business strategic thinking Archives

5 Reasons Why Every Business Should Have a Strategic Plan

Some great TV comedy moments were achieved during the David Letterman shows when he did the top ten lists. Some examples were: “Top ten least popular Broadway Shows: #10, Oprah-homa! ,” “Top ten least-loved Christmas Stories: #9, The Sweatiest Angel ,“ and “Top ten courses for athletes at SMU: #10 Subtraction: Addition’s Tricky Pal.”

Letterman’s writers and producer must have had a strategy when creating this idea, just like a business owner should have a strategic plan when running a business. If you are a small business owner without a strategic plan, here are the top five (not ten, because we’re on a budget, here) reasons why you should have one:

Businesses without a plan probably lack a purpose: Why does your business exist? Just to make money doesn’t cut it. Sure, we are in business to make money, but each business must also have a purpose. This purpose should infuse all business practices and should be obvious to clients. For example, if your business purpose is to bring integrated wireless technology to small businesses at an affordable price, your prospects must know that.
Businesses without a plan probably lack a vision: Instead of dream, strategize. Dreaming is a vision with no road to the rainbow. Strategy is dreaming using realistic facts concerning yourself and your industry.
Businesses without a plan probably lack a direction: You may think you know where you are going, but can you imagine where your business will be in ten or twenty years? Small business owners usually cannot see past the end of the month, or worse, past the next pay date. You may have a vision, but there are four horizons. Which horizon are you moving toward?
Businesses without a plan probably lack a culture which supports change: Owners cannot change a company unilaterally. They need to foster a culture that flexes with change in the direction of the vision. If business owners cannot design a plan, they cannot communicate it to their employees, and therefore, they cannot execute it.
Businesses without a plan probably lack meaningful tactics: If you don’t know where you are going, any tactics you establish will get you there. Businesses usually focus on tactics (how to do something), as opposed to strategy (where they are going). Therefore, the tactics are set up in a void. Just doing things, like increasing your advertising budget, is not strategic planning. There are many steps you must place together before implementing your tactics and establishing your metrics to measure them.

Small business owners must go through their own top 5 (or 10) lists when creating their strategic plans. If they don’t, the end result with be like a joke without a punch line.

(Reprinted from Money for Lunch–September 16, 2014)

https://www.moneyforlunch.com/5-reasons-why-every-business-should-have-a-strategic-plan-2/

Don’t use a Pineapple Upside down Cake Strategy to Increase your bottom line

Have you ever baked a pineapple upside down cake? It was one of my favorite desserts as a kid. You start the recipe with laying pineapple rings and cherries on a brown sugared baking pan base. You then pour the batter over this sweet foundation before placing it into an oven to bake. When you turned the baked cake over on a plate the pineapple is displayed on top.

Most small businesses seem to build their businesses like a pineapple upside down cake. They start with the items that are most visible in a business, like sales, the inventory, and purchase orders, and ignore the biggest part of a business like the processes, structure, and culture. Then they turn the business upside down expecting it to operate efficiently and to increase profits. However, the foundation of the business (the batter) falters. This may cause problems and decrease the bottom line.

I tell small business owners that the best way to increase your bottom line is to increase their top line. Not cut, cut, cut your payroll and operating costs. Oh, sure they should operate a business as efficiently as possible, but no business ever shrunk itself to greatness.

For example, let’s say a small business owner is not making as much money as she wants. So, to increase her bottom line, she “lays off” a couple of employees and shifts the excess work to the remaining employees. The benefit is that she may have a more efficient company earning 10% more net profit. The negative impact might be as follows:

Culture: Working employees harder unnecessarily might disrupt employee morale. The change also may lead to employee carelessness, quality-control issues, and theft.
Processes: If the company originally operated efficiently, a reduction in the workforce could disrupt that process. Quality control issues, again, may be affected, but not only because of a decrease of moral, but because of a process that requires “more hands.”
Structure: Employees need to know their responsibilities. A good structure (like an organizational chart), helps lay out responsibilities and accountabilities in a visual format. When you reduce your workforce unnecessarily, you may disrupt the known chain of command, thereby creating little vacuum pockets where nobody is responsible for certain steps in the overall process.

So what is a small business owner to do to increase the bottom line?

