Storytelling and Commerce: When Art Meets Business

Fundamentally, humans seem hard-wired to appreciate and crave stories, and smart entrepreneurs and businesses instinctively understand this predisposition and will market themselves accordingly. In an age of 24/7 news cycles, the proliferation of media channels which didn’t exist a generation ago, and economic cycles which for many require constant reinvention and self-promotion to stand out from the competition, those who incorporate storytelling practices and techniques into their business are more apt to command the attention of both internal and external stakeholders, as well as customers.

THE ELEMENTS OF A SUCCESSFUL BUSINESS STORY

Well-told stories will always have certain traits in common, regardless of larger elements which are layered and woven in such as mythic structure, use of archetypal characters, genre conventions, cultural predispositions and the like. These traits ultimately come together to create a narrative that is:

• Credible
• Compelling
• Consistent
• Coherent
• Character-Driven

So let’s dive deeper and define the above and provide some concrete, business-related examples to stir up some entrepreneurial juices.

CREDIBLE AND COMPELLING

Telling a story which is credible may on the surface seem odd from the point-of-view of the world of fiction, but actually, even fantasy and science-fiction must conform to rules established by the author through the conventions of the narrative. Unlike ancient Greek tragedy playwriting, the presence of deus ex machina plot devices is viewed by most as sloppy and/or lazy writing and is long out of fashion.

On the business front, maintaining credibility with customers, as well as employees and outside vendors, is critical for the fiscal health of the enterprise, and is vital whenever outside capital is being solicited. This credibility can not only pertain to the manner in which the business is presented and positioned in external facing collateral, but may extend to the behavior of key employees as well, including senior management. Once credibility is lost, whether due to incompetence, malfeasance, or simply failure to act in an appropriate and timely manner to a perceived problem, it can be extremely difficult to regain trust.

Determining what make a narrative compelling might seem like a tall order, but if one analyzes stories across various cultures and genres, it becomes very clear that at its heart, the answer is quite straightforward – the audience must be emotionally invested in the outcome of the story. If you fail to engage and hook the audience, you’ve lost them, their attention will wander, and your chance of regaining their interest will likely be compromised since they have already pre-judged your storytelling ability.

For a business to have a compelling story, it is essential that prospective customers understand the product and/or service offerings, and furthermore, that a Unique Selling Proposition (USP) exist. USP is fancy marketing speak for a succinct description of what differentiates your business from the competition, and potentially what benefits customers will derive from purchasing from you and not your competitors. It is essential that a business owner, as well as any staff who interacts with prospective customers (which if you get down to it, is actually everyone) clearly understand and be able to articulate your company’s USP.

CONSISTENT, COHERENT AND CHARACTER-DRIVEN

Consistency is another hallmark of a well-told story, and this is true in both the fiction and non-fiction realms. Most often, this is a reflection of the tone and style of the story, which in written form are conveyed in the use of language and point-of-view. In the fictional world, different genres over time have developed certain conventions, and while it is certainly possible to “break the rules” and even mix genres at times, the storyteller must be very careful in doing so, because when expectations are defied, a certain amount of risk is entailed. A similar restriction applies to non-fiction writing, such as reporting, memoirs, text books and the like. For example, fictional elements and personal opinion are never supposed to co-mingle with what is reported as “news” or represented as a “true life account.” To do so violates fundamental precepts of the form and undermines, if not outright destroys, credibility.

In business, it is just as important to remain consistent. This is true not only in the positioning of the company from a marketing and sales perspective, but also from an operational one as well. In order to develop efficient processes and economies of scale, companies need to create consistent means of performing tasks, with means to ensure quality, report results and address issues which arise during appropriate lifecycles. Successful national businesses with retail outlets, for example, spend considerable effort and capital ensuring that the customer experience at one location is replicated identically at another. If you’re a fan of the fast food burgers at a nationally known chain, you can rest assured that the meal you order at one location will more or less taste the same at another.  In the service world, it is important that methodologies and approaches which produce the best results are implemented consistently so that quality of the services delivered does not differ substantially depending on the resource(s) rendering the service.

