STRATEGIC BUSINESS PLANNING A DYNAMIC SYSTEM for improving performance & competitive advantage pdf

STRATEGIC BUSINESS PLANNING STRATEGIC BUSINESS PLANNING A DYNAMIC SYSTEM for improving performance & competitive advantage 2ND EDITION CLIVE READING London and Sterling, 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 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 Part The strategic business planning framework The purpose of strategic business planning What is strategic business planning? 7; The confused company 8; The focused company 11; Serving the customer 15; The benefits of SBP 16 Understanding the framework Company purpose 17; Goals 25; Performance targets 36; Action programs 42; Summary 43 17 Company purpose The overarching purpose 44; The business model 48; Profit 57; Process 57 44 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 Market/product/service Summary 106 79 Identity The value proposition 107; What is identity? 109; Customers’ actual perception 112 107 People The resource pool 118; Business values and company culture120 117 Efficiency Summary 149 142 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 Developing the performance targets 172; The draft first report 175; Refining the plan 176 172 11 Evaluation Test the logic 179; Test the soundness 179; Financial analysis 184 179 Part Strategic concepts 185 12 Degree of strategic change 187 13 The role of the hypothesis Death of a salesman 201 200 14 Simple strategy in a complex world 223 Contents vii Part 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 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 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 319 255 276 viii Contents 21 Business analysis Introduction 323; Organization of the business analysis workshop 324; Three-stage sieve 324; The base analysis 325; Strengths and weaknesses analysis 330; Summary 334 323 22 Some useful techniques Introduction 335; Product/service analysis 335; External appraisal 342; Organization 352; Chapter summary 363 335 23 Summary The rules of strategy 366; Strategic thinking 366 365 Index 368 Introduction 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: l l l l ad hoc and developed in response to a particular situation; concentrated on limited functions or activities in the company; not an organized, comprehensive, process; not fully implemented The strategy they 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 successful 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 leadership team Fourteen years ago I developed the concept of strategic business planning, linking company purpose, business goals, strategy, performance 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 leadership team want to try a new approach to business this can be incorporated 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 than the time to 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 362 The strategic business planning process One way job descriptions can be useful is as a position audit, to establish where the company is now, how employees view their current responsibilities and what they believe they are responsible for Having established this, brief documents can be issued, with the rider that change is constant, that this is only a snapshot of where the company is now and that there is every chance it will have changed in a year from now This can be done effectively in a workshop If you think job descriptions are useful in your company, make sure they are kept ruthlessly up to date and are built into the appraisal system A job description should be no longer than one page, and even then it is difficult to remember all of it I have seen examples of job descriptions that have 14 areas of accountability, including two with their own subsets of five further sets of accountability These become meaningless as a motivating or managing tool Every statement within the job description needs to be discussed between the manager and the subordinate to ensure absolute clarity and agreement on what each one means If a job description is given to a subordinate without being discussed carefully it becomes another meaningless list of responsibilities The following example of a job description for John Smith is in a format that has proved successful: Position Description Job title: Area Manager Job holder: John Smith Reports to: Regional Manager Date: November 23 2001 Purpose: To manage the accounts that constitutes the area for effective cost control and growth in line with the company objective Scope: Area includes the following named accounts in Idaho plus any future additions Main responsibilities: Planning: Account improvement Efficiency improvement To improve total account turnover by per cent in line with profitability and budget Organizing: Customer care calls on a regular cycle Allocation of operators to meet required volumes Some useful techniques 363 Evaluation and control (measurement systems): To achieve results in line with the agreed budget, and to know on a ‘ real time’ basis how the area is performing in terms of sales and costs Climate setting: To create a positive working attitude in all dealings with customers and employees Operational: To meet key customer-facing personnel at least once every week To meet all operators at least once every two weeks To ensure that every customer complaint is actioned within 24 hours Key relationships: Reporting up: Regional Manager Reporting in: Customer Care Department Liaising: With Other Area Managers Reporting to: Account Operators Authority levels: No authority to spend capital No authority to sell assets No authority to start new services No authority to change wage rates CHAPTER SUMMARY After you have applied the techniques that are relevant to your organization, you should find it possible to complete information under the headings below Some of this information will be able to be summarized with only a brief statement; other headings will need detailed coverage and will be of vital importance in developing your strategic options Because of this they will need expanding beyond the outline given here Usually this data is not completed until after the first workshop New business opportunities l l Potential new products/services Potential new markets 364 The strategic business planning process l l Possible acquisitions Possible new approaches to conducting business Industry trends and business environment l l l l l l l l l l l Structure of the industry Differences among top three competitors Main competitive thrust Sales/distribution structure Substitution threats where the need satisfied by a product or service can be met by another, different product or service Factors for the most successful companies in the industry Economic forecast for the industry over the next n years Main impacts, cause and effect, expected in industry in the next n years Impact of technology Impact of product innovation Availability of energy, raw materials, labors Social factors l l Attitudes towards the industry – customers, political, public Impact on the industry of changes in society – by market Economic factors l l l Economic forecast for the next n years – by market Possible impact of currency fluctuations Possibility of protectionism in major markets Political factors l l Possible impact of a change of political leadership – by market Possible political impact on production/service centers 23 Summary There are three main reasons why the SBP process is so effective The first is to with defining goals It is the goals that produce the thought and rigor that leads to the production of a plan that will improve company performance The goal structure is shown in Figure 23.1 Distinctive capability The combination of business processes, attributes and competencies that distinguishes the company and creates competitive advantage It will also enable it to seize the opportunities that arise in the future that match its strategic direction Market/ product/service The focus of application for the skills and competencies of the company Identity Communicating a clear positive perception and image of the company to each of the audiences who are important to its future well being People Organising the skills and competencies of the company to meet the needs of the customers both now and in the future Efficiency Ensuring the business is focused on the correct activities, is run as efficiently as any competitor and fully exploits the potential of ecommerce Option Figure 23.1 The goals Customizing the strategy to meet the special needs of an organisation 366 The strategic business planning process The second reason for the effectiveness of SBP is the logical of flow from goals to action program, the information for which is contained on a single page From the way the plan is presented it is clear how the strategy will be achieved The third reason is to with the process itself, the development of the strategy The structure of the process, from building the leadership team to implementing organizational change through the system of performance target teams, creates an organization that knows where it is going, has the commitment to take it there and a built-in process to enable it to structure itself to make the change THE RULES OF STRATEGY There are five rules that any strategic process should follow if it is to be successful: l l l l l There should be a formal strategic planning process The strategy team should be championed by the leader of the organization and the top executives The strategy should be communicated to staff and customers The strategy should be continuously probed and tested The strategy should enable managers to think strategically The SBP approach clearly encompasses the first four rules What I want to explain in this summary is how it covers the last point STRATEGIC THINKING To achieve real long-term