Act while business is booming: Don’t wait until there is an economic downturn before taking action to increase your business size or increase profits.
Think Strategically: The example above demonstrates the pitfalls of tactically thinking, as opposed to strategically thinking. Strategic thinking is what to do, tactical thinking is how to do it. A business should design and implement a strategic plan that projects to ten or twenty years.
Build from the unseen: As shown above, the underlying processes, structure, and culture were ignored when the business owner decided to increase her net profit. Start with what is not seen in a business and make that solid before moving on to more obvious tactics. Strategically set tactical pieces in motion.

With a growing business, you can have your cake and eat it, too, but you have to make sure you bake it properly.

(Reprinted from Money For Lunch–September 16, 2014)

https://www.moneyforlunch.com/dont-use-a-pineapple-upside-down-cake-strategy-to-increase-your-bottom-line-2/

The Magic of Disney: Where Business Theory Does Not Have To Be Just Theoretical or Theatrical

Have you discussed something on a theoretical level with someone only to realize it was just mental calisthenics? In other words, did that conversation deal with the REAL world?

I came across a Harvard Business Review article, What is the Theory of Your Firm? by Todd Zenger that put teeth into strategic planning. His article discussed Walt Disney’s 1957 Theory of Value Creation in Entertainment (seen here).

As I studied this 1957 vision, I realized that it fit well into one of the major steps of strategic planning: the vision. As Zenger said, “It’s founder had a very clear theory about how his company created value, which was captured in an image held in the company’s archives.”

As a small business owner or an artist, how you can integrate this into your strategic plan resulting in a single sentence that projects a 10-20 vision using horizontal or vertical integration?

Using Disney’s map as a template, it seems his original core were films. However, I could have argued that the theme parks had risen as a second core. In any event, they complimented each other. Next Disney drew satellite profit centers like TV, music, merchandising, etc.

But the magic of Disney were the lines that connected the main core to the satellites. They were his animated characters. It is like the theatrical film was the heart, the satellite profit centers (or assets) the organs, and the connecting Disney characters the veins and arteries.

From this, Zenger imagined that Walt Disney’s theory (or vision) could have been, “Disney sustains value-creating growth by developing an unrivaled capability in family-friendly animated (and live-action) films and then assembling other entertainment assets that both support and draw value from the characters and images in those films.”

The interesting historical fact pointed out by Zenger is that the power of this theory was revealed within 15 years after Walt’s death when the core film machine shifted away from animation. The whole empire slowed to a crawl. In my words, the heart stopped pumping, anemia set in and the organs suffered. Michael Eisner took charge in 1984 as the surgeon and rediscovered the theory generating film greats as The Little Mermaid, Beauty and the Beast, and The Lion King.

Zenger laid out three “sights” of strategy that compliment our strategic planning sessions:

Foresight: Projects where the industry and customers are heading in 10-20 years. Our Opportunities step addresses these developments.
Insight: Theory must be company specific so as to discourage copycats. The Threats step questions the competition’s abilities to steal market share.
Cross-sight: The combining of assets and theory, or as I like to say, Praxis (marriage of theory and practice.) Many don’t see this, but accounting can play a large role in this implementation.

Many strategy books deal with similar concepts from different points of view. The important part is that without a vision (theory) a business just flounders hoping to fall into a lucky opportunity.

Learn from the Big Shots When Designing Your Business Strategy

I recall reading Bill Gate’s book in the early 1990s about a device that will come to the market that you can use as a phone, a personal computer, a device to buy merchandise, and many other useful tools. And, it would be the size of a pocket book.

I could not have imagined that an iPhone would be such a big part of my life in about 15 years.

Well, another harbinger may be here in Apple’s purchase of Beat according to Owen Thomas’s article, Apple Bought Beats because Music is Dying. The article discussed Apple’s purchase of this steaming software as a growth mechanism. Beats is trying to bring back the “album-like” experience, not the soup of individual songs. Young people are not being moved by random song by song and are abandoning music as we once knew it.

This actually rang true for me yesterday when my 15 year old daughter discovered the Beatles and requested a phonograph player for her birthday so she can play our old albums. She experienced a new concept, “the Beatles album” and the various messages the Beatles were trying to bring across in one tight two-sided package.

