Integrated Business Planning - Strategy
This is blog 2 in a series of 9 on the topic Integrated Business Planning (IBP). In these blogs we will detail our IBP Framework, the importance of a proper IBP implementation and the benefits it can bring organisations. Topic of this blog: Strategy.
To have a strategy…or not
In my 30 years work experience as a consultant and business owner, I do not come across many companies that 1) have a clear strategy and 2) all employees have the same interpretation of that strategy and their role in achieving the strategic goals. Many companies do have a strategy but it is out of date, not communicated regularly or even a outdated strategy. Some companies do not even have a strategy. I have come across only a handful of companies where the employees understand perfectly well their role or the role of their department in achieving the company strategy.
Why is it that companies do not pay the needed attention to their strategy? In my opinion, the creation and periodic reflecting on the company’s strategy is the role of C-level and the Board. But in most companies, C-level is too occupied in operational issues. Focus on the operation (looking down) and you do not look up once in a while to reflect on your strategy.
Advantages of a strategy
And that is a shame, because a clear strategy makes decision making in a company so much easier. When you know in which direction your company is heading the next couple of years, if you know the ‘dot on the horizon’, you can break it down into smaller steps (year plans) and every decision, project, action in a company should add value to the process of achieving the strategy. It creates clarity on the long & short term goals, direction and actions. Clarity on what needs to be done to achieve the set goals, but also clarity on which activities to do…and not to do! For example, if you want to become the market leader in your segment, any action, internal project, product development, relations with suppliers should deliver the result to achieve the long term goal. Any action or project that is not directly beneficial in achieving the goals, should not be undertaken. We see a lot of activities performed within organisations, but to what extend? Do they bring the company closer to its set goals, the strategy?
This clarity works so much better for all layers in an organisation! Management knows how to setup and create an organisation that fits the strategic goals. HR has a clear understanding of the skills of the to be hired employees, operations knows where to look for improvements, marketing knows the type of company you need to be and can adjust the marketing material to fit that vision. And most important: every decision can be translated back to the strategy.
What is strategy
Strategy (from στρατηγία stratēgia, “art of troop leader; office of general, command, generalship”) is a general plan to achieve one or more long-term or overall goals under condition of uncertainty. It is the so called ‘dot on the horizon’, the end-game. Employees like to have such kind of long-term vision because it enables them to bring the future to today (now). To be able to see and work on the activities needed to bring the organisation from today to the envisioned end-point. Without a strategy, without a clear end-game, employees do not know which direction to take, do not know which activities have a higher priority or can even be abandoned.
So start with a clear strategy, a vision what your organisation stands for and where it will be in 2 to 3 years from now. Each decision in the organisation can be made based on the strategy: does it support our strategy? If so, prioritise, if not, stop the activity. Make sure everyone in your organisation knows the strategy. Keep communicating your strategy on a periodic base to make sure everyone stays aligned. For new employees, a crisp and clear explanation of your company’s strategy needs to be part of your onboarding process. And go back to your strategy periodically to revise if needed. Every year you should do a sanity check if your strategy is still valid. The world around us changes fast, so a periodic update of the strategy is a must. Recreate that ‘dot on the horizon’ based on your current understanding of the world. And keep communicating this updated strategy to all layers in your organisation.
As it has become clear by now, strategy is the starting point of IBP. We see many IBP initiatives where the start of the journey is linking the current S&OP process with Finance. But it is the other way around. Strategy drives financial goals and plans (Finance), which drive the operational plans like Marketing, HR and S&OP (Operations). So from top-down to bottom-up, where the outcome of Operations should be aligned with the strategy to close the loop. Strategy as the staring point will define the financial plans for the next years. In most companies this link exists between strategic direction and the translation into financial KPI’s. The missing link in most cases is the one between Finance and Operations. More on these topics in the next blogs.
Our next blog will cover this topic: Finance.