business planning for success - 5 essential steps

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Business Planning for Success Five Essential Steps By Walter Adamson Principal, Digital Investor September 2005 [email protected] www.digitalinvestor.com.au

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Five Essential Steps. There are five stages necessary to achieve success in business planning: 1. ABCD Planning, 2. Mission, Objectives, Strategy & Action, 3. The Balance of Loose and Tight, 4. Monitoring Key Projects, 5. Organisational Alignment. Subtitle: Enhancing alignment and value for IT investments.

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Page 1: Business Planning for Success - 5 Essential Steps

Business Planning for Success

Five Essential Steps

By Walter AdamsonPrincipal, Digital Investor

September 2005

[email protected]

Page 2: Business Planning for Success - 5 Essential Steps

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

The Opportunity

Develop a sustainable and effective plan:

� Clear link from actions to strategy

� Aligned with structure and culture

� Clear and consistent themes

� Focus attention and effort where needed

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

What we will do

There are five stages:

1. ABCD Planning

2. Mission, Objectives, Strategies, Actions

3. The Balance of Loose and Tight

4. Monitoring Key Projects

5. Organisational Alignment

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 1 – ABCD Planning

Understand today and envisage tomorrow:

A. Acknowledge today

B. Plot the intent

C. Manage within means

D. Understand the risks

ABCD planning has to start with an authentic view of the current situation - obtaining that clarity is often the most difficult part.

ABCD Planning process

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Enhancing alignment and value for IT investments

Phase 1 – ABCD Process

The ABCD Planning process helps cross the gap and bridge the company to the new strategic intent, while managing the risk of transition.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 1 – ABCD Steps

The steps:

� A is the AS IS – today

� B is the STRATEGIC INTENT

� C are CONTRAINTS and CRITERIA, and

� D is the DESIGN of Pilots (prototypes of the new business model – used to test the feasibility of the Plan).

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 1 – ABCD Key Points

A and B are the hard parts:

� A - Confronting the genuine status and capabilities and strengths and weaknesses today is often threatening

� B - Developing the Strategic Intent, which requires clarity of vision and purpose is challenging and requires effort

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Enhancing alignment and value for IT investments

Phase 1 – ABCD The Intent

The Strategic Intent must be clear:

� Which drives the Mission and its

� Objectives, Strategies and Actions,

Which in turn require judgments about what is Loose and what is Tight, and the Tight are reported through the Scorecard.

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Enhancing alignment and value for IT investments

Phase 1 – ABCD Challenge

The biggest challenge is for successful companies that have grown to a certain point and now need to take the next step:

� How to move from A to B?

� What constraints are there?

� How to manage the risk?

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 1 – ABCD Capabilities

Understanding capabilities:

� What capabilities exist today (point A)

� What capabilities are needed (point B)

The capabilities encompass organisationalcompetencies and individual competencies, and the means to deliver these competencies.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 1 – ABCD Output

The output from Phase 1 includes:

A – As Is

SWOT

Capabilities

B – Strategic Intent

Vision

Values

Mission

C – Constraints

Money

People

Competencies

D – Prototypes

Manage Risk

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Next – Phase 2

There are five stages:

1. ABCD Planning

2. Mission, Objectives, Strategies, Actions

3. The Balance of Loose and Tight

4. Monitoring Key Projects

5. Organisational Alignment

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA

Developing, executing and maintaining a clear Mission, and set of Objectives, Strategies and Actions is vital:� The Mission is why we exist

� Objectives are where you want to be

� Strategies are what you’ll do to get there

� Actions are how you’ll achieve the strategies

Names may change but there is no substitute for these components in an effective Business Plan.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - Mission

The Mission is why we exist:

� Our products and services

� Our markets and standards

� Our preferences

“Our mission is to be the world's most dynamic science company, creating sustainable solutions essential to a better, safer and healthier life for people everywhere.”

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Enhancing alignment and value for IT investments

Phase 2 – MOSA - Mission

Guidelines for Mission statements:

� The Mission statement must “work” not only today but for the intended life of the strategic plan of which the mission statement is a part.

� Focus is a primary benefit of the Mission statement.

It should be broad enough to allow for the diversity (new products, new services, new markets) required of your business. And it must also be specific enough to provide the focus necessary to the success of the business.

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Enhancing alignment and value for IT investments

Phase 2 – MOSA - Mission

Examples of Mission statements:

� Become the company most known for changing the worldwide poor-quality image of Japanese products.