These concepts can help any business when conducting their business strategy. Stop, trying for the home run and focus on winning the game. Regardless if you are an accountant or an artist, your customer should be feeling the message of what you are trying to get across. Here are some suggestions:

Always put yourself in the customer’s shoes. You must be honest. What are they feeling? What attracts them to your industry? What are they missing from you and others in your industry?
Don’t repeat history just for the sake of history. We always did it this way is not a reason to keep a product or service. The big shots in your industry may help you with their publicity.
Discard services and products that don’t meet the customer’s needs.
Refine your short list of services or products.
Project your company strategy and see if these decisions match.
Project the financial needs to implement your strategy.

When a large player in your industry predicts a change, you should take note. If you had told me thirty years ago that a coffee shop would be one of the leading “fast food” franchises, I would have laughed. Little did I know that the public had a need to hang out with good coffee.

Learning for big shots can help you aim better with yours.

Sailing Strategic In Order to Avoid Mutiny or Running into the Rocks

At nine years old, my cousin Bill and I learn to sail and eight foot sailboat that his dad made. The first thing that intrigued me was that you usually don’t sail a boat in a straight line to your destination. No, you “tack” back and forth zigzagging so the the sail is always facing the wind. Yet, you had one eye over the bow, and one eye on the distant horizon that may at 45 degrees to the boat’s bow.

The article in the McKinsey Quarterly, Building a forward-looking board by Casal and Caspar reminded me of the sailing because the article alert board members that they are spending too much time watching the direction of the boat, and the not the horizon that they should try to attain. According to them, ” Directors still spend the bulk of their time on quarterly reports, audit reviews, budgets, and compliance—70 percent is not atypical—instead of on matters crucial to the future prosperity and direction of the business.”

Now this insight is not different than what I have written about small and medium-sized businesses and their inability to strategically plan for the future. But the article did impress me with the future-minded chairman who must strategically create the board. The article states:

“Too often, vacancies on a board are filled under pressure, without an explicit review of its overall composition. An incoming chairman should try to imagine what his or her board might look like, ideally, three years from now. What kinds of skills and experience not currently in place will help fulfill the company’s long-term strategy? What, in other words, is the winning team? A willingness to look ahead expands the number of candidates with appropriate skills and heightens the likelihood that they will sign up if and when they become available.”

This concept is very similar to a Jim Collin’s mantra of “to get the right people on the bus” before you start strategizing. In other words, don’t focus on the future if you don’t have the personnel to help you envision it.

As a CPA firm, we have to look at the short term and historical aspects of a business in order to advise our clients from a managerial aspect. However, once we are satisfied with the state of the “books,” we turn our eyes to the long-term and focus on the distant horizon. Then once we assist the client in developing the long-term strategy, we run our eyes along the path from today to the horizon and establish benchmarks. As CPA’s we are in the proper position to monitor the company in light of these benchmarks to insure that the company is moving in the right strategic direction.

CPA firms usually don’t provide this service for small and medium-sized businesses because CPA firms usually only look historically at the financial statements and prospectively for only a few years. The CPA industry has to understand that they are wasting a vital role on items that will only benefit clients in the short run, if at all.

The same is true for company boards. Talent is wasted when focused on only short-term goals and endeavors. With the quick-moving world of technology, today, CPA s and board members must not focus on only their shoe laces. These types of businesses will be run over by those companies who include the horizon in their peripheral vision.

Business Ethics Start at Home, But Strategic Planning is a Music Industry Necessity

About ten years ago I went into my fifteen year old’s room and laid on the bed to talk to him while he was online. He told me was he had learned of this “new” music service where you can acquire music for free. It was called Grokster. After watching him for a few minutes I concluded that this was wrong behavior. I explained to him that this activity bothered me for two reasons: 1) It was stealing. He was not purchasing but “acquiring” music for free. and 2) I had music clients who made their living from selling the music they wrote and performed. I told him that he had to cancel his account and not use it. In its place, I made him and his following brothers and sister a deal. If they promised not to download free tunes, I would pay for all of their music purchased through a service. Fortunately, they did not go hog-wild and buy thousands of songs. Instead, they usually purchased the latest acts, classic rock , and jazz. Since I shared the music account with them, I was able to learn a lot about the latest acts and play jazz. The practice still lives today with child (daughter) number four, but I really don’t care to listen to Justin Bieber. Still, honesty prevailed and they learned that conventional wisdom is not always wisdom at all.

However, according to Paul Resnikoff’s article, Technology didn’t kill the Music Industry. The fans did… , we were in the minority. Mr. Resnikoff’s article focused on educating the public as to the value of music and the unethical and illegal practice of stealing it.