growth, a company needs a strong leadership team There may be a dominant leader, but one person cannot run companies of any reasonable size The leadership team needs to act as one, with common aims and purposes The old idea of strategy, as an ivory tower exercise handed down for the managers to implement, just does not work The leadership team and the managers have to be their own strategists The practitioners have to be the planners Therefore they need a system that they can use and follow, that will be comprehensive and exhaustive, yet understandable They need a model that simplifies the situation, but does not ignore the complexities Summary 367 SBP is to with the mind, both the individual minds and the collective mind of the team One successful CEO described how he has a mental model of how his company operates, which he calls the ‘vehicle’ All the key activities, decisions and outcomes of the business are included in this model Three things stand out about the ‘vehicle’: l l l It is a conscious idea and he has given it a name It is also subconscious – when he spoke about it to us it was the first time he had discussed it with anyone It defines his role, he uses it to decide his actions; not the actions of his job description, but the operational actions of managing the company That is what SBP is, a ‘vehicle’ for deciding actions, one that every executive, every manager, and every employee has in his or her head For the leadership team it will be the complete plan, and they will be able to see how outcomes and events either move the plan forward or call for some reappraisal of it For managers perhaps it is part of the SBP document, but with more detail The action programs and allocated responsibilities lead directly into day to day management, and give purpose to the work of employees The plan itself is simple, and can be recited by those who helped to frame it It appears almost to be a poor return for all the effort But the plan is the model that simplifies the complexity Only by going through the long process of developing common knowledge, understanding and attitudes to the company, does the simplified model become a vehicle for strategically managing the business The mechanism for developing the common understanding of these factors is the workshop That is why workshops are so powerful When unexpected events affect the company, the managers know what impact they will have on the strategy, and will usually understand the actions that need to be taken There may be disagreements among the group, but at least there is a common base of communication Having made their decision, they can all adjust their mental model When the SBP process reaches this level, of being a conscious vehicle, then it has truly achieved its aim to become a way of strategic thinking and strategic managing 368 Index Index NB: page numbers in italics indicate drawings, figures, graphs or tables 80/20 rule/Pareto principle 12–13 Age of Unreason, The 327–28 Amazon.com 49–50, 54, 55–56 automobiles 21, 73–74, 210–16 change, benefits of 212–14 customer buying patterns 212 future scenario, a 212–16 Internet car retailing 211, 212 used cars 214 Belbin, R M 261 Belbin output 127 team analysis 176, 260–61, 262, 264 Boston matrix 339, 340, 340, 341, 341 cash cow 339, 340 dog 339, 340, 341 question mark/problem child 339 star 339 BMW 61, 68–69, 74, 77, 78, 94–95, 95, 157, 214, 215 Boeing 121, 191, 196 BP/BPAmoco 147, 224, 352 brainstorming 87, 114, 343, 348 British Airways 34, 70, 71–72, 196 Brown, J 224 Brown, Sir John 147 Buffett, W 33–34 building the leadership team see leadership team, building the business analysis 323–34 background 323–24 base analysis, the 325, 326, 326–30 accumulated experience base 326–28 control base 328 existing resource base 325–26 ideas base 329–30 leadership base 329 organizing the workshop 324 strengths and weaknesses analysis 330–34 conducting a session 330–34 strengths 332 weaknesses 333 summary 334 three-stage sieve 324, 324 business model 59 business model strategy, changing the 192–96 business values and company culture 120–41 culture, changing the 130–33 loyalty to employees 132 organizational culture change 130, 131 culture – power, achievement and support 129 ethical stance 124–27 business value definitions 125 business values chart 126 establishing business values 124–27 management and organization structure Index 369 134, 134, 135, 135, 136 organizational values 127–29 people goal and company philosophy, the 133–34 performance target organization structure, achieving the 137–38 performance target teams, building 138–40 policy-setting values 120 communication 122–23 establishing business values 124 growth 121 independence 122 innovation 123 investment 123 people 122 quality 123 risk 120–21 teamwork 122 project leadership 137 summary 133 training 140, 140, 141 cannibalization 195 Chambers, J 144 Coase, R 219 Collins, T 110 company purpose 17, 18, 