• Companies that “puddle jump” are making moves that allow them to avoid the next X, Y or Z that can befall them. They are making very tactical moves that are by design cautious and practical. As an example, a puddle jumper is a company that probably reduced their advertising/marketing spend in the past couple of years.
• Rock skippers are doing things a little differently because their focus isn’t geared towards avoiding the water, but getting across the water as quickly as possible. They recognize that because of the nature of business sooner or later they are going to get wet. As an example, a rock skipper probably increased their sales/marketing budget during the past couple of years and likely made some strategic investments in people, equipment and opportunity.

There is obviously a time and place for puddle jumping; the early part of 2009 was definitely a year for puddle jumping, both because of fear and sheer necessity. However, you can’t be a puddle jumper for too long because sooner or later the rock skippers are going to come out to play because they see the opportunity in others hesitation. The fundamental difference is that puddle jumpers have been positioning themselves to survive to the end of the recession while rock skippers have spent the past couple of years positioning themselves to not only survive but also be growing during and after the end of the recession. Is it better to be one or the other? I suppose it depends on the personal preference of each company, but I like being a rock skipper.

Joe Strategy’s advice to small businesses can fix that! Welcome to Business Plans 101, the most basic and uncomplicated understanding of what’s good and bad about business plans that you will find.

What Does A Business Plan Do?

1. A business plan precisely defines your business, identifies your goals, and serves as your firm’s resume.
2. It provides specific and organized information about your company that informs the reader how wonderful you are.
3. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions.
4. It is the roadmap of your strategy; identifying the actions needed to implement the strategic plan.
5. It provides the information necessary for others to evaluate your company’s strategy.
6. It is one of the strategic planning tools that can be used to measure the performance of the business and its managers.

How to Write a Business Plan?

Simply answer the following questions; in bullet format, with just enough detail and description for the information to be understood by someone who does not know your business; and you will have a business plan:

1. What are your company’s mission, vision and values?
2. Who are your customers, how will you reach them, and how do you know that your approach for reaching them will work?
3. What do your customers need and value, how do you know this, and how will you provide it to them?
4. What are the current trends in your industry and market?
5. Who are your competitors?
6. What differentiates your business from all the others in your industry? How will you create a Blue Ocean market for your company? *
7. What are your qualifications to accomplish your goals?
8. What will you do to make it easy for people to do business with you?
9. What are your assumptions for revenue, expenses and profit margin; and how do they compare to industry benchmarks?
10. How will you measure your progress financially, operationally and strategically?
11. What are frequently asked questions and their answers about your business and your plan?

Do’s and Don’ts

As you write your plan, keep in mind these “do’s and don’ts”.

DO:

1. Write a short Executive Summary that truly recaps the answers to the above questions.
2. Make sure you understand the audiences who will be reading your plan.
3. Make the description of mission, vision and values clear, concise and easy to communicate.
4. Keep it simple (stupid).
5. Use straight forward and professional language. Leave out the fluff.
6. Keep it as short as it can be while delivering a comprehensive understanding.
7. Make sure customer and marketplace research is documented and that your strategy is consistent with the findings.
8. Recognize why the competition is in business and why business is done the way it is.
9. Explain the logic and methodology utilized to create the projections.
10. Double the timeframe you think you need to execute your plan.
11. Use bullets and pictures.

DON’T:

1. Allow the Executive Summary to become as long as the plan itself. That is repetitious.
2. Forget that bankers, investors, employees and customers are all reading your plan with a different perspective.
3. Try to be Shakespeare.
4. Make it long winded or all encompassing. If it takes forever to either write or read, then something is wrong and it becomes too much work for too little benefit.
5. Allow delusions of grandeur to turn the reader off.
6. Write a novel.
7. Second guess the customer and the marketplace. You could be going against an immovable force.
8. Underestimate the competition and the industry structure.
9. Leave the reader guessing on how you arrived at your numbers.
10. Forget that reality rarely goes according to plan.
11. Forget that you can put very detailed information into an appendix.

* In their best-selling book, Blue Ocean Strategy, W. Chan Kim and Renee Mauborgne discuss Red Oceans and Blue Oceans as part of strategic planning best practices.

Red Oceans are market spaces in which a crowded market of competitors focus on fighting with each other. In red oceans, companies often invest in advancements that are only marginal advantages over the competition and therefore easily copied.

