Strategic Business Planning: A Dynamic System for Improving Performance and Competitive Advantage

381 Pages·2003·2.7 MB·English

by  Clive Reading

STRATEGIC
BUSINESS
PLANNING
STRATEGIC
BUSINESS
PLANNING
A DY N A M I C S Y S T E M
for improving performance & competitive advantage
2ND EDITION
CLIVE READING
London andSterling, VA
First published in 1993
Second edition, 2002
Apart from any fair dealing for the purposes of research or private study, or
criticism or review, as permitted under the Copyright, Designs and Patents Act
1988, this publication may only be reproduced, stored or transmitted, in any
form or by any means, with the prior permission in writing of the publishers,
or in the case of reprographic reproduction in accordance with the terms and
licences issued by the CLA. Enquiries concerning reproduction outside these
terms should be sent to the publishers at the undermentioned address:
Kogan Page Limited
120 Pentonville Road
London N1 9JN
UK
© Business Knowledge Transfer Ltd, 1993, 2002
British Library Cataloguing in Publication Data
A CIP record for this book is available from the British Library.
ISBN 0 7494 3807 X
Typeset by JS Typesetting Ltd, Wellingborough, Northants
Printed and bound in Great Britain by Biddles Ltd, Guildford and King’s Lynn
www.biddles.co.uk
Contents
Introduction 1
Part1 The strategic business planning framework 5
1 The purpose of strategic business planning 7
What is strategic business planning? 7; The confused
company 8; The focused company 11; Serving the
customer 15; The benefits of SBP 16
2 Understanding the framework 17
Company purpose 17; Goals 25; Performance targets 36;
Action programs 42; Summary 43
3 Company purpose 44
The overarching purpose 44; The business model 48; Profit 57;
Process 57
4 Distinctive capability 58
Characteristics of distinctive capability 58; Distinctive capability
comes from business processes 63; Developing a new distinctive
capability 64; Overall competence 66; Traditional thinking 67;
Strategic assets 70; The new distinctive capabilities 72;
Competitive advantage 74; Developing new distinctive
capabilities from the old 75; Distinctive capability and the
strategic plan 76; Outsourcing and distinctive capability 77
vi Contents
5 Market/product/service 79
Summary 106
6 Identity 107
The value proposition 107; What is identity? 109; Customers’
actual perception 112
7 People 117
The resource pool 118; Business values and company
culture120
8 Efficiency 142
Summary 149
9 Synthesizing the strategy 150
Effective strategy 150; Three generic strategies 155; Company
strategy 158; Fixed cost base reduction 160; Process cost base
reduction 160; Differentiation 161; Combined low cost and
differentiation 164; Principles for a general cost reduction
strategy 164; Principles for a general differentiation strategy 166;
Assumptions 168; Strategic options summary 169; Successful
strategies 171
10 Completing the SBP framework 172
Developing the performance targets 172; The draft first
report 175; Refining the plan 176
11 Evaluation 179
Test the logic 179; Test the soundness 179; Financial
analysis 184
Part2 Strategic concepts 185
12 Degree of strategic change 187
13 The role of the hypothesis 200
Death of a salesman 201
14 Simple strategy in a complex world 223
Contents vii
Part3 The strategic business planning process 231
15 The development process 233
The strategic business planning structure 233; Planning 235;
The terms of reference 236; Data collection 238; Building the
team 239; Data analysis 239; The development of the plan 239;
Format and presentation 240; Evaluation 240; Implementation
241; The process of strategic business planning 241; Organizing
a workshop 242; Starting the process 243
16 The reasoning and psychology of SBP 245
Robust strategy 245; Implementation 246; The SBP psychology
247; Learning through the SBP process 250; Communicating the
strategy 252
17 Building the leadership team 255
Emotions and tensions 255; The role of the leadership
team 256; The motivations of leadership team members 257;
Team roles 262; Adding value 263
18 Implementation 265
Communicating the strategy 265; The first year 267; Long-term,
fundamental or complex performance targets 270; Prioritizing
performance target 270; Performance targets 270;
Instructions to PTTs at the start of the project 274; Action
program decomposition 275; Monitoring attainment 275
19 Data collection 276
The base data 276; Base data forms 290
20 Financial analysis 296
Introduction 296; Analysis of assets and liabilities 297; Analysis
of performance 300; Using the analysis to compare two
companies 303; Traditional cost accounting 305; Activity-based
costing 307; The 10 per cent rules 308; Business unit cells and
market/product units 313; Monthly management performance
