Wednesday, September 17, 2008

Analogy #209: Draw A Bigger Circle

THE STORYOnce upon a time, there was a politician who wanted to clean up water pollution in the local rivers. He decided that he would have greater success if he started small. Therefore he took a map of a large river in his district and drew a circle over a portion of that river.

“There,” he said. “I will start by making all the river water within this circle pollution-free. Once that is done, I’ll move to another circle until the whole river is clean.”

The politician passed all sorts of laws making it impossible for anyone to do any sort of polluting within the boundaries of that circle. Proud of himself, he later went to check on the quality of the water within that circle. To his dismay, the politician discovered that the water was more polluted than before.

“How can this be?” the politician cried out. “I banned all polluting activity within that circle.”

Upon further investigation, he discovered that:

1) There were factories on the shore of the river just outside his circle that were pouring tons of pollutants in the river.

2) There were tributaries to this river that were bringing polluted water into the river. These tributaries were also outside the area in the drawn circle.

3) There were polluting activities upstream from the circle that flowed into the area inside the circle.

At this point, the politician realized that he could not solve the problems of the water inside his circle without also tackling issues occurring outside the circle.

“I guess I drew my circle too small,” sighed the politician.

THE ANALOGYThe strategic planning process is a tool to help improve the performance of our business. This is similar to the politician’s goal of trying to improve the quality performance of that river.

The politician’s mistake was that he tried to fix the problem by only looking at the area inside the circle. He failed to realize that his little portion of the river is connected to a lot of other areas. These other areas had a significant impact on the quality of that river’s water. By ignoring the outside influences, he was unable to control the internal results.

The same is true in business planning. Our goal may be to improve our firm (or brand or division or product’s) performance. However, not all of the factors which influence that success fall within the direct control of the firm (or brand or product). Outside influences are important.

Therefore, as we develop our strategic planning, it is important that we do not draw our circle of planning too small. The process needs to be inclusive enough to cover not only our own internal team, but the major influencers as well.

THE PRINCIPLEThe principle here is that interconnected solutions work best if all the interconnected pieces are a part of the planning process. So the question we must ask ourselves is this: How big is the circle of people involved in our planning process? Is our circle large enough?

In this blog, we will look at four groups you may want to consider adding to the list.

1) EmployeesThere are two reasons why it is important to get employee feedback into the planning process. First, employees are your eyes and ears out in the areas where your products/services are produced and sold. They see things that may never make it to the secluded offices at corporate headquarters. They know things you do not know. This knowledge and insight can be very valuable in creating a strategy most appropriate for the “real” world (which may look different from the “perceived” world in the minds of the leaders at the top). Take advantage of that resource.

Second, the employees are the ones who have to do a lot of the work to make the plan a reality. If they are not solidly behind the strategy, they may not be as effective at implementing it. By contrast, if they had a stake in creating a strategy, they are more emotionally attached and motivated to making it come to life.

2) PartnersToday’s business activities are far more interconnected. Larger pieces of the business are outsourced to various outside partners. In addition, financial partners have a desire to become more active and involved in how the business is run. More and more of your success is dependent upon these partners over which you do not have full control.

If you do not invite your partners to the planning table, they may not be able to fulfill their role in making your strategy a reality. For years, Microsoft and Intel worked closely to ensure optimal performance for their own individual business. Microsoft knew that if Intel did not supply sophisticated enough chips, there would not be the ability for computers to run the next generation Microsoft software. Similarly, Intel knew that if Microsoft did not invent more complex software, there would not be demand for their more sophisticated chips.

Since each company’s success was dependent upon the actions of the other firm, there were benefits to working this out together.

The new Boeing Dreamliner airplane is being built with cooperation of an extraordinarily large number of outside partners. Significant delays are occurring due to the difficulties of coordinating the activities of all of these outside partners. The better you can jointly plan these activities, the smoother the cooperation.

3) SuppliersThe same principle applies to suppliers. In this just-in-time world, it is difficult for a supplier to meet the demands of your plans if they are not aware of what the plan is. Even more important, if you let the suppliers in on the planning process up-front, they may have suggestions on how to do it better, based on their unique perspective and superior knowledge in their own field. This point may be even truer with partners.

The Japanese auto industry shows some of the advantages of working more closely with suppliers.

4) CustomersIn today’s environment, customers are demanding a greater say in the operations of the businesses they patronize. Digital technology is making it easier to create interaction between customers and companies. For example, Dell has used web 2.0 consumer conversations to help them understand what the customer really wants. Dell’s latest product introductions are a direct result, offering some of the most wanted features.

There are many ways to include the customers in your planning process. The good news is that the more the consumers are involved in the brand, the greater the emotional attachment to the brand. This should improve customer loyalty. In addition, it’s no small benefit if the interactions create a strategy more in tune with the marketplace where the money is made.

This is not to imply that all of these people (employees, partners, suppliers and customers) need to be a part of the entire planning process. Yet, it amazes me how often these players are not a part of any of the planning process.

Who do you invite into your planning circle? What is the list of people invited to sit at the planning table? Is it big enough?

SUMMARYIndividual company/brand/product success depends not only on the internal actions of your business, but also upon the actions of numerous parties on the outside. Your chances of success in having a successful strategy improve if these outsiders are invited to the planning table. First, they bring knowledge and insight from their unique perspective. This knowledge can improve the quality of the plan design. Second, by being a part of the plan, they should be better able to execute their portion of the plan.

FINAL THOUGHTSSome problems are so large that it may be necessary to even work together with your competitors. For example, it may be beneficial to get the government to change its stance on issues related to your industry. Therefore, industry associations and lobbying groups may also be people to include in your planning circle.

About Me

I have over 25 years of experience, having worked in strategy with a number of leading US retailers. You can learn more about me by visiting my digital resume (www.VisualCV.com/geraldnanninga) of the site for consulting (http://planninga-from-nanninga.webs.com)