18–25, 44–57 business model, the 48–57 Amazon.com (hypothetical example) 49–50, 54, 55–56 assumptions 54–55 criteria for 53–54 purpose statement, testing the 55–56 Tesco and e-grocer 50–52 three elements of 49–50 understanding the model 52–53 unfounded purpose statement 56–57 process 57 profit 57 purpose statements, effective 22–25 purpose statements, questions/tests for 22 purpose statements 20–22, 55–57 reasons for purpose statements 25 shareholder value, managing 44–48 direct stakeholders 44, 45, 46 stock performance example 47 value drivers, understanding 47 slogans 24 Compaq 303–05, 341 completing the SBP framework see strategic business plan framework, completing the contract flexibility 354 contract research organizations (CROs) 353 contract sales organizations (CSOs) 353 core competencies 225 Cork, Sir Kenneth 313 critical success factor (CSF) 27 customer loyalty 228 customer relationship management (CRM) 80 DaimlerChrysler 75, 215 data collection 238, 276–95, 323 activity-based costing 279, 280–81 see also financial analysis base data 276–90 base data forms 288–89, 290–95 customer profitability analysis 285 customers 282–86, 287, 287–88, 288 further action 289–90 product evaluation 281–82, 283 sales 277, 278, 278–80 de Bono, E 97 definitions hypothesis 200 market scope 83–84 product scope 84–85 degree of strategic change see strategic change, degree of Dell 35, 51, 78, 143, 212, 216, 220, 303–05, 340 development process, the 233–44 data analysis 239 data collection 238 see also main entry development of the plan 239 evaluation 240–41 format and presentation 240 implementation 241 planning 235–36 process of SBP, the 241–42 starting the process 243–44 strategic business planning structure, the 233, 234, 235 team, building the 239 terms of reference 236–38 background 236 method of working 237–38 purpose and scope 237 staffing, time and costs 238 workshop, organizing a 242–43 differentiation 154, 155, 157, 159, 161–64, 166–68, 180, 343, 343, 344 distinctive capability 58–78 and the strategic plan 76 business processes 63 characteristics of 58–63 370 Index distinctive capability development model 59, 60 distribution 62–63 innovation 60 key attributes of 59 operations/purchasing 61–62 sales and marketing 62 service 63 competitive advantage 75 developing a new 64–66 distribution example 64 innovation and operations example 64–66 new distinctive capabilities 72–74 automobiles 73–74 see also main entry pharmaceuticals 72–73 see also main entry new distinctive capabilities from the old 75–76 outsourcing 77–78 overall competence 66–67 strategic assets 70–72 IBM 70–71 traditional thinking 67–70 BMW and distinctive capability 68–69 British Airways 71–72 Wal-Mart 69–70 Drucker, P 12, 22, 282 e-business 142, 146 e-commerce 76, 151, 192, 194, 201 e-ffectiveness 142 e-fficiency 142 efficiency 142–49 characteristics of efficient business 146 current business model review 146–47 e-initiatives, effect of 145 efficiency survey 145 energy expenditure in an organization 142–43, 143, 144 external relationships 148–49 high cost resources, reducing the use of 147–48 improving efficiency 144 outsourcing 147 summary 149 efficiency of the model (SBP) 146 e-grocers 50–52 emotional bonding 114 e-price 211 ethics/ethical stance 33–34, 124–27 evaluation 179–84 financial analysis 184 logic, testing the 179 soundness, testing the 179–83 strategic evaluation 183 strategic management, principles of 179–83 aims and means, coordination of 182 cultural fit 182 defense against competitors 180 differentiation 180 efficiency 181 flexibility 181 opportunities, exploiting 182 resources, concentration of 180 simplicity and unity 181 strengths, building on 180 timing and speed 181 facilitator(s) 242–43 figures 10% rules 309 10% rules applied to Compaq 312 ABC analysis 279 action program monitor 269 action program resource analysis 177 analysis of assets and liabilities 299 analysis of performance 300 assessing the base potential for growth 326 assumptions 169 audience value perception 110 balance sheet 297 benefit measures 99 BMW 95 Boston matrix 340 Boston matrix development chart 341 brainpower expenditure in an organization 143 break-even point 302 business value definitions 125 business values chart 126 buyer value analysis 99 cars on the US market 248 cash performance in $ 317 change justification chart 311 clarifying words 112 company purpose 13 comparison of Dell and Compaq 304 competitive market scope for a management consultancy 83 competitive product scope for a management consultancy 85 competitor financial analysis 105 competitor market/product stance 91 competitor product matrix 104 Index 371 competitor ranking and analysis 104 confused company, the customer profitability chart 285 customer/product purchase chart 288 decision impact 14 degree of strategic change 189 differentiation evaluation 343 discriminators 103 distinctive capability 59 distinctive capability development model 