Our final elements for inclusion are coherence and the importance of having memorable characters populate a story. Coherence might seem to some as a “no-brainer,” but poorly conceived, written and delivered stories can be found all around us without expending much effort to look. Sometimes coherence is sacrificed due to having too many people influencing the story, and in doing so, providing inconsistent guidance which creates a disjointed narrative. From the perspective of business, this is typically communicated through branding efforts and the development of vision, mission and positioning statements which communicate the company’s raison d’être. Businesses start to run into trouble when they cannot clearly define what it is they offer, what audience they serve, or why they are even in existence in the first place.

My final point regarding the creation (or featuring) of memorable characters highlights the fact that people tend to identify with or react emotionally to people (fictional or otherwise) who they aspire to be like, or someone they would like to befriend, or who represent a natural foe or adversary, or whose own story provides them with inspiration and meaning. As a business, talking about a corporate identity can seem rather cold and impersonal, and effective marketing often seeks to humanize the business by focusing on the personalities and achievements of management and staff, or at the very least, attractive spokespeople who will resonate with the target market. Some business leaders are naturally larger than life “characters” that the media quickly respond to, since writing stories about them is far easier than more bland or retiring personalities, while others will often invent or otherwise exaggerate certain qualities in order to draw attention and create publicity. There are certainly lessons to be learned from the colorful characters found throughout history as well as the present day, even if embellishments have invariably been added to those who really once existed, or walk the world today.

WHY STORIES MATTER

Stories, whether written down, acted out by performers, or delivered orally, form the backbone of any society. Stories communicate cultural values, important myths, and often convey history from the point of view of the story’s creator or communicator. They engage our interest on a visceral level and help us to make sense of not only what our senses tell us on an individual level, but to process the messages conveyed by our environment on a larger macro level as well.

Obviously, this article cannot possibly delve into the complexities of applying time-proven storytelling techniques within a business environment, but it hopefully does make the case that creative license, if not misapplied with the intent to deceive, should be part of every business toolbox.

Author’s Note: This posting originally ran on the blog Serial Startups on May 26, 2011…

Common Financial Modeling Pitfalls

Financial modeling is part art and part science, and in the hands of those inexperienced or deliberately seeking to obfuscate reality, potentially an exercise in wishful thinking if not outright deception. The truth is, nobody has a crystal ball that can unerringly predict future revenues, cash flows, expenses and other pro-forma information given the countless shifting variables which can influence these numbers, but with some foresight, analysis and careful planning, one can create a credible, defensible model that illustrates performance that is not “black swan” in nature and has a reasonable chance of being realized given the stated parameters.

We must also separate the mechanics of programming an Excel Workbook with inter-linked datasheets necessary to create desired pro-formas (e.g. the Income Statement / Profit & Loss, Cash Flow and Balance Sheets) with the planning necessary for information to logically flow throughout the model. This requires a certain amount of sophistication and understanding of how these items all relate to each other. As with any other programming, the mantra “garbage in, garbage out” is one to remember.

Following are some of the key pitfalls that I have observed in financial models, aside from incorrect calculations and formulas…

BEWARE PREDICTABLE “HOCKEY STICK” REVENUE GROWTH

It’s interesting to note the tendency that regardless of the business vertical or product or service offerings, so many revenue projections tend to follow an extremely predictable trend line; the first two to three years often show modest growth, but by Year Four revenues suddenly rocket upwards, buoyed no doubt by massive public recognition of the value of the company’s offerings and resulting in what analysts call a “hockey stick” profile.

This “default” profile more often than not reflects the need of a company seeking investment to demonstrate an attractive return on investment (ROI) within a time-frame that is not too long-term for most investment sources. Unfortunately, it is often arrived at by manipulating, consciously or sub-consciously, data in order to arrive at a desired result, rather than compiling data without regard to the desired result, and then following it to its conclusion. In other words, rather than letting the facts speak for themselves in order to form a theory, one arrives at the theory first and then cherry picks “facts” in order to prove the theory true.