� FedEx is committed to our People-Service-Profit Philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global, air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery.

� To develop, design and deliver great communications solutions to every customer.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - Objectives

The Objectives are specific outcomes:

� Where we will be

� By when

� And perhaps how measured

“No less than 30% of our customers will be ASX 200 by end-2006 and have an average annual revenue of greater than $1m each.”

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - Objectives

The Objectives have time-deliverables:

Mission

Objective 3

Objective 2

Objective 1 By end-May 2006

By end-2006

By end-December 2005

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - Strategies

The Strategies are “the how and who”:

Objective

Strategy 1 What

How

Action 1, by when, by WHOMAction 2, by when, by WHOMAction 3, by when, by WHOM

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - Strategies

Strategies are WHAT we will do:� To deliver the Objectives, by

� Breaking down the Strategies into Waves

� Providing focus on Key Result Areas

� And incremented in Actions

“Develop a skilled and empowered workforce with a ‘can do’ attitude.”

“Enhance our KPIs and benchmark, and use them to drive the business.”

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Enhancing alignment and value for IT investments

Phase 2 – MOSA - Strategies

$64 question – how to design Strategies:

� Nominate Key Result Areas (above Objectives)

� Develop Strategies for each Objective

� And a series of “Waves” each lasting 1 year

� Develop Waves for each Strategy

The Waves provide a basis to keep the transformation initiatives, budgets and financial targets knitted together – and this keeps the results visible on an annual basis.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - KRAs

The KRAs are designed to:� Embrace the objectives and priorities for the year

� Consists of Strategies and Waves

� Each Wave owned by a senior executive

� Waves contain Actions

� The executive is the Project Director for the collection of Actions within each Wave

The Waves become part of the responsibility of the people running the day-to-day business.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - KRAs

KRAs can be grouped into different types:

� Performance – improving today

� Transformation – leading to tomorrow

� Mandatory – compliance and governance

For example:

� KRAs - Performance / People / Products

� Can be grouped as above

� Contain multiple projects

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - KRAs

Each KRA has an Objective:

Key Result Area & Objective

Strategy 1 What

How

Wave 1, by when, by WHOMWave 2, by when, by WHOMWave 3, by when, by WHOM

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA - Actions

HOW we will implement Strategies:

� Contained within Waves

� With measures

� And targets

“Document customer delivery efficiency KPIsin Account Plans. Responsibility: BM. By March 2006.”

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA + Vision

The Vision is the “light on the hill”:

� How a Vision is used

� The impact of Vision

� The process of creating a Vision

Having a clear Vision helps in times of change and in implementing change.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA + Vision

A Vision statement is important:

� A Vision is a guiding image of success

� It can drive behaviours

� It drives shared commitment

� Starts from values, intuition and dreaming

Best drafted by one or two people and come back to the group for discussion.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA + Vision

Examples of Vision statements:

� We try harder

� Crush Reebok

� We make people happy

� An Apple on every desk

� First Choice through Excellence

The way to think of this is that the VALUES drive the VISION which in turn drives the MISSION.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 2 – MOSA + Values

Knowing what you value is important:

� It drives behaviours

� It enhances empowerment

� It drives the Vision, and Mission

� It’s about the means not the end

Ask yourself what you aspire to, in the way that your people behave and treat each other and your clients and partners.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Next – Phase 3

There are five stages:

1. ABCD Planning

2. Mission, Objectives, Strategies, Actions

3. The Balance of Loose and Tight

4. Monitoring Key Projects

5. Organisational Alignment

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

The balance of what is loose and what is tight is often the most critical structural and operational key to success.

Failures occur when:

� A local unit has all loose and no tight;

� Key Result Areas are not tight;

� Excessive “tight” kills responsiveness.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

Some of the most common causes of failure result from an inappropriate balance.

Failures occur when:

� Too tight – bureaucratic, slow, unresponsive, ineffective

� Too loose – fast but wrong, inefficient, lack of governance and corporate cohesion

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

Despite the simple nature of the concept, it needs investment in terms of money and time to enable effective implementation.

� The CEO should be the champion

� The project should never be a project for the human resources department!

Needs a coordinated effort to find out how value is created in the organisation.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

The scorecard directly relates to the Key Result Areas of strategy, by analyzing the Vision and Mission:

� Requires alignment of the vision and the objectives

� Much more than financials and operational efficiency

� Include “the customer”, and

� Internal learning and growth perspectives

Long term sustainability of the organisation is found in the customer, internal business process and the learning and growth perspectives (not in profit and shareholder focus!).