Blue Oceans are uncontested market spaces in which successful companies find ways to create demand in areas that are ripe for growth. These companies find ways to create value for customers that others are not providing. And at the same time, they look for activities to reduce or eliminate that are not valuable to customers in order to become a lower cost operation.

Joe Strategy’s advice to small businesses that are either family-owned or managed by a dominant leader is to use the strategic planning tool developed by the Vann Group called “It’s Good to be King!” Essentially, you insert the following exercise into your strategic planning process….

Give all members of your strategic planning team the ability to anonymously identify what they would do to improve the company if they were running the show with no constraints. Ask them to identify specific processes, practices, functions and strategies across functional areas, looking at:

1. Employees
2. Infrastructure
3. Business processes
4. Communication
5. Product/service development
6. Sales and marketing efforts
7. Financial and administrative management

This exercise will generate a goldmine of innovative ideas.

Joe Strategy’s advice for small businesses is that when the SWOT starts to produce the same old “to do list”, it’s time to engage in the Vann Group’s own strategic planning tool called “CORE” to trigger fresh thinking that stretches your comfort zone and is never tainted by “conventional wisdom”. CORE frames the small business strategic planning discussion in a fresh and more productive manner. It works like this:

1. Challenges – Take a step back and be brutally honest and objective about the areas of your company and industry that can adversely impact your short and/or long-term performance.
2. Opportunities – Stretch your mind and think broadly about the upside of the current circumstances for your company and industry. Think about what you need to do more of to capture that upside and also what you can do less of or eliminate all together.
3. Realities – These are the undeniable facts that impact your company. They are self evident.
4. Expectations - Given the reality of the challenges and opportunities, this is the essential understanding of the company’s prospects. Complete clarity about these prospects should foster a fierce focus on pursuing them while shedding all extraneous activities.

Check back often for more strategic planning best practices.

My first strategic planning session was in 1996. I participated in one last year that was almost identical in process, exercises, and focus — as were the dozen others in which I have been a participant instead of a facilitator.

• Perform a SWOT analysis? Check.
• Build/revisit the mission/vision statements? Check.
• Identify some short and long-term goals? Check.
• Identify some actions we can take to get there? Check.

The world in which we live today is almost unrecognizable from the reality that was 1996:

• GM and Ford were numbers 1 and 2 on the Fortune 500.
• Jim Collins had just published Built to Last in 1994 and it would be another five years before Good to Great was published.
• Netscape was the dominant web browser, AOL the dominant company in the emerging Internet era and Google didn’t exist; much less Facebook or Twitter.

Yet, while Thomas Friedman was busy proving that Columbus was only partially right – the world is in fact kind of flat, nothing in the world of strategic planning changed?

Has there not been an evolution in thoughts on competition, diversification, or the relationship between the customer and brand? Have we not seen new business models emerge and old ones collapse? How can one look externally and not consider the simplicity of Blue Ocean strategy? Or, how can one discuss the purpose of an organization and not have a conversation about the Hedgehog Concept or BHAG? Have we not learned anything from our rock star stategists? Is there not something we can learn from the past fourteen years of strategic business thinking and apply it to the planning process?

Of course there are plenty of ideas like those I’ve just named that should be part of the process, but the problem is that strategic planning is a tired profession these days. The process is tried and true which means for newbie planners it is simple to learn and for the old hand plannner, the tried and true promotes laziness. Why learn something new and push yourself when there is no motivation to do so?

If we are to add value for our customers, we as strategists need to integrate new thinking into the planning process. We need to bring strategy into the new millenium and use it to differentiate true strategists from the zombies.

What business ideas, models and concepts do you think should be part of a best practice planning process?

The Dangers of Conventional Wisdom
Conventional Wisdom is defined as the ideas, opinions, or understanding that is considered to be generally accepted by the public. In strategic business planning there is no greater threat to success than conventional wisdom as it unfairly and often times incorrectly defines the characteristics and traits of an industry and marketplace. Consider that conventional wisdom held that:

1. Coke was losing market share because people preferred the sweeter taste of Pepsi. The introduction of New Coke led to a massive consumer backlash and the original Coke was brought back to the market within a month.
2. People liked crispy cookies, not soft and chewy cookies, and that a cookie store is a bad idea. Despite this, Debbie Fields went forward.
3. There was no reason for anyone to want a computer in their home. Ken Olson, the President of Digital Equipment Corporation might have a different perspective on that today.