To be sure, there are certainly legitimate circumstances for the “hockey stick” profile to emerge, but you must be confident that this is not the product of wishful thinking or the confluence of “perfect storm” conditions.

ASSUMPTIONS ARE NOT GROUNDED IN REALITY

More sophisticated reviewers of financial models understand that these exercises in analysis are not a Magic Eight-Ball but rather an artificial construct that is highly dependent upon the quality of data entered, the programming which drives the resulting pro-formas, and of course, the ability of the company to execute on the various aspects of the business plan which allegedly support the conclusions show in the financial projections.

All too often, those preparing the model will fail to cite sources from which data is extracted or will base projections on overly-optimistic third-party research which sometimes has an agenda of its own. While it is not always possible or practical for a company to conduct extensive primary research or have access to historical operational data to help support future projections of market conditions, customer behavior and trends, etc., it is vital for the sake of credibility in the due diligence process that the company err on the side of caution and present conservative projections which under-estimate revenues and over-estimate costs to provide more margin for error and adjustment to “reality on the ground” rather than pie-in-the-sky wishful thinking.

MISTAKING TAM FOR THE MARKET NICHE YOU ARE TARGETING

Another very common problem is that companies sometimes overstate the actual market their product(s) or service(s) are addressing, and paint an unrealistic picture of the actual market size. In marketing lingo, “total addressable market” (TAM) is a conclusion as to the size of a given market assuming no competition exists and the company can distribute its product/service without constraint. Of course, this is something of an artificial benchmark, because competition (even indirect) always exists, even for a brand new product/service, and achieving complete distribution is virtually impossible no matter the medium.

However, in reality most companies are targeting very specific niches within larger markets and when assessing market potential, they must recognize and acknowledge this. For example, if you are manufacturing men’s technical outdoor apparel, your TAM would have to be based on the industry’s definition of “technical” clothing, intended for the outdoors, and only for men. It would be irrelevant and erroneous to base your market size projections on total revenues realized from sales of newly manufactured clothing, which includes men, women, children and all of the various types of clothing within the broader category.

COSTS TO CAPTURE MARKET SHARE GROSSLY UNDERESTIMATED

Another error to avoid when projecting market share is the tendency to take “short-cuts” and make arbitrary decisions such as, “our company can capture 2% of the market by Year 3” simply because that seems like a modest slice of the pie and that 2% number nicely dovetails into sufficient revenues and net profits to make your model look attractive to investors.

Unfortunately, if you wish to be taken seriously and have a credible defense to skeptics and those playing devil’s advocate, you must work more granularly and outline the process by which you arrive at the projected market share. Even more importantly, you must be realistic about the costs involved to capture such share, which will involve marketing initiatives that cost very real dollars, even in a digital age. All too often, companies grossly underestimate the costs of marketing channels, the duration of campaigns, or assume that “word of mouth” and other free or low-cost solutions will provide the customer awareness, brand equity and penetration that they need.

CASH FLOW RELIES ON OPTIMUM PAYMENT CYCLES FOR A/R AND A/P

Another easy to overlook detail in a financial model is the assumption that is made regarding payment cycles for accounts receivable (A/R) and accounts payable (A/P) especially during challenging economic environments. There is a tendency to assume 30-day cycles for both, without taking into consideration industry practices, likely customer behavior, and the effect of tightened credit as a result of the global recession which began in 2008. Many companies naturally will be aggressive in seeking to collect on A/R, yet will drag out their A/P as long as possible to conserve cash. In order to maintain sufficient operating capital, it is critical when preparing a model that you assume that you will not be paid as quickly as you might like for your products/services, and you will still have to pay your bills in a relatively timely manner or face other consequences which may constrain operations.

CLOSING THOUGHTS ON FINANCIAL MODELING

While preparing a financial model can be daunting and time-consuming, when done properly it should provide a business with a useful tool for internal planning as well as raising outside capital, if that is the company’s intention. In my experience, financial models that project beyond 5 years out are unnecessary and so incredibly speculative as to be fairly worthless, and are usually discounted by reviewers anyway. While some modeling advocates like to provide a monthly breakdown over a 5-Year / 60-month period, this too is often unnecessary; many reviewers are happy with breaking out only Year 1 (and sometimes Year 2) by month, and some will settle for quarterly breakdowns in lieu of this.

