. I’ve gleaned new information on some approaches I’ve implemented in the past (SWOT, Hoshin Kanri, 5 Forces, BSC, OKRs) and some that are newer to me (Blue Ocean, PESTEL, BHAG – by Collins and Porras, Ansoff Matrix), to name a few. I’m deliberately careful in using the term “approaches” as each framework has a slightly different purpose for strategy planning and deployment. More on that in my next post, as I will talk more about Balanced Scorecards and OKRs. All have advantages and disadvantages and can help a leadership team establish their longer- and shorter-term objectives. My only suggestion is to read, speak with those who have already used some of the tools and processes, and pick one, two, or three (don’t go overboard, though) you feel the most comfortable with. Most can be very complementary to each other. Some can be redundant if used together. I would suggest starting with a combination of SWOT, 5 Forces, PESTEL and the Ansoff Matrix, as they really focus on the company’s current environment and landscape. I believe most methods will get you to the same end state; it’s just a question of how long it might take you to get there. In my experience, I’ve found SWOT and the 5 Forces the simplest to implement and use. Hoshin Kanri is excellent, but it often loses people during the deployment stage.
But what is strategy?
As a backdrop to this term, I’m reminded of military operations. The strategy establishes the desired outcome (victory), operations are the main orchestrated battles (campaigns), and tactics are the actual front-line (in many cases, hand-to-hand) combat. In the business world, I’ve usually seen the latter two terms interchanged, where tactical execution occurs on a monthly/quarterly basis, and operations are looked at on a daily/weekly basis. I prefer to keep the tactical planning as the drumbeat, so on a daily/weekly (even hourly) basis is my preferred way of thinking.
In business, I’ve often found we get too lost in semantics and phrases – everyone wants their flavour of the day. Let’s KISS, and allow me to provide my interpretation of essential terms for strategic planning.
First, I consider the words “goal” and “objective” largely interchangeable, just as I would “outcome” and “result.” Many can debate, though I think I have Merriam-Webster and Oxford on my side. For clarity, I’m more inclined to use the word goal for year-long plus activities (annual goal-setting) and individual performance (personal goals). In contrast, I use the word objectives in describing or highlighting those sets of actions supporting a goal’s completion.
Strategy, to me, is a desired set of outcomes over a 3-10-year period that will allow the company to grow and be more successful in alignment with the company’s vision and purpose. I’d rather keep the time range for strategies to 3-5 years, as with today’s rapid advances in technology, what could be critical to a business in 10 years might not exist yet, and one must be prepared to adjust to the changing landscape. However, JFK’s strategy of exploring a new frontier by putting a man on the moon and safely returning home by the end of the 60’s (9 years from the initial speech) still resonates with me as such a perfect long-term goal (or strategy) that 5 years doesn’t have to be hard and fast. A strategy still needs to be able to pivot, not necessarily annually, but some transformational events could warrant it. I don’t know any company that has succeeded in having more than 3 or 4 strategies. If you do, add something to the comments. The exact manner in which each strategy will be successfully executed is TBD; that’s where goals and objectives come in.
Goals, to me, are akin to step 3 in the Hoshin Kanri process (annual objectives), and I associate them with the specific accomplishments to support the strategy. They are more clearly defined (SMART) outcomes and results, time-bound, realistic, detailed, and measurable (though this element might not be in place, the key is that it can be). To emphasize the linkage, completing 5 successive annual goals, each tied into the same strategy over 5 years, will result in attaining that specific strategy (assuming it’s based on 5 years as well).
Objectives? This is where terminology gets confusing. I view objectives as a series (in parallel or sequence) of activities/projects/initiatives that support completing a goal and, hence, the strategy. They get into more specifics and are completed at a faster cadence than the goal would be.
Moving these principles into practice, I’ll borrow from a recent entry into the automotive sector. I’ve made assumptions about some goals and objectives to align with the definitions above, though I have closely followed Tesla’s stated Vision and Strategy.
Vision: “To create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.”
Strategy: “To be the biggest car company in the world” (a Big, Hairy, Audacious goal, if ever I read one, although it was never specified by what measure, or at least I haven’t read it)
Year 1, Annual Goal 1: Design and prototype a high-performance (based on 0-60 times or hp perhaps) electric sports car
Objective 1: Hire an automotive engineering team of 10 by month one (really should have started this in the previous year).
Objective 2: Define vehicle requirements for emissions and performance by month two
Objective 3: Complete the 1st design, ready to be prototyped, meeting specifications by month five
Objective 4: Have a prototype built by month eight
Objective 5: Have the vehicle tested to ensure it meets requirements by year-end
Year 1, Annual Goal 2: Enhance internal and external capacity to allow for high-scale production (x units/day) of the vehicle
Objective 1: Have sufficient capacity in place (employees, facility, machines, tools, technology) by year-end to meet forecasted production demands
Objective 2: Secure the supply chain of critical components (ex., battery) by year-end
Year 2, Annual Goal 1: Produce and sell y units of electric sports car
Objective 1: Have 1st set of vehicles off the production line by month one
Objective 2: Have vehicle certification by month two
Objective 3: Achieve a production rate of x vehicles/day by month six
I could go on with more goals and objectives around marketing, sales targets, future products, reinvestment, dealership footprint, etc, but the idea should be clear.
One final thought that I’ll leave with you. Many authors suggest *not* to include Operational improvements as a strategy. I agree with this, at least for the minor incremental improvements. That is part of the company’s tactical execution. While I have often included them as leadership goals, I don’t place them at the level of strategy (5% productivity improvement should be thought of as naturally looking to improve, not a differentiator as a strategy). However, if the operational improvement is a transformative initiative (brand new technology, for example), I think it is fair to include it as a strategy. Between the financial and resource investment, it needs to be linked to the strategy to show its importance to the organization.
Keys to remember – keep alignment with your vision and/or purpose statements, use strategic planning methodologies that you’re comfortable with, gather multiple opinions and perspectives, know the landscape and your capabilities, and set transparent, achievable, but challenging goals. Be committed to the plan, and pivot only as a last resort. Make it an annual process to review and update your goals and incorporate them into your Business Operating System.