summary 313; Increasing management impact 315; Develop
financial requirements for next budget year 317; Organizing the
financial analysis workshop 318; Calculations 319
viii Contents
21 Business analysis 323
Introduction 323; Organization of the business analysis
workshop 324; Three-stage sieve 324; The base analysis 325;
Strengths and weaknesses analysis 330; Summary 334
22 Some useful techniques 335
Introduction 335; Product/service analysis 335; External
appraisal 342; Organization 352; Chapter summary 363
23 Summary 365
The rules of strategy 366; Strategic thinking 366
Index 368
Introduction 1
Introduction
Most senior executives think they know how to plan and implement
strategy for their company or strategic unit. The difficulty they often
have is that their approach is:
(cid:1) ad hoc and developed in response to a particular situation;
(cid:1) concentrated on limited functions or activities in the company;
(cid:1) not an organized, comprehensive, process;
(cid:1) not fully implemented.
The strategy they do develop is not robust and will change with even
slight economic downturns or industry trends. Companies unable to
hold to an agreed course, even over a period of three to five years, will
never perform strongly. Robust strategy requires pursuing the most
attractive strategic targets, focusing the resources of the business on
them and aligning the organization, systems and technology to support
their achievement.
Achieving focus in a company is not easy. Many members of the
leadership team will have reached their position through being success-
ful in one particular function, even though they may have worked in a
number of different functions. They will tend to have a mindset formed
of their earlier experiences. Bringing all this experience together to create
a strategy can be a great strength, but it needs a unifying process to
ensure there is ownership of the strategy in all members of the leader-
ship team.
Fourteen years ago I developed the concept of strategic business
planning, linking company purpose, business goals, strategy, performance
2 Strategic business planning
targets and the action program in one framework. Having now worked
with some 80 businesses in Europe, North America and Asia, many of
them over a number of years, the success of the approach is proven.
Over 700 top executives, 75 per cent of them chairmen or CEOs, have
attended my one-day seminar. Many of those who have implemented
the system have told me how effective they found it in developing
highly competitive, sustainable strategies and, equally importantly,
consensus and commitment within the leadership team and active
endorsement from employees.
The approach is to ensure that the strategy is owned by the leadership
team and the action program by executives and employees throughout
the organization. This is the key to successful implementation.
The approach is not a fad, but a robust business process to improve
the performance and competitive position of a company. If the leader-
ship team want to try a new approach to business this can be incorpor-
ated into the system, but it will clearly be part of an overall strategy,
not an isolated initiative. The Internet and the impact of e-commerce
are all encompassed within the approach.
In a fast-changing world, strategy has to be capable of encompassing
radical change, continuous improvement and the options in between.
The part on strategic concepts, which has been developed mainly over
the last three years, enables leadership teams to understand the cycle
of strategy and develops ideas on how they can consider, decide and
implement radical strategy as well as strategies for competing within
the existing market/product/service arena.
All the top executives and leadership teams that I know are under
time pressure; there is always more to do than the time to do it. Most of
them work long hours in managing the business for today, winning
new orders, keeping operations moving with continuous efficiency
improvements and ensuring they meet the short-term expectations of
their owners and Wall Street.
This approach uses their time effectively and sparingly. It can take
no more than five days of their time over a period of two to four months
to develop a robust strategy that will create new competitive advantage
and focus the whole business on generating better returns for their
intellectual, managerial, energy and resource inputs.
A clear strategy that is understood by employees, customers, investors
and all stakeholders, and that has the universal support of the entire
leadership team and board of directors, is essential to any successful
enterprise, be it business or non-business. Strategic business planning
will enable the leaders of companies to develop that strategy.