Finally, since it is easy to make honest mistakes in constructing a model, even if operating from a template, having another knowledgeable party review the calculations and underlying assumptions is a great way to error-check and provide friendly challenges so the model can withstand less forgiving scrutiny.

If your business requires assistance in developing a financial model, or for other Business Plan development, strategic planning, marketing or project management needs, please visit Black Rock Consulting online or email us for a confidential discussion of your needs. Initial consultations are FREE OF CHARGE and WITHOUT FURTHER OBLIGATION.

Seven Core Elements of Successful Business Planning

Working with start-ups and other early-stage ventures, as well as even more established entities, reveals the undeniable truth that planning is often relegated to the realm of theory or executed as part of an initial checklist to secure outside funding, then promptly forgotten. This is a mistake which can haunt or even cripple a business, and is one that is best avoided by keeping a handful of axioms in mind.

The following list of “Seven Core Elements of Successful Business Planning” is intended to serve as a guide for both enthusiastic (i.e. by choice) as well as reluctant (i.e. forced by circumstance) entrepreneurial souls to help maintain your focus and gain traction in the market as your business matures.

• “Know Yourself.” It is vital, whether you are a lone individual selling a product or service or a corporation of any size to be able to dispassionately assess both your strengths and weaknesses, so you can capitalize on the former and minimize the latter. While this may seem self-evident, many businesses fail to thoroughly undertake this exercise or make the mistake of treating it as a one-time thing, when in reality, circumstances change over time and what were once strengths may no longer be so, while conversely, weaknesses may have dissipated, multiplied or otherwise shifted. It’s a good practice at least once per year to undertake a SWOT analysis to see if changes in strategy are necessary.
• “Find Your Market Niche.” All too often, it’s human nature to want to be universally liked or otherwise in demand. However, for most brands, this is a tall order, and in the effort to accommodate and please everyone, the product or service invariably winds up diluted and really pleases no one to any great extent. This phenomenon is often witnessed when committees or other forms of bureaucracy get involved in the process, and is all too often exacerbated in government. Fundamentally, it is essential that you find a way to be valuable to a targeted niche, ideally one that can meet the prices that you anticipate charging for your solutions.
• “Know the Competition.” As obvious as this may sound, many businesses blithely commence operations with little understanding of what makes the competition tick, or worse, assumes or states that it has no competition, which is the mark of either an arrogant fool or an incompetent. There’s always competition, at the very least indirect, for any product or service with a definable consumer. Don’t make the mistake of believing it hasn’t been done before, because chances are, it has, and if it is no longer in existence, there may be good cause for this. Of course, this doesn’t mean that you may not improve upon another’s offering, but that’s a different story altogether.
• “Decide What Metrics Are Important – And Measure Your Progress Regularly.” This is crucial in understanding whether or not your business is succeeding under its current strategy, or requires a course correction to avert disaster or to capitalize on shifting market trends or emerging opportunities. Anything that is quantifiable can be measured, and as a business owner, executive or stakeholder, or even just an employee hoping to remain gainfully employed in uncertain times, it’s vital that you optimize your performance. While the metrics which are used may vary widely depending on the nature of the business, these should be identified from Day One and monitored closely, and if circumstances change and necessitate the inclusion of new metrics, be proactive and do so. As a final note, don’t be willing to discard or exclude metrics simply because they do not cast the business in a favorable light – that is not a legitimate reason to bury one’s head in the sand.
• “You Can Never Have Too Much Capital.” Two of the leading causes for business failure are under-capitalization (especially at inception) and issues managing cash flow. While it’s true that money can be easily squandered or flitted away on ill-conceived projects and initiatives, this does not negate the reality that having ready access to money (i.e. liquidity), especially cash, is an enormous competitive advantage. If you are raising money, be sure to challenge your own assumptions as to the pace at which revenues, never mind profits, will flow, and always assume that your expenses will be higher than initially projected and revenues lower. Failure to do so tends to have adverse consequences down the line.
• “Have a Strategy (Preferably a Good One).” If you’ve been around business long enough, you come to realize that a surprisingly large percentage lack any form of coherent strategy that can be easily articulated internally, let alone to outsiders. Many businesses are reactive rather than proactive, blindly groping their way through the darkness, hoping to stumble upon an acorn every now and again. This isn’t a strategy, and it isn’t viable for very long. While strategies may evolve or change over time (and correspondingly, impact tactics), they need to be aligned with clearly specified goals. If you don’t know where you want to be, you’ll have a devil of a time getting there.
• “Be Unique (And if You’re Not, Give the Impression You are Anyway).” It’s common parlance among marketers to speak of “unique selling propositions” (USP’s) which make one business different from another. Sometimes these are actually true, but more often than not, they speak to the need to position your business to meet the psychological needs of your target customer. Fundamentally, there is nothing wrong with this, as nothing in business actually happens until someone makes a sale, and part of the process of engaging with a prospective client or customer is convincing the party that you have something worth offering to them that they can’t find anywhere else. They may find something similar (perhaps even strikingly so) to your product or service, but they’ll miss out on the benefits (both tangible and intangible) that you bring to the table if they opt to go with another option. So it’s your responsibility to make sure this doesn’t happen.