Clearly, conventional wisdom can be dangerous. One form of conventional business wisdom is that the strategy planning model should be focused on beating the competition.

A better strategy, espoused by W. Chan Kim and Renee Mauborgne, in their best selling book, Blue Ocean Strategy, is to create new opportunities in uncontested market space, thereby making your competition irrelevant.

Rather than fight with competitors in a crowded market (the red ocean), successful strategic planning models find ways to create demand in areas that are ripe for growth (the blue ocean).

Uncontested Waters
Based on the teachings in Blue Ocean Strategy (which Joe Strategy highly recommends as advice for small businesses) and the Vann Group’s own work in applying these concepts, we offer the following three-step process to finding your uncontested market space.

Step 1: Understand Your Competition and Industry Factors
Begin by identifying your competition, and based on trends, those who could be future competitors. Then you need to identify the factors on which your industry competes. For example, most industries compete based on some combination of these factors: value added services, customer service, price, reputation, products, accessibility, size and expertise. Lastly, you’ll want to identify the degree to which you and your competition invest in each of the competitive factors. For example, a company that invests in customer service is directing significant resources toward having high quality customer service, believing that it is valuable to customers and therefore worth the investment.

Step 2: Understand What Your Target Customers Need and Value
Often times, conventional wisdom defines what customers need and value, such as low price and high quality. In fact, if you ask customers what they want, they are likely to tell you just that. But if you ask your best and most loyal customers what they like the most about you, they might say things like “I feel valued” or “I love the personal touch”. It is common for customers to express their true feelings about a product or service in emotional terms, either due to feeling taken care of or having a burning problem solved. Another way to determine what your customers need and value is to observe how they use your products and your competitors’ products. For example, in today’s banking world, customers have a choice of banking in person, online, over the phone or at the ATM. It is important to observe which medium each customer segment is using to determine what they value.

Step 3: Build the Value Proposition
Once you understand the manner in which your industry is competing for business and your customers’ needs and values, it is time to assess your own ability to deliver. Your goal is to determine what additional value you can create that’s meaningful to your customers and that is not already available in your market. To do so, as part of your strategic planning process, you’ll want to ask and answer these questions:
– What are your core competencies?
– What can you be the best in the world at?
– How does your company create value?
– What capabilities do you bring to the table?
– How do you substantiate your ability to deliver on your value promise?

Once you know what you can deliver that your customers will value and that is not available from your competition (you have created a Blue Ocean!), you’ll also want to find activities that you can eliminate or reduce so that you become a lower cost organization and you’re only investing in those activities that will make a BIG difference for your customers and for your bottom line.

In Conclusion
In conclusion, it is important to understand your competitors and how your industry competes. But that does not mean the goal of your strategic planning process should be solely to beat the competition. This is the “red ocean” strategy which often leads to investing in improvements that are only marginal advantages over the competition – and easily copied – which makes them short term marginal advantages. A better small business strategy is to differentiate your company in a way that is meaningful and unique and to reduce the cost of operations at the same time.

We defined branding as how your customers and the marketplace perceive you. We emphatically professed that brand equity is a real thing and should be an important strategic goal for any business. And we pointed out that too often branding and strategic planning activities are separate and that this divide leads to disconnects between brand promise and delivery, discontent among customers and employees, and the erosion of brand equity.

In this post, our premise is that not only is it critical to integrate branding activities with strategic planning, it is becoming even more critical every day so you better do it fast. Here’s why…

Less Time and Fewer Chances
In today’s world, consumers and business decision makers are over communicated to. Think about it. In addition to print advertising, TV, radio, telemarketing and direct mail; we now have popup web advertising, updated news each time we open a web browser, legitimate and illegitimate (spam) direct e-mail, telemarketing to our cell phones, text messaging, billboards that move, ticker tapes on the bottom of TV screens; not to mentioned the many sources that we like to frequent for meaningful information on topics of interest.

Not only is it harder to get peoples’ attention, but because they’re feeling bombarded and squeezed for time, they are getting increasingly skeptical of the claims all around them. That means you have less time to capture their attention and fewer chances to perform exactly like your brand promise says you will.