Though I don’t disagree with Mr. Resnikoff about educating the public, I believe it is the wrong strategy to help the musician. People will always rationalize the theft of music, unless they get caught and pay penalties. That is an enforcement issue that is outside the scope of this article.

Instead of bailing water out a sinking boat with a tea spoon, the budding musician should learn how to strategically plan their career. The new musician cannot make music the old tried and true ways. Those days are over.

For example: Cirque du Solei changed the circus industry. Their strategy resembled the Blue Ocean Strategy. They focused on what attributes their circus customers wanted, (e.g., clowns, acrobats, and music) and discarded attributes that customers did not want (e.g., animals, big name lion tamers, and 3-rings). The result: a new type of entertainment that stole market share from plays, sporting events, and amusement parks.

The musician must reinvent the appetite for music. For example, who would have guessed 40 years ago that The WHO and other bands would sync license their music for substantial money on television shows and commercials? I don’t recall many doing that in the 1960s.

To be a “successful” artist or business person in capitalism, strategic planning must be done on both an individual level and industry level. Right now there is no strategy in the music industry to save the musician, and likewise, there are hardly no strategies on the individual level to save the music industry. Both are needed and must be interrelated.

Be an “Opportunist” and Put the “O” Back in SWOT

Did you ever catch a baseball at a professional baseball game. I had attended Dodger games since I was a kid, and never even got close. The odds of catching a ball changed depending on where you sat. However, no matter how great the odds were, I would bring my ball glove. Nothing came close, except when I became a father.

Then one day, I was walking down the steps behind home plate with a Carnation frozen shake (my favorite Dodger concession) in each hand. Before reaching my family, I heard the crowd cheer above me when a foul ball hit the upper level. The fans failed to catch it letting it escaped down to my level about twenty steps above me. As I turned, I watched a baseball bounce down the steps toward me. To heck with the malts, I dropped them splattering on the ground and fell to one knee to field the grounder like I was taught in Little League. My opportunity had come and I was ready.

Most small and medium-sized businesses probably don’t prepare a strategic plan. If you did, you would probably include a common tool: SWOT. The SWOT tool looks at your company’s “Strengths, Weaknesses, Opportunities, and Threats. Many companies usually list the SW, and T. But opportunities? That can be tough. The probably with this is that companies only look to their existing markets, and not leverage their product or expertise in other markets.

Take music for example: Songwriters and producers are banging their heads on the wall trying to get a share of a shrinking market. Yet, they don’t realize that they may have the tools to use music in a different way. Take Song Pong, for example. Song Pong is a music based social media game allowing users to communicate through music. The players can pose a challenge, share favorite songs, or deliver dedications. Song Pong utilizes personal music libraries and the 26 million song in the iTune store.

Now, I am not saying that you should not pursue your passion, but sometimes your passion can be an opportunity that you have not discovered. Michael Gorton, owner of the Song Pong app focused on the connectivity of music instead of producing its content.

So, how do you start? You start by looking at the needs of the public. Start with what you are producing and what is needed. Discard with is not needed and us the tools of what is left to inquire into several new markets.

Killing Me Softly With His Song: How the Social Media Strategy Is Killing Some Bands

Abraham Maslow stated in 1966, that if the only tool you have is a hammer, you would be tempted to treat everything as a nail.

Such is the case with social networking. If all you strive for are “followers” and “likes,” you are using the social networking the wrong way. You are using it as a hammer to pound non existing nails.

Such is the jest of the article Are you Guilty?–4 Ways Indie Musicians Are Killing Social Media by Joshua Smotherman. Smotherman exposes the practice of “Me, me, me Marketing.” No social conversation, no interaction, and most of all, no benefit to the reader.

Regardless if you are a band or a bar, you must engage your audience in something that can help them. It might be something educational like videos of band rehearsals, or the manufacturing of your product. Your reader (or viewer) walks away a more educated person.

Don’t make yourself the center of the hub because you are selling yourself. Instead, be the center of aiding the reader. “Seduce” readers into your world, don’t force them. If you offer something for them to use, they will find YOU useful. If you offer them only you, they will find you boastful.

Become the expert, not the exhibitionist. Advise others who seek your expertise, don’t pitch them for their attention. Your assistance will make you the expert, and you will build a loyal following.