By implementing the above list, and regularly revisiting the issues raised, you will give your business an increased chance of successfully weathering economic storms when times are tough and thriving when optimism returns to the market.

Have a business question or want to learn more about business planning and other related services? Black Rock Consulting is available to assist you with solutions that meet your needs and achieve results.

Finding Center

In the traditional Asian martial arts, there is often quite a bit of emphasis on “finding one’s center” and learning to move from the center, which the Chinese refer to as the dan tien. As esoteric as this may seem upon first impression, it actually makes a great deal of sense once properly understood, and the lessons are as applicable in business as in the practice of martial arts. In fact, “finding center” shares a great deal in common with the Hedgehog Concept advanced by Jim Collins in his deservedly well-regarded business book, “Good to Great.”

One key theme that emerges from the work of Mr. Collins is the “Hedgehog Concept,” which in turn is credited to the work of Isaiah Berlin in his book “The Hedgehog and the Fox.” When traced back to antiquity, this stems from a Greek parable which posits that the world is divided into “hedgehogs,” or people that define the world through a single defining idea, and “foxes,” or people that view the world through multiple experiences. In other words, hedgehogs know one thing very well while foxes know many things, but not necessarily in any real depth.

The Hedgehog Concept boils down to the need for a company (or arguably, an individual) to define itself by what it can be the best at. This forced examination of strengths and weaknesses, which requires an honest assessment of not only one’s own capabilities but the competition and operating environment, is arrived at by envisioning three circles and finding the intersection where all three overlap:

1. What you can be the best in the world at. For some individuals and companies, this is potentially a painful realization. You may or may not be currently on the right path, because as case studies have found, being “competent” or even “good” in the face of global completion is not sustainable. Your product or service must be world class, or at the very least perceived by your customers as being so, if you are to thrive and become “great.”
2. What drives your economic engine. At the end of the day, a business must earn more money than it spends. It’s as simple as that. Without profits, you cannot survive, and profits are arrived at by maximizing revenues and containing costs. Understanding how to do this, and arriving at a business model that is sustainable and scalable, and aligned with your product(s) / service(s), is one of the greatest challenges that you can face.
3. What you are deeply passionate about. If an individual (or business) does not truly enjoy the work that it performs, no matter how much it attempts to fake it or muster false enthusiasm, this eventually comes out in the work. False passion cannot be manufactured indefinitely; it must be an outgrowth out of genuine enjoyment and satisfaction in engaging in the process of Mastery, and to be the best in the world at something, you must walk the Path of Mastery.

If you take the time to diagram the approach above, you will discover that in creating the three overlapping circles, you are in effect “centering” by finding the point where these all come together. And make no mistake, this exercise is not an easy one in practice, as simple as it is in theory, because we live in a world of illusion.