The World has Gone Viral
It’s not just political candidates whose gaffs travel the electronic world in lightening speed, but consumers have multiple methods at their fingertips to tell all about a less than satisfactory brand experience. Between e-mail, texting, IMing, twittering, social networking, professional forums and the incredible proliferation of blogs and vlogs; today’s word of mouth commentary spreads like wildfire. Brands can be celebrated and denigrated in no time flat.

Leadership Transfers
We know that demographic forces are already increasing the number of leadership transitions in both public and private companies. Branding must be part of an incoming leader’s strategic planning efforts in order to understand the company’s brand equity and brand promise. Any strategic changes must consider the brand impact so that appropriate strategies can be developed and executed to ensure alignment between brand understanding among employees, investors and partners; brand promise to the marketplace; and ultimately brand equity for the company.

Tough Economic Times
The Great Recession has made economic uncertainty a certainty that will prevail for the foreseeable future.  Therefore, it’s important to understand that both funders and buyers are going to be more conservative and more discerning. They are going to examine the brand closely before they fund or buy. They want to know exactly what they’re spending their money on and they’ll only do so if they’re sure it is a good value.

Wrapping it Up
So what does all this have to do with branding and strategy? The issue is that it is getting more and more important every day for branding to be an integral part of strategic planning in order to:

1. Understand how the marketplace perceives your business.
2. Create and deliver products and services that are aligned with the way your company portrays itself.
3. Have employees who live the brand with every customer touch point and who work productively together toward a clear and common goal.
4. Have customers who use word of mouth tactics to sing your praises when you deliver on your brand promise.

All this contributes to brand equity, which contributes to the bottom line because:

1. Customers will choose you over your competition.
2. Customers will pay more for your brand.
3. You’ll spend less money educating customers.
4. Customers will stay longer and tell their friends.
5. You’ll be able to hire more talented employees.

These must be strategic priorities.

You’ll also find several definitions of the word “brand”, most of which sound something like this one, which most people would agree doesn’t even begin to describe what branding really is: “A distinguishing symbol, mark, logo, name, word, sentence or a combination of these items that companies use to distinguish their product from others in the market”.

These days you’ll hear debate about whether marketers or consumers have more control over brands, theories about emotional brand attachment, stories of individuals creating their own personal brands, and (much) more.

Joe Strategy is not here to add to the clutter about branding and is not really a branding expert. But as small business strategic planning experts, our advice to small businesses is to think about the following concepts regarding branding and strategic planning:

A Better Definition – Your brand is really how your customers and the marketplace perceive you. If you’re doing a good job serving your market and in your branding efforts, then how you want to be perceived and how you are perceived are the same. You are delivering on your brand promise, and your “distinguishing symbol, mark, logo, name, word, sentence or a combination of these items” authentically reflects your promise.

Brand Equity is Real – While difficult to achieve and measure, there is no question that brand equity is a real thing and should be an important strategic goal for any business. When customers choose you over a competitor based on their perception of you without making a detailed price or other comparison with your competition; they are more likely to pay a higher price, renew, buy more and tell others about you. All of these actions contribute to the bottom line.

The Common Separation Between Branding and Strategic Planning is Not Productive – Historically, branding activities and the strategic planning process have been separate and disconnected. The Senior Leadership Team may be undertaking a strategic planning process at the same time that the marketing department is cooking up a new tagline or contracting with an outside agency to update the look and logo. This separation only leads to disconnects, discontent, and the erosion of brand equity.

Externally, if the company is not delivering on its brand promise; i.e. it is creating and delivering products and services that are not aligned with the way the company is trying to portray itself; the marketplace will know it immediately. It is as simple as not doing what you say, which is a fast way to lose credibility.

Internally, if employees at all levels don’t understand the brand the same way, then there are disconnects between how the product is marketed, sold and serviced. Customers feel lied to, marketing blames sales, sales blames marketing, and the service people blame them both. None of this is productive.