60 effect of e-initiatives on Oracle 145 efficiency survey 145 evaluation of developed differentiation 344 expectation charts 321–22 field managers’ scoring of service to customers 38 five forces acting on an organization, the 345 focused company, the 12 goals, the 365 gross margin by customer percentage 287 growth vector, the 170 identifying market/product segments 86 implications of the product life cycle – characteristics 337 implications of the product life cycle – responses 338 improvement by incremental percentage 310 influence of direct stakeholders 45 influences on direct stakeholders 45 linking of company and individual pyramids 249 margin performance improvement at Compaq 312 market analysis – end user trends and drivers 88 market/product development chart 29 market/product/service scope and range 90 market/product/service segment attractiveness 89 mismatch of goals in a typical company 10 monthly management performance summary 315 new company structure 354 office leasing – industry structure chart 347 opportunity analysis 348 organization growth model 356 organization growth model – management concerns 357 organizational culture change in a static company 131 organizational culture change in the NHS 130 percentage of decisions based on strategy 247 performance in days 317 performance target teams, management of 135 product evaluation chart 283 product life cycle 336 product/market segment chart 92 product/service potential analysis 342 product/service range perception 93 product/service ranking by profit contribution 278 product/service value analysis by MPS 100 reinforcing training to increas behavior deployment 140 sales and cost performance 316 SBP structure 234 segmentation 81 sigmoid curve 188 stock performance of two biotech companies 47 strategic alignment of cost base and differentiation 159 strategic business planning framework 177 strategic business planning framework 18 strategic cycle 188 strategic evaluation 183 strategic focus model 171 strategic planning cycle issues 190 strengths 332 synthesis of strategic options 142 team combination report 262–3 team effectiveness 273 threats analysis 349 three stage sieve 324 traditional management structure 134 useful techniques map 336 weaknesses 333 word association 113 financial analysis 296–322 activity-based costing 307–08 activities 307 cost drivers objects 307 resources 307 372 Index assets and liabilities, analysis of 297–98, 299, 299–300 service companies 300 background 296–97, 297 business unit cells and market/product units 313 calculations 319–22 days inventory outstanding (DIO) 319–20 days payables outstanding (DPO) 320 days sales outstanding (DSO) 320 examples 320 expectation charts 321–22 increasing management impact 315–17 monthly management performance summary 313–15, 315 next budget year, developing financial requirements for 317–18 organising the financial analysis workshop 318–19 performance, analysis of 300, 300, 301–03 break-even point 302, 302, 303 gross margin 300–02 performance summary 315–16 cash performance 316–17, 317 performance in days 317, 317 sales and cost performance 316, 316 the 10 per cent rules 308–09, 309, 310, 310–13 using the rules and charts 310, 311, 312, 313 traditional cost accounting 305–06 using to compare two companies 303, 304, 304–05 five forces analysis 344, 345, 345–48 competitive rivalry 346–47, 347, 348 customers’ bargaining power 346 potential entrants 345 suppliers’ bargaining power 345 threat of substitutes 346 Ford 62, 68, 74, 211, 212, 215 FreeMarkets Online/FreeMarkets.com 35–36, 156 General Electric 20, 62, 97–98, 163, 224 General Motors 73–74, 115, 210, 211, 214, 215 genes, patenting of 147–48 genomic fingerprint 206, 207, 209 goals 25–36, 37, 365–66 distinctive capability 26–27, 37 critical success factor 27 key competence 27 unique selling proposition 27 efficiency 26, 35–36 goal structure 365 identity 26, 30–33 as way of life 33 image 30–32 market/product development chart market/product service 25, 27–30 people 26, 33–35 ethics 33–34 values and standards 35 safety 36 29 Hammer, M 148–49 Handy, C 327–28 Harvard Business Review 148 Harvey-Jones, J 242 Honda 31, 61, 64–66, 67, 214 hypothesis, the role of the 200–22 change/drivers of change (death of a salesman) 201–22 automobiles 210–16 see also main entry pharmaceuticals 202–10 see also main entry sports shoes 216–18 definition 200 e-commerce 201 main drivers and enablers 218–20 customer loyalty 219–20 efficiency 219 R&D, saving in 219 sales force, future of the 220, 221, 222 hypothesis 48, 54, 192, 193, 194 IBM 62, 63, 70–71, 72, 76, 99–100, 132, 133, 163, 251–52, 303, 341 identity 107–16 customers’ actual perception 112–13, 113, 114–16 goal, developing the 115–16 goal, reality of 113–15 word association 113, 113 perception of 109, 110, 110–12 clarifying words 112 parameter setting 111–12 value proposition, the 107–09 suggested approach 109 implementation 266–75 action program