Many traditions hold that what we perceive as “reality” is simply illusion, and that the physical world is subject to varying interpretations and perceptions based on the frame of reference of the individual / organization. As individuals we both consciously and subconsciously create illusions, either because of a desire to portray ourselves in a favorable light (yielding to the ego), or because we filter the information that our senses deliver and interpret it based on biases or assumptions that we may not even be aware of.

Not only must we contend with self-manufactured illusions, but we must also deal with the illusions cast forth by others, which all feed upon each other and perpetuate uncertainty, unclear intent and lead us astray from our chosen path. This can be the root cause of a great deal of unhappiness, misunderstanding and suffering.

Even without delving into the spiritual aspect, or discounting it entirely, finding one’s center has both a physical and psychological dimension. In the physical expression of many martial arts and other physical endeavors, one seeks to create a grounded connection with the earth, often manifested in the manner in which weight is distributed and the body’s center of gravity is rooted. While some pundits have observed that the successful use of force is the imposition of one’s will on another, I would argue that an alternative explanation is the imposition of one’s center on another. Since two objects cannot occupy the same physical space, the object whose center is most rooted and connected with the universal energy at the moment the paths intersect is the one that will prevail. Perhaps this interpretation seems rather metaphysical and/or mystical to some, but physics seems to bear this out.

Psychologically, finding one’s center implies achieving balance, and “balance” is often an adjective used to express how a healthy psyche is described in layman’s terms. We all instinctively understand that when something, or someone, is unbalanced that there is danger of a loss of control, often with unfortunate consequences.

The inescapable conclusion is that our success as individuals (no matter how we personally define “success”) and in turn, the success of organizations, is dependent upon the ability to “find center” and maintain this no matter what obstacles appear in the path. In a world of illusion and obfuscation, deliberate and consequential, being rooted in one’s center is the only way to live one’s purpose and find contentment. It’s a challenge to be sure, but it is part of the journey that we all must undertake…

Growth During Recessionary Times: The Five Pillars

To quote Dickens, “It was the best of times, it was the worst of times.”

One day we will all collectively look back on this difficult period in time, and with the perfect clarity and wisdom of 20/20 hindsight, we will either rue missed opportunities or perhaps be in a position to congratulate ourselves on our prescience and persistence. For we must ultimately adopt a mindset that believes that things eventually will get better and that the economic wheels will once again turn freely, or we are tacitly accepting the notion that we are in the onset of a new global “Dark Ages” whose trials and tribulations may be too terrible to contemplate.

In either case, I still believe that rather than curse the darkness, it is better to light a candle to provide illumination for not only yourself, but for others to follow.

In an effort to help other entrepreneurial souls and small business weather these dark times, I am calling attention to what I term “The Five Recession Defying Pillars.” Now truth be told, there are probably a much great number of issues that a business owner can potentially focus on if properly motivated. However, by limiting our discussion to five which I feel are arguably most critical, we’re more likely to successfully implement them. As with the fingers of the hand, alone each “pillar” has its limitations, but when formed into a fist or pressed together to form a “knife edge” surface of the hand, they are much stronger acting in unity.

The Five Recession Defying Pillars include:

• Focusing on Core Competencies
• Building Alliances & Networks
• Mining Niche Market Plays
• Judicious Guerrilla Marketing
• Scrutinizing Cash Flow

Let’s quickly examine the relevance of each of these pillars.

“Focusing on Core Competencies.” There’s a natural tendency when business slows down to lose focus and in the desperate gambit to attract new business, start diluting your offerings by delving into areas where you have little experience, aptitude or passion. This is self-defeating. Figure out what you’re good at, find a hook, and work it rigorously.

“Building Alliances & Networks.” There’s often strength in numbers. Never underestimate the power of referrals, or what active networking can do. But rather than approach it with a “What’s in it for me?” attitude, you must demonstrate how you can bring value to the equation. Or better yet, engage in the “pay it forward” concept of trying to genuinely connect and assist others, because in turn, you will eventually receive the same treatment. If you don’t belong to or attend industry events, or professional/trade/civic organizations, now is a good time to reconsider. There are opportunities in abundance to volunteer time or offer your expertise to develop the “credibility capital” that can pay off financially.

