Post on 19-Dec-2015
AGENDA
Review Simulation Results Fundamentals of Planning
• Goals:• To understand the relationship between strategy,
plan, and execution• To understand the components of a good plan• To assess the strategic readiness of select plans• To make the numbers believable
Tomorrow: Basics of Project management • Please install OpenProj (http://openproj.org/openproj)
Tools
Readings• Mintzberg “Fall and Rise of Strategic
Planning”• Kaplan/Norton “The Office of Strategy
Management”• Kaplan “Resource Capacity Planning”• McGrath/McMillan “Discovery-Driven
Planning”
MCI Case
Mintzberg on Strategic Planning
Observations:• “Strategic planning isn’t strategic thinking”
• “One is analysis the other is synthesis”• “Real strategic changes requires inventing new
categories, not rearranging old one”• “Planning is a calculating style of management,
not a committing style”• “Planning has often been used to exercise blatant
control over business managers”
Mintzberg…
The Fallacies of Strategic Planning• Fallacy of Prediction
• Can planners forecast with any accuracy?
• Fallacy of Detachment• The idea that strategy must be detached from operations• A strategy can be deliberate or emergent (and probably has
elements of both)
• Fallacy of Formalization• Formal procedures will never be able to create novel
strategies• Do we think then act or act then think? Effectuation logic…• Should be called strategic programming
Mintzberg…
Planning as Strategic Programming• Codification
• Clarifying strategies in operationally relevant terms
• Elaboration• Breaking down the codified strategies into projects and
action plans (i.e. the non-routine aspects of organization)
• Conversion• Restating objectives, reworking budgets, reconsidering
policies, and standard operating procedures (i.e. the routine aspects of organization)
• Benefits: • Focus, coordination and communication (internal/external)
Mintzberg…
Other roles for planners• As strategy finders• As analysts
• Carrying out analysis of specific issues– The quintessential MBA?
• As catalysts• Getting others to question conventional wisdom
and think about the future in creative ways
The Office of Strategy Management
Statistics• 67% of HR/IT department strategies don’t reflect
corporate strategy• 90% of frontline workers not compensated for
success of strategic priorities• 95% of workers don’t know or understand the
strategy• 60% of organizations don’t link budgets to
strategies• Are you surprised?
• How big of an issue is this for your organization?
OSM…
Sher’s view• “…while many people believe that chief executives
wield direct and easy influence, the reality is that any CEO has a difficult time influencing his or her organization”
• “I want to exert my influence indirectly…I don’t command any parts of the organization”
• “Information, particularly bad news, is filtered before it gets to me”
• “we were spending way too much time debating the quality of information”
• “much of management is the search for the truth”
OSM…
What good OSMs do• The OSM is a facilitating organization, not a
dictating one (uhuh!)• Roles
• Create and manage balanced scorecard• Align the organization (cascade BSCs – rare)• Facilitate monthly strategy reviews• Develop and communicate strategy• Manage strategic projects/initiatives• Integrate strategic priorities with other depts
– Budgeting, HR alignment, knowledge mgt
MCI…timeline
Evolution• 1960s to 1980 – battles with AT&T and
regulators• 1984 – decentralization to compete with
Baby Bells• 1986 – crisis• How did the strategy process evolve over
this time?
MCI…
1990s – globalization, new technologies, sophisticated customers• How should MCI alter its strategy processes
to cope with these growth opportunities?• What do you think of the goals in Exhibit 5?
Resource Capacity Planning
MBA assessment issue• No concrete data-driven recommendations
Linking strategy to operations• Typically 90% of corporate spending on routine
operations (OpEx) vs StratEx• Four steps:
• Derive sales forecasts for strategic plan• Translate into operating plan• Use time-based ABC to forecast resources• Derive budgets for operational and capital spending
(see DA example)
Discovery-driven planning
New ventures…• have a high ratio of assumptions to
knowledge• often deviate from plans because
assumptions are wrong
Traditional planning bakes in assumptions• Companies don’t have hard data but proceed
as if assumptions were facts• When they do get data they often don’t check
assumptions
Discovery-driven planning
Reverse income statement• Start with required profits
• We want to generate $100K in additional profit• Necessary revenues if 10% sales margin = $1m• Allowable costs with 10% sales margin = $900K
• Calculate per unit figures• Required unit sales at $100 per unit = 10,000• % of market = 10% of US market per year• Allowable costs per unit = $90
Next steps
Estimate expenses• Cost of sales
• E.g. Unit sales / size of order = no. of orders• Sales calls per order x handling time = no. of staff
• Cost of manufacturing• Cost of shipping/warehousing• Capital expenditure/depreciation
Allows you to identify and track assumptions Plan to test assumptions at milestones with a
“keeper of the assumptions”• http://faculty.unlv.edu/phelan/MGT709/ShadBusinessPlanningModel2005.xls
Strategic Readiness Audit
You need to analyze your chosen plan for its strategic readiness• By that I mean the ability to execute on the
plan
What makes a plan more executable? • What ideas have influenced you the most in
the readings?• What things would you look for in a plan?
• What are some red flags?