decomposition 275 action program monitor 269 attainment, monitoring 275 communicating the strategy 266–67 multifunctional teams 267 first year, the 267–70 Index 373 long-term, fundamental or complex performance targets 270 performance target teams 270 performance targets 270–74 PTT instructions 271–74 team effectiveness 273 In Search of Excellence 243 Incyte Genomics Inc 147–48 Industrial Classification Standard, North American (NAICS) 80 Internet 21, 35, 49, 101, 195, 217, 219, 220, 222, 277 car retailing 210–211 shopping 52 Katzenback, J 272 key competence 27 leadership team, building the 255–64 emotions and tensions 255–56 motivations of team members 257–60 personal motivation 259–60 personal vision 258–59 team roles 260–64 Belbin team role profile 260–61, 262, 264 self-analysis test 261 team combination report 262–63 the role of the team 256–57 value, adding 264 Making It Happen 242 Management Teams: Why They Succeed Or Fail 261 Managing for Results 282 market/product segment (MPS) 91, 92, 92, 137–38, 139 creative use of the 97–98 customer, knowing the 97 niche marketing 158 market/produce/service 79–106 buyer value analysis 98, 99, 99–100 competitive scope 82–83 competitor analysis 103, 104, 104–05, 105, 106 creative use of the MPS 97–98 discriminators 102–03, 103 end user market, the 87, 88, 88, 89, 89 output from analysis 88 future product and service offerings 86–87 future scope, deciding on 89–90, 90, 91, 91 four options 90 identifying advantages for customers 91 knowing the MPS customer 97 market scope, definitions of 83–84 available 84 penetrated 83 potential 84 served 83–84 market scope 83, 83, 84 market/product segment (MPS) 91, 92, 92 objective 79 predictable revenue streams – current customers 80, 82 price and cost comparisons 100, 100, 101–02 pricing decisions 96 product scope, definitions of 84–85 accepted 84 fudgeable 85 impossible 85 possible 85 primary 84 product scope 84, 85, 85, 86, 86 definitions of 84–85 win rate 86 product/service range perception 92, 93, 93–94, 95, 95–96 segmentation 79–80, 81 SCC and NAICS (codes and standards) 80, 82 summary 106 MaxiMarketing 110 Mercedes/Mercedes-Benz 61, 68, 93–94, 351 Merrill Lynch 82, 195 NASDAQ 225, 226, 301, 302 net cash flow (NCF) 316 Nike 62, 218 Nokia 78, 191 Novartis 203, 209 organization growth model 355, 356, 356, 357, 357–61 autonomy crisis 359 chaos, periods of 356–57, 359 control crisis 360 co-ordination 360–361 creativity 357–58 delegation 359–60 direction 358–59 organizational skills 192 original equipment manufacturers (OEMs) 96, 346, 347–48 outsourcing 77–78, 147, 353 people 117–41 374 Index business values and company culture 120–41 see also main entry resource pool, the 118–20 job skills and modularization 119 project management 119 performance target team (PTT) 135 performance targets see strategic business plan framework, completing the Peterman, J 51, 54 Peters, T 27, 67, 243 pharmaceuticals 72–73, 202–10 computer modelling 205–06 drugs, targeting 209–10 drugs and humans 204–05 forces impacting the industry 202 future scenario 206–08 genetics 205 genomics 203 health and an ageing population 208–09 molecules 203 organic molecules and lead compounds 203–04 Philip Morris 20, 28, 62, 67, 93 Positioning to Win 102 price/earnings (p/e) ratio 226, 227–28, 301 PricewaterhouseCoopers 85, 147, 352 product life cycle 35, 163 profit before interest and tax (PBIT) 316 psychology see reasoning and psychology of strategic business planning purpose statements 20–22 Rapp, S 110 reasoning and psychology of strategic business planning 245–54 communicating the strategy 252–54 reticular activating system (‘gate’) 252, 253 implementation 246 learning through the SBP process 250–52 percentage of decisions based on strategy 247 robust strategy 245–46 SBP psychology 247–48, 248, 249, 250 pyramid concept 249, 249, 252 short-term memory 248–49 research and development (R&D) 77, 07, 124, 156, 219 return on capital employed (ROCE) 306 Rolls-Royce 68, 163, 351 safety 36 sales, general and administration (SG & A) 143 Saloman Brothers 33–34 Schwab, C 195, 220 Scott, R 147, 148 short-term memory 248–49 SICC see standard industrial classification code (US) sigmoid curve, the 187, 188, 188–89, 189, 190 simple strategy in a complex world 223–30 business direction 224–25 business goals 224 corporate strategic planning 228–29 divisional, operating and service function SBPs 229–30 execution goals 225 price/earnings (p/e) ratio 226–28 resource identification and analysis 230 slogans 24 Smith, D 272 Sony 60–61, 164 standard industrial classification code (US) 80, 82, 92 strategic business plan framework, completing the 172–78 action program resource analysis 177, 178 draft first report and layout 175–76 performance targets, developing 172–75 refining the plan 176 strategic business planning framework 177 strategic business plan framework, understanding the 17–43 action programs 42 responsibilities 42 company purpose 