“Mining Niche Market Plays.” While it’s difficult to be a leading player in many vertical markets from a macro-perspective due to the existence of well established and capitalized competitors, there are often under-served or neglected segments within these larger markets that a shrewd and nimble business can capitalize on. Sometimes there can be incredible value in being the “big fish in the small pond.” For one, you don’t get eaten by larger fish.

“Judicious Guerrilla Marketing.” One of the worst mistakes a business can make is to completely abandon or neglect its marketing. We all know that traditional media is getting reamed because of changing consumer preferences and behavior, which means opportunities abound to cut deals if it makes sense to reach your customers through these channels. The proliferation of digital media, which is often far more affordable and provides a more measurable ROI, is a boon if you cherry pick your placements and really understand your prospective customer behavior. Even if you don’t have a budget, establish a regular presence on social networks such as LinkedIn, Facebook and Twitter. If you can offer relevance and value, you’ll eventually attract paying customers.

“Scrutinizing Cash Flow.” If you don’t have money in the bank, you cannot pay your bills. It’s that simple. Having accounts receivable is nice, but remember that your A/R is someone else’s accounts payable, and they may not be in a hurry to part with their cash. Cash, as well as content, is king.

So get out there and don’t give up. This too shall pass…

If you’d like to follow The Zentropist on Twitter, click here.

The Fundamentals of Strategic Planning: Key Issues Decoded

Today we’ll examine the concept of “strategic planning,” which is (or should be) an integral part of any business operation, regardless of its current size, scope, or industry vertical. In this “flattened” and highly competitive world, a business cannot take for granted that past successes will continue to be replicated, or that its competition is limited to a particular geographic boundary. We live in a world in which businesses, and the leadership and workers that staff them, must be constantly evolving and adapting to new realities, market pressures, opportunities and the like.

Strategic planning all too often tends to either be ignored or devolves into an abstract, academic exercise in which a company (or even an individual), in a furious burst of energy and attentiveness, and often with the expenditure of not insignificant amounts of capital, generates some fine ideals and theories, but fails to follow through and actually put into practice the information gleaned from such effort. This is wasteful and yet another example of the creative entropy which the Zentropist must re-focus and put to constructive use.

Over the past few years, I have found that many clients and prospects, regardless of the stage/maturity of the business, struggle with the definition of 9 key components that are necessary to either update an existing Business or Strategic Plan (not to mention other related collateral) or to create one for the first time. I’d like to briefly explore these issues, offer some suggestions, and hopefully provide some clarity on how this process can be managed in an efficient fashion.

Although I sometimes prepare a Strategic Brief as a prelude to development of a full-blow Business Plan or Strategic Plan, I have also found this exercise to be extremely helpful and revealing as a “reality check” when working with an existing business. For example, I will assign key stakeholders in the business a worksheet which they are to fill out without consulting with their colleagues in an effort to determine if everyone’s vision or understanding of the business is aligned or not. More often than not, I find discrepancies, sometimes fairly significant ones, which signal to me that the business needs to improve its internal communication protocols and to re-align or otherwise define core fundamentals if it hopes to improve performance.

The nine (9) key issues that we focus on are:

1. SWOT Analysis
2. Management Vision
3. Mission Statement
4. Corporate Values
5. Business Objectives
6. Primary Goals
7. Secondary Goals
8. Key Strategies
   
9. Strategic Action Items

In addressing the issues above, a company is forced to define and decide mission-critical, substantive concerns that directly impact its ability to coherently and efficiently operate, much less execute any sort of plan.

SWOT Analysis: This concept should be familiar to many, as it is shorthand for evaluating the Strengths, Weaknesses, Opportunities and Threats facing a business or individual. As part of this exercise, it is useful to try to settle into as objective and non-emotional a mindset as possible, and to be completely honest in your assessment. Also remember that according to the Yin/Yang principle underlying all things, depending on perspective, a “strength” can also be exploited by another and turned into a “weakness,” and today’s “weakness” can be addressed and transformed into a strength. Furthermore, today’s “strength” may become tomorrow’s “weakness” due to its failure to change with the times or lack of dedicated practice and effort to build upon its foundation. Likewise, the window to exploit “opportunities” can fast close, and may or may not come again. And while some “threats” are obvious, some perhaps are less so, and it is a wise idea to explore how your own “strengths” and “weaknesses” might be turned against your business by a clever competitor.