Brand Must be an Integral part of the Strategic Planning Model – The bottom line is that it is not possible to create a sound small business strategy without having a good understanding of how the marketplace perceives you and how that perception relates to customers’ needs and values. Ideally, in creating your small business strategy, you have a good understanding of what people need, that you can deliver, that they cannot get elsewhere. Then, your product/solution development process will create what your marketplace needs and your marketing/branding team will create the look, feel and messaging that authentically portrays your unique promise and value to the market. And, if you communicate your strategic plan and branding efforts throughout your organization, and it makes sense, your employees will reinforce the brand with each customer interaction. The product is marketed, sold and serviced according to the same promise and message.

Therefore – It is critical to understand brand perception in order to develop a sound small business strategy – which then should serve as the foundation of the branding efforts.

The owners of 37 Signals recently published Rework, a book that outlines their world view of business.  Anyone who follows the Company knows that part of their approach/strategy is to be provocative; they embrace the path less traveled and like to turn conventional wisdom on its head.  They see value in picking fights with competitors, embracing work/life balance and sadly, they shun planning.

In Rework an entire chapter (about 1 ½ pages) is dedicated to the topic of planning as guessing.  As 37Signals sees it, planning is nothing more than guesses, so why take waste your time guessing? As they note, “make decisions right before you do something, not far in advance”. I couldn’t agree more and if they left it at that I could agree with them.   Unfortunately, when people try to be provocative they can also end up becoming hypocritical if they are not careful; in the case of Rework, the authors have been hypocritical about planning because they actually promote planning within the book:

• Page 56; a business without a path to profits isn’t a business
• Page 59; you need a commitment strategy, not an exit strategy

I may be a bit naive and not quite understand what I am reading, but I am assuming that “path to profit” and a “commitment strategy” would both be considered plans of some type and likely long-term plans.  Given that, I was surprised when I read that one of the things that should be avoided are things like “long-term road maps” (page 62). Either I misunderstood what they were saying, or they are confused about planning. In all likelihood, it’s the latter.

I’m picking on 37Signals because as bright and successful as the Company and its owners are, even they misunderstand planning. Unfortunately, most people misunderstand it, which is why it’s easy for people to bash it; misunderstood things are easy targets and planning is probably one of the most misunderstood elements of business.

The reason for this can be traced to the very definition of the word plan: – a detailed proposal for detailing and doing something.  You should plan what you are going to do today or this week, not what you should do a year from now.  37Signals is right – a business plan or strategic plan that looks out for a long-period of time is a guess so why waste your time with it.

However, businesses need to be looking out long-term; they need to know what the path to profits is and they need to know what they are committed to.  The problem we face in communicating this is that the term planning, as historically defined doesn’t work for this necessary exercise.  Sadly, given its ubiquity we appear to be stuck with it.  Therefore, we are left with one option – we need to redefine the term “planning”.

And, that is what this site is about.  Joe Strategy isn’t about promoting strategic or business planning as we know it; it’s about changing the conversation and the perception of what planning is. It’s about identifying the best way for businesses to plan so they can create their path to profits and know what they and their organization are committed to.  It’s about helping businesses defining the outcomes they want to achieve, no matter how big or small.

As I write this blog, I hope you will join me in providing your ideas about how to accomplish this.

Therefore I wanted to offer this blueprint for strategic planning during a downturn. It is critical that businesses engage in strategic planning during difficult economic environments so that they 1) completely understand the realities and possible outcomes from the current situation, 2) they spend their money and time in the most productive manner, and 3) they capture opportunities that often arise through shifting market and customer circumstances.

The reality is that the strategic planning process during a downturn is not different than in good times, but there are nuances to the approach that will improve the chances of creating a winning small business strategy during a downturn.

We offer this step by step process for small business strategic planning during a downturn.

Step 1

The key element to the strategic planning process in a downturn or crisis is the attitude and approach taken when the chips are down. Some companies panic and make bad decisions (like cutting costs in the wrong places) while others create a sense of urgency which leads to smarter risk taking.

Our advice for small businesses begins with it being critical that you retain faith that you will prevail in the end, regardless of the difficulties; and that you confront the most brutal factors of your current reality.

Step 2

Understand that small business strategy development works like a filtering process and it must take a holistic approach by looking at and documenting:

1. External Realities – Understand customers, market conditions, competitive realities; all of the things that on the surface you cannot control.
2. Internal Factors – Understand organization specific issues and challenges and realities including people, systems, processes, infrastructure, capital, etc.
3. Market Realities – This is external. It is critical to understand the nature of your relationship with your customers and how the market perceives you.
4. Outcomes – Defines what you want to achieve.