The trick really is to weave what I have stated into your web page, blog, social network, videos, and appearance into your marketing strategy. Everything should be interrelated and substantially greater than if you did each one independently. Everything must tie into every “other” thing. You should not have a piece of the tactics sitting out in left field not integrated into the rest of the strategy. If you can’t integrate it, dump it.

Musicians and other business people must understand this going forward because at least one of your competitors will.

“The Most Stolen Song of All Time” Could Just Be A Common Small Business Pitfall

Bobby Owsinski’s article, The Most Stolen Song of All Time is a playful little article that talks about how a common four chord progression can be use for so many pop songs starting with “Don’t stop Believing” by Journey. For you musicians it is I, V, VIm, IV, or if you are playing on an ipad(iphone) keyboard, play F-C-Dm-Bflat. However, the chords just don’t make a song. You need melody, rhythm and usually lyrics.

But this isn’t so in the world of small and medium-sized businesses. So many play the same “chords”: “What are my sales, and do I have enough money to make payroll?” When I say this to business owners, most agree, but some think that because they are the best (or at least think they are the best) at what they do, then anything else is irrelevant. To this comment, I recall a quote from Michael Gerber’s The E-Myth’s fatal assumption: “if you understand the technical work of a business, you understand a business that does that technical work.”

This false assumption goes hand and hand with the owner that refuses to relinquish control and delegate. That owner does not think like an entrepreneur. Some may never reach this mind set. This mindset is strategic thinking. Like my friend, Dr. Stan Abraham writes in Strategic Planning, A Practical Guide for Competative Success:

The five principal dimensions of strategic thinking to consider are:

How to be different
Being entrepreneurial
How to find more opportunities
Being future-oriented
Whether to be collaborative

These points hardly occur to a technical business owner imprisoning him (or her) in a timeless cycle of mediocrity. Their whirlpool movements never get them to a destination because they don’t look for a destination. They just churn and churn and churn until they either go out of business, or quit.

Strategic planning is the best step to take in moving downstream. Business owners cannot play the same four chords expecting to create a new song.

Alfano the Great and the Strategy of a Spectacular Thrill Artist

My Grandfather, Louis Alfano, was Alfano the Great. Yes, all our grandfathers probably had great long tales that expanded with time, but my grandfather had proof. He would work as a tight-rope walker in the 1920s between two buildings in Chicago. When asked about it fifty years later, he would say, “Oh, don’t remind me. I can’t believe that I did such a crazy thing.”
Still, ninety years later, Alfano the Great can teach us a little about strategy. Imagine if he went through the strategic planning steps in fulfilling his vision. I’ve pulled some steps from Johnson and Smith’s 60 Minute Strategic Plan to guide us. Here is something like it would go:

Issues: The issue that my grandfather would have to solve is how he could adequately entertain people for money without killing himself?
Assumptions: You would assume that he has some experience, talent, and good equipment. Without these three aspects, he would not have a chance of addressing his issues.
Vision: �His horizon is to reach the other building and prove that he is the greatest spectacular thrill artist in the world . He had to make it there in one piece without compromising the entertainment value.
Beneficiaries: The biggest beneficiary was the department store that hired him to bring people to their front door. Other stores on the street can benefited.
Obstacles: Wind, distractions, or a cable break could cause failure, and what a failure that would be. These obstacles are external to him.
Gauges of success: Obviously getting to the other side multiple times by foot and bicycle were the biggest indication. Another gauge could have been the audience applause.
Opportunities: Good weather was a great opportunity, expecially if the wind was not blowing off Lake Superior. This too was an external attribute that can affect his degree of success.
Strengths: He had determination, poverty, and tricks of the trade to fulfill his vision. He said that he deflated the bicycle tires to get a better grip on the cable when crossing.
Weaknesses: Fear may have been an internal weakness. Maybe a lack of experience, also.
Strategy: Alfano the Great’s strategy was to perform six different acts across the wire: Hand over hand; hang by his feet; a quasi-handspring; ride a bicycle to the other building; perform “arms” with a rifle, discharging it; and slide down a wire to the ground head first.
Tactics: Training on the ground, rigging equipment for a higher chance of success, and obtain accurate weather forecasts. These are some of the tactics Alfano the Great needed to be “World’s Greatest Spectacular Thrill Artist”

How do you approach the strategy for your business or life?

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