Strategy and Plans

 

Count how often you ask why? That is strategy. Count how often you ask how, where, who, and when? That is planning. More than 50% of the Fortune 500 companies from the 1980’s have retired ticker symbols. Companies that invested thousands of hours with brilliant groups in elegant, in-depth planning were replaced by technologically innovative businesses. Empirically, plans with impeccable depth, logic, and financial sophistication are shown to reduce shareholder value. Let’s analyze the why.

 

Pro-forma financials, graphs, and in-depth detail on when, how, where, and who a business will sell its products or service, while not to be diminished, are most often uninspiring and mundane. For the majority, plans include reliance on others. If those you count on to implement your plan are not inspired and thrilled with understanding the why of your plan, your business may be like 60% to 75% of business mergers, a reduction in your business’s value instead of an increase after five years of implementation.

 

The business landscape is competitive and often plans rely on constants, e.g. inflation has been 4% over the past 30 years, oil has powered transportation for more than a century. These constants can change. You need to strategize.

 

Why is important, but strategy is more than questioning. Business strategy DNA is observing, evaluating, positioning, and acting.

Observation

Observe your business environment, your customers and clients preferences and purchases. Economics and innovation play a significant role in success of management and shareholder value. Observe the industry leaders. If you are an industry leader in your locale, you want to observe industry leaders in other market sectors. Often the best ideas are adapted from different industries to your specific market.

 

Evaluate

Form an idea of the value and merit of adapting and modifying strategy as you assess the business environment, and industry leaders. Read trade publications and industry journals and think through the innovative challenges and opportunities your industry faces. When evaluating the specific steps toward action, take precautions to prevent the formulation of strategy hypothecations that inhibit flexibility of implementation, e.g. investing significant sums in high maintenance, high risk strategies, e.g. deferring implementation to key person(s) without contractual commitments, or who lack enthusiasm.

 

Positioning

 

Positioning is preparing your resources for action. Positioning involves drawing on your observations and evaluations in preparation for action. It is the preplanning for action. Positioning includes documenting your strategy and preparing financially, and occupationally.  If your plan is expansion of product lines or facilities, how much capital do you need? Don’t build on the sand. What is the cash burn rate on the venture, i.e. what are start-up costs and when does the pro-forma begin to show profit? Importantly, what is the exit strategy? If you are entering a new business, market sector, or product line, plan for egress. Planning egress can be as important as entry, and best if part of positioning. Few businesses proactively plan egress, but for those who do position for goals reached, valuations achieved, or famine effects minimized, often shareholder value is maximized.

 

Acting

Thinking is easy compared to implementing, but if you have observed astutely, evaluated prudently, positioned resources effectively, put your strategy into action. “Go to now, ye that say.” Thinking doesn’t require financial resources; action in business most often does; and when financial performance is hinged to strategy implementation you will understand the value obtained with proper preparation.

Effective business strategy repeats these steps again, and again, i) observe ii) evaluate iii) position and iv) act. Above all, while money is important, don’t make it the daily motivation. Develop your strategy around what inherently inspires and thrills you, it’s the key to increasing and maintaining value as a shareholder.