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

As a first pass the Balanced Scorecard can:

� Include financial, and sales indicators

� Include internal efficiency

� Include all the Key Result Areas (as one sector)

In the longer-term, in a full implementation, the scorecard should be cascaded down into each operating unit and support unit, with clear linkages to performance assessment, and to corporate strategy.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

Autonomous Strategy Balanced Strategy

Stand-alone

Operating

Units

Integrated

Business

Strategy

Easy Fixes with Quick

Gains

Develop core capabilities

1

Expand in existing markets

2

Expand into new markets

3

Individual Successes Corporate Successes

e.g. Managed IP

services

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 3 – Loose and Tight

Once the decision about balance is made then the key to effective management is the scorecard:

If it is not on the scorecard then it is not “tight”, since the scorecard is the tool for visibility into all the selected tight variables.

Highlight with “traffic lights”.

Financial Operational

PeopleKey Result

Areas

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Next – Phase 4

There are five stages:

1. ABCD Planning

2. Mission, Objectives, Strategies, Actions

3. The Balance of Loose and Tight

4. Monitoring Key Projects

5. Organisational Alignment

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 4 – Project Reviews

Regular review of key projects is essential:

� Quarterly at least

� Executive Working Group

� All business change programs

� Report on success

� Manage risks going forward

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 4 – Project Reviews

The key global projects that are enabling the execution of the strategies are always “tight”

and have to be tightly managed through regular reviews.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 4 – Project Reviews

Projects in Key Result Areas are a “tight”:

� They must be reviewed and reported

� Regularly

� Independently – including Project Director

� Quarterly or better

� Summary statistic on Balanced Scorecard

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 4 – Project Reviews

Many companies, especially those expanding overseas, have floundered when key global projects have surprised the Board:

� Regular reviews are about risk management

� Ensure ongoing alignment with the business

� Ensure project does not have “a life of its own”

� Ensure that good money is not following bad.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Next – Phase 5

There are five stages:

1. ABCD Planning

2. Mission, Objectives, Strategies, Actions

3. The Balance of Loose and Tight

4. Monitoring Key Projects

5. Organisational Alignment

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

Strategic intent, strategic plans, balanced scorecards and good project management are all necessary but not sufficient to achieve success.

Very often, there is a mismatch or a lack of alignment and synchronisation between the strategy and execution, and the culture and organisational structure.

This gap restricts the performance of the organisationand causes friction in the timing and value-realisation of the intended strategy.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

Exceptional performance comes from:

� Peak human performance

� Peak business performance, and

� Relates to clarity, consistency and commitment

Better aligned organisations perform better.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

The most crucial elements of successful corporate performance, as reported by CEOs, are:

� Strategy

� Execution

� Structure

� Culture

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

The Structure must align with the Strategy:

� The shape of the organisation is important

� Clearly linked to Mission and Objectives

Need to know where you want to go and what shape we need to be to get there.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

Once Strategy is right, and the Execution can be conceived, there must be alignment

of Structure and Culture.

The most effective tuning and alignment of Structure and Culture will enable the most

effective Execution of Strategy.

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

The practical steps, start with Strategy:

� Build execution capabilities

� Begin to convert Structure

� Begin to convert Culture

� Execute in parallel – in a measured way

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Phase 5 - Alignment

Alignment is a verb, not a noun:

� It must be maintained, and

� Improved, through a feedback loop

Strategy > Execution > Structure > Culture

Alignment – Plan-Do-Check-Act

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Enhancing alignment and value for IT investments

Summary and Attachments

1. Summary – 5 steps to success

2. Attachment - Example

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©2005 Walter Adamson

Enhancing alignment and value for IT investments

Summary – 5 Steps to Success

1. Get the Intent clear – and understand how big an effort and how risky it is to get there.

2. Build the Execution plan – and a clear link from Strategy to Actions.

3. Judge the Balance – and if it is not on the Scorecard then it is not “tight”.

4. Watch the Key Projects – since they will determine your success.

5. Align the Structure and Culture – with the Strategy and Execution.

This will deliver the most effective and assured platform for business performance.

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Enhancing alignment and value for IT investments

Attachments - Example

Resource IT function to best-in-class.Strategy

Talent recruitment and managementWave

Performance Management

Benchmark salaries

CarriageTargetsMeasureActions

To utilise best IT applications and tools to provide outstanding customer service.

Objective

CustomersKey Result Area