Step 3

Engage in the Vann Group’s own strategic planning tool called “CORE”. We developed CORE because too many business leaders have been through too many “SWOT” (Strengths, Weaknesses, Opportunities and Threats) exercises through the years. When you do the same thing too many times, you come up with the same answers. During a downturn it is critical to trigger fresh thinking that stretches your comfort zone and is never tainted by “conventional wisdom”.

CORE is a strategic planning tool that frames the discussion in a fresh and more productive manner. It works like this:

1. Challenges – These are the areas of the company and industry that can adversely impact the company’s short and/or long-term performance.
2. Opportunities – Articulate the upside of the current circumstances for the company and industry.
3. Realities - These are the undeniable facts that impact the company. They are self evident.
4. Expectations – Given the reality of the challenges and opportunities, this is the essential understanding of the company’s prospects

Step 4

Use another strategic planning tool developed by the Vann Group called “It’s Good to be King!”. This is particularly useful in family owned or any business with a strong and dominant leader. Essentially, you provide all members of your strategic planning team with the ability to anonymously identify what they would do to improve the company if they were running the show with no constraints. Ask them to identify specific processes, practices, functions and strategies across functional areas, looking at:

1. Employees
2. Infrastructure
3. Business processes
4. Communication
5. Product/service development
6. Sales and marketing efforts
7. Financial and administrative management

This exercise will generate a goldmine of innovative ideas.

Step 5

Develop a deep and thorough understanding of your customers:

1. Who are they?
2. What do they need?
3. What do they value?
4. How do they measure that value?
5. How do they perceive you?
6. How does the market perceive you?

There should be two critical outcomes of this exercise. The first is to understand your brand – or the perception that your customers and the market have of you. It is important to be objective and honest that your brand is what exists not in your mind but in the minds of others. Brands are a critical component of small business strategic planning, because the strength of your brand will impact 1) the price that customers are willing to pay for your product, 2) the extent to which customers will be loyal to your product over your competitors, and 3) the extent to which customers and partners will referral you to others. The second outcome should be to identify how you can create and deliver additional value for your customers that they cannot find elsewhere. That is, what else can you do for your customers that they need and value that they cannot get elsewhere?

Step 6

Now, take all of the information and ideas that you have developed thus far, and engage in the 4 Actions Framework espoused by W. Chan Kim and Renee Mauborgne in their best-selling book, Blue Ocean Strategy.
The point of this strategic planning best practice is to identify what you can do to increase your value to customers (from step 5 above) while at the same time becoming a lower cost and more nimble operation by reducing or eliminating activities that are not valued by customers and therefore do not command a price high enough to create target profit margin. It looks like this:

• Eliminate: Which activities should be eliminated entirely?
• Reduce: Which activities should be reduced?
• Raise: Which existing activities should be further emphasized in order to increase value that will fuel the economic engine?
• Create: What new activities should be created in order to deliver greater value to customers that they cannot find anywhere else in the market.

Step 7

Lastly, you’ll want to test your hypotheses against your Hedgehog and your Big Hairy Audacious Goal or BHAG. Both of these strategic planning best practices were created by Jim Collins, the author of Good to Great and Built to Last.

A Hedgehog is a simple, crystal clear concept that flows from a deep understanding about the intersection of 1) what your company is passionate about, 2) what you can be best in the world at, and 3) what drives your economic engine.

According to Collins, a BHAG (pronounced bee-hag) is a 10 to 30 year objective that serves as a unifying focal point of effort and should galvanize people and create team spirit. It is crisp, compelling and easy to understand.

Thinking through the strategies developed in Step 6 against your Hedgehog will help you be sure that 1) you can energize your organization around these strategies (passion), 2) you can execute your strategies successfully (best in the world), and 3) you’ll be profitable (economic engine).

Understanding your strategies in this context will also help you to execute fast, because any business activity that does not fit your Hedgehog is irrelevant.

Similarly, tying your strategies to your BHAG will make you nimble and productive through the energy and focus that it creates among all employees.

In closing, our advice to small businesses is that these steps and concepts are important in all economic circumstances, but are especially critical during tough times. The more energy, objectivity and commitment to this strategic planning process taken by business leaders, the more successful the outcome will be.