Management Vision: Truthfully, companies can get hung up on differentiating between a “Vision Statement” and a “Mission Statement,” and sometimes this distracts them from the real concerns of operating the business. Still, if management cannot clearly articulate why the businesses exists and what the “big picture” dream or purpose is for putting in the blood, sweat, tears and capital, there is something fundamentally wrong with the corporate leadership.

Mission Statement: Many pundits will state that a mission statement clearly needs to articulate the following: the purpose of the organization; who its clients and other stakeholders are; the responsibilities that the organization has to clients and stakeholders; and finally, an explanation of the products and/or services offered. This isn’t bad advice by any means, but it can lead to long, rambling and unfocused statements that really do not resonate with those charged with carrying out the mission. In my opinion, the best mission statements clearly define why the business exists, what it does, and who it does it for in as concise a manner as possible.

Corporate Values: Organizations have values, even if they are never articulated, because these are expressed everyday in the actions and behaviors of both its rank and file and management. If you care about the image that your organization conveys, or truly want to stand out from competitors, it is well worth your time to not only define what your values are, but to put these into practice in all of your interactions.

Business Objectives: Generally speaking, in the for-profit world it’s understood that your business exists in theory to make a lot of money for its stakeholders (unfortunately, in this day and age this sometimes conflicts with the interests of all stakeholders, more often than not sacrificing those outside of management’s hallowed halls or even public shareholders for the benefit of management despite fiduciary duties). However, some businesses actually have more noble objectives as well, and articulating these and ensuring that they are met (while hopefully generating profits in an ethical manner) is very rewarding.

Primary and Secondary Goals: In order to measure the achievement of your stated objectives, you need to set quantifiable goals (ideally ranked in order of importance, which may change over time) against which your progress can be gauged. It is equally important to be able to differentiate between goals which are of primary concern, and those that are of lesser importance in the “grand scheme of things.”

Key Strategies: Once you have clearly stated your objectives (based on the vision, mission statement, values and SWOT analysis) and classified goals according to relative importance, you are in a position to actually determine possible strategies to achieve the desired results. Strategies cannot be developed in a vacuum, and should not be inflexible, and the tactics used in pursuit of these strategies must be carefully considered and malleable, because in my experience, if the defined strategy or strategies are legitimate and truly achievable, it is the tactics which first require adaptation before completely jettisoning the strategy as “unworkable” or no longer relevant.

Strategic Action Items: Ultimately, when you complete the Strategic Brief, you should be able to develop a list of actionable items that will enable your business to transform theory and conjecture into practice. This could range from developing certain written deliverables to reducing or increasing internal meetings or revamping internal processes to hiring an outside party to help you achieve the results that you need.

In summarizing all of the points above, we can begin to identify such jargon-laced concepts as your company’s  “unique selling proposition” (USP) which are the darlings of MBA’s everywhere (and certainly important to understand), but often neglected or painfully unclear to any but those reading the company’s internal strategic literature.

In closing, I should also point out that planning is an ongoing process and no plan should ever be viewed as “locked in stone” or otherwise rigid. Circumstances change, and plans must adapt. Trying to implement a plan today based on yesterday’s invalid assumptions is foolish, and thinking that it will be any more effective tomorrow based on outdated data or realities is disrespectful of both the human and financial capital which must be invested in its pursuit.

A Zentropist must be respectful, even as he or she is tearing down or discarding false assumptions, outmoded ways of thinking or channeling the energies that heretofore have remained unfocused.

If you would like to receive a free, no-obligation copy of Black Rock Consulting’s “Strategic Brief Worksheet,” with helpful instructions for developing a Strategic Brief, please contact us via email or phone.