No matter a big multi-national company or smaller one, the five year strategic plan is always a key activity annually. The whole process will last a few months from beginning to mid of the year. Long term strategic plan is a key cross-function initiative which leads by CEO or General Manager and facilitate by Finance and Strategic Marketing. Here I would like to use the Ten Step Ethical Decision-Making Framework which was taught by Professor Andrew J. Sherman to introduce how to make it happen. It is very practical and useful. With this 10 steps logical thinking, even if it can’t say to resolve all the issues we may face but at least can provide a structured approach to think through.
1. Identify the Key Facts: “Role play” key stakeholders to see what they see as facts. Watch out for assuming causative relationships among coincidental facts.
Strategic plan is the long term development plan which aligning all business functions and organizations to company vision and priorities. It not only focus on how to achieve topline double digit growth in the coming five years but also focus on organization efficiency and cost competitiveness.
2. Identify & Analyze the Major Stakeholders: Make sure to identify both direct and indirect stakeholders. Genuinely “walk in their shoes” to see what they value and want as a desired outcome.
Strategic plan involves Sales, Business, Marketing, Finance, Human Resource, Supply Chain, Procurement, Research & Development etc. It almost covers all key functions in the company. Finance, Sales, Business and Marketing are direct stakeholders since they are Profit & Loss owners. Supply chain, Procurement, Research & Development are indirect stakeholders. They don’t own Profit & Loss directly but will contribute customer satisfaction and possible margin improvement heavily.
3. Identify the Underlying Driving Forces: Think like a doctor – look for what may be the cause of the apparent or expected symptoms of the problem.
Strategic plan is to fit the internal resource and capability to the external dynamic market trends and further drive the business growth. For instance, pharmaceutical industry is identified as high potential growth driver since it has high capital expenditure. New age verticals such as renewable energy, big data, Industry Internet of things etc. are also been identified as future growing opportunities.
4. Identify/Prioritize Operating Values & Ethical Principles: Think of this step as determining the up-front “design parameters” for an effective solution. Don’t rush this step – gathering diverse viewpoints and building consensus here will pay off.
Strategic plan builds growth initiatives and customer relationships. It redeploys the resources to targeted verticals & industries so as to achieve grow faster than competitors and increase market shares. Each business unit has to work on in-depth evaluation for top 2 to 3 competitors.
5. Decide Who Should Be Involved in Making the Decision: All stakeholders have a right to have their best interests considered. If you can’t actually involve all stakeholders, have someone “role play” their point of view.
The decision makers would be top down from global business heads vs. bottom up from local management team. The more alignment of both parties, the more reasonable plan will be made and implemented.
6. Determine & Evaluate All Viable Alternatives: Imagine possible consequences of each alternative cascading down on each stakeholder. Analyze cost-benefit of these consequences – actual and as perceived.
Doing business in emerging market, the competition is intensifying since local competitors deliver products faster and at a lower cost. I remembered a case study of GE healthcare in India. Their original product was challenged by high price which most of rural patients couldn’t afford. The doctors also couldn’t bring them to see the patients since it was heavy and big. Furthermore, it was very difficult of operation and maintenance due to complexity. However, through frugal innovation, the R&D team in Bangalore finally achieved to use US$0.5 million investment to design a new product which tailored for India market. The successful experience was also applied to GE healthcare in China.
7. Test Preferred Alternative With A Worst-Case Scenario: This step helps prevent a “rush to judgment” towards a wrong solution. Emphasize this step when all stakeholder interests are not being adequately considered.
Assume slow macro economy growth or lack of resources to implement breakthrough initiatives, under this circumstance, the goal of local New Product Introduction (NPI) would be to speed time to market with intelligent risk taking. This can be described as voice of the customer driving a “good enough” offering. The right features will be introduced at the right price. By doing this way, we would gain first mover advantage and reduce cost in the meanwhile.
8. Add a Preventive Component: “Problem-solving heroes” want to get on to the next problem and won’t take time for this step. Only immediate-solution decisions usually come back to bite you.
How to survive and grow in recession period will be big challenges to management team. Sometimes, if it is impossible to meet topline goals due to slow macro economy, then it will be critical on how to drive cost competitiveness to meet bottom line target. For example, management has to make decision on furlough leave. It may not be popular for employees but avoid further lay-off. When economy turns around, the company will have enough resources to expand.
9. Decide and Build a Short & Long-Term Action-Plan: The devil’s usually in the details – take the time needed to be detailed and comprehensive. Make sure that the means used in your action-steps correlate with your desired ends.
Strategic plan is long term plan for five years. In order to facilitate it, there are different levels of business planning and operating processes tightly linked, including medium plan such as annual budgeting and short term plan such as monthly forecast and sales inventory operations planning (SIOP). Annual budgeting is an operational targets to establish basis for measuring business success and advance strategic plan objectives during next fiscal year. Monthly forecast predicts near-term financial results accurately. SIOP coordinates manufacturing efforts to keep sales forecast, production plan, and inventory in balance while meeting key business objectives.
10. Monitor the Consequences of Your Concrete Action Plan: Were the desired and planned outcomes as hoped? Are adjustments necessary? What did we learn? What would we do differently next time?
Once the strategic plan being approved, monthly review and cross-function brainstorming which leads by GM and facilitate by Finance will be held to ensure everything is on track. Any identified issues will be taken quick actions. Furthermore, as finance leaders, besides to engage ourselves, we also need to encourage team members to work closer with business and think bigger, execute business strategies and drive business results, encourage team members learning by doing and learning from lessons.
Conclusions:
Business development has their own cycle. Strategic plan helps us to understand where we want to go and how to get there. Annual budgeting helps us to make a detailed execution plan and take actions. Monthly forecast and operation review focus on progress check and problem solving. All these processes put together help us to drive healthy sustainable growth. Finance leaders act as key financial advisors provide high-quality, relevant and timely financial business information to business leadership teams during the whole processes to improve and impact on decision making.
Endnotes:
- The Ten (10) Step Ethical Decision-Making Framework – Professor Andrew J. Sherman Jul 2017
Note: Original. Welcome to repost but please give sources if citing another article or passage.
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