17, 18, 18–25 see also main entry goals 25–28, 29, 29–36 see also goals execution 26 position 25–26 performance targets 36–38, 38, 39–41 see also goals assigning responsibility for achieving 41 customer contact staff behavior/ attributes 40–41 field operations 38 new product development 40 SBP framework 18 summary 43 strategic business planning, the purpose of 7–16 benefits of SBP 16 confused company, the 8, 9, 9–10, 10, 11 poor management customer, serving the 15–16 direction, setting a Index 375 focused company, the 11, 12, 12, 13, 13, 14, 14–15 maintenance/efficiency decisions 14–15 value of SBP 7–8 strategic business units (SBUs) 346 strategic change, degree of 187–99 business model strategy, changing the 192–96 cannibalization 195 changes without disruption 192 hypothesis, constructing and using a 192, 193 organization as self-adapting organism 192 timing of events 195 capability and infrastructure, developing 197 developing, expanding, refocusing 197 process 198–99 reaping 197 sigmoid curve, the 187, 188, 188–89, 189, 190 transformation strategy 191–92 strategic thinking 366–67 strong leadership team 367 vehicle model 367 strategic options 151, 152, 152–54 business values 154 capabilities 154 competitor analysis 154 culture 154 differentiation 154 economic trends 153 efficiency 154 industry trends 153 market trends 152–53 new business opportunities 152 organization structure 154 political 153 resource priorities 154 social 153 stakeholder requirements 153 strategy, rules of 366 strategy, synthesizing the 150–71 assumptions 168, 169 combined low cost and differentiation 164 company strategy 158, 159, 159 differentiation 155, 157, 161–64 continual product/service improvement 162 creative ability of company 163 operational customer care 162 uniqueness 161 effective strategy 150–51, 152, 152–55 generating options 155 strategic options 151, 152, 152–54 see also main entry fixed cost base reduction 160 general cost reduction strategy, principles for 164–66 consistent cost reduction 166 cost drivers, understanding 165 cost reductions, sources of 165 customer need 165 pricing/costing, separating studying the competition 165 general differentiation strategy, principles for 166–68 communicating the benefits 168 costs involved 166 customers’ needs, identifying 166 customers’ perception of benefits 168 extra costs, incurring 166 reducing costs to minimum 166–67 total differentiation 167 uniqueness 167 value for users and buyers 167 generating options 155 generic strategies 155–58 differentiation 155, 157 lowest cost producer 155, 156–57 niche 155, 157–58 growth vector model, the 169, 170 process cost base reduction 160–61 strategic focus model 170, 171 strategic thrust 170–71 successful strategies 171 summary 365, 365, 366–67 strategic thinking 366–67 strategy, the rules of 366 Sur/Petition 97 SWOT analysis 330 synthesizing the strategy see strategy, synthesizing the tables sales occupations in USA (1997) 221 techniques 335–64 external appraisal 342–52 demographics and near certainties 343–44 differentiation evaluation 343, 344 five forces analysis 344–48 see also main entry product/market opportunities 342–43 opportunities and threats, an approach to 348–51 economic trends 350 376 Index generation 348 new business opportunities 349 opportunity analysis 348 political trends 349 social trends 350–51 technology 351 threats analysis 349 organization 352–63 business restructuring 352–54, 354, 355 job descriptions 361–63 organization growth model 355–61 see main entry summary 361 product/service analysis 335–42 Boston matrix 339–41 see also main entry product life cycle 335, 336, 336–37, 337, 338, 338 product/service potential analysis 341–42, 342 summary 363–64 new business opportunities 363–64 economic factors 364 industry trends and business environment 364 political factors 364 social factors 364 Tesco 50–52, 67 Thriving on Chaos 67 Toyota 14, 36, 68, 74, 75 triggers, motivating 21 understanding the framework see strategic business planning framework, understanding the unique selling proposition (USP) 27 useful techniques see techniques Virgin/Virgin Atlantic 34, 71, 108, 121 virtual doctors 206–08 Volvo 30–31, 115 Wal-Mart 35, 51, 69–70, 73 Waterhouse, L 27, 76, 243 Web, impact of the 144 Wedgwood 61, 157, 163, 351 Welch, J 20, 144, 224 Wisdom of Teams, The 272 Yamaha 64–65 .. .STRATEGIC BUSINESS PLANNING STRATEGIC BUSINESS PLANNING A DYNAMIC SYSTEM for improving performance & competitive advantage 2ND EDITION CLIVE READING London and Sterling, VA First published... responsible for achieving each performance target and a similar system is used for the action program The performance target team leader and those named as responsible for the action program are the team... cascaded through the organization and implemented PART ONE The strategic business planning framework Developing a strategy that will lead to sustainable competitive advantage and can be effectively