EXECUTIVE SUMMARY: The bigger your company, and the faster it’s growing, the harder it is to keep everyone on the same page. The problem, of course, is that there isn’t a single page around which to align. Instead, there are likely more than a dozen actual and imaginary ones, along with memos and emails, each purporting to describe your company’s vision, values, strategies, goals, and priorities. Many of these messages may be riddled with unclear and even contradictory statements about your company’s identity, what it does, and how it accomplishes this. This chapter will introduce you to the One-Page Strategic Plan (OPSP), updated since it was first introduced more than a decade ago and used by more than 40,000 companies worldwide. It’s a simple yet powerful tool that helps you edit down your vision to a single, action-oriented page. We’ll also introduce the SWT, a tool to augment the traditional SWOT analysis as you prepare your OPSP, along with a Vision Summary which provides a succinct way to communicate your vision.
The One-Page Strategic Plan (OPSP) has been critical to the growth of JSJ Corporation, the Michigan-based parent company of six durable-goods firms. With 2,700 employees spread out around the world, the family-owned firm, which is approaching its 100th anniversary, began using the OPSP in 2006.
After hearing about the OPSP, Nelson Jacobson, the CEO of JSJ, sent the company’s head of organizational development to a two-day “Mastering the Rockefeller Habits” workshop. Executives also spoke with leaders of a local company who were using it, to learn how the tool had helped them scale up and manage business performance.
“I had been the chief operating officer of JSJ since about 2000,” recalls Jacobson, a member of the third generation of one of the founding families. “We went through the post-9/11 recession. At that point, it became a very different company. When I became the CEO in 2005, I was searching for a tool that would make us a more cohesive operating entity. The OPSP gave us a way of tracking and driving business performance.”
Confident that the OPSP could help JSJ grow cohesively, Jacobson introduced it to his seven-member leadership team. “I was looking for something to bring the company together,” he recalls.
Each of JSJ’s six companies has a different focus, so each creates and updates its own OPSP. These, in turn, influence JSJ’s plan for the entire company. There is a rhythm to this: Each business typically develops its own plan in time for the company’s Annual Operating Planning session in October. Over the next several months, the six companies’ plans get finalized, so JSJ can utilize them to further shape its own plan. JSJ’s plan, in turn, becomes final at a February board meeting.
Jacobson says the OPSP helped the leadership team make one of its toughest decisions: to sell one of its companies, a lithographic printing firm in California. “It helped us to evaluate which were the right businesses to hold,” he recalls. “That one didn’t fit.” Fortunately, the parent sold it at a good time. “We used those funds to invest in and grow the remaining businesses,” Jacobson says.
JSJ’s efforts have taken commitment, but there’s been a big, measurable payoff. The company has developed new technologies, launched additional product lines, and expanded geographically as a direct result of decisions it made while using the OPSP. “We’ve had continuously improving profit and growth since we started,” says Jacobson. “The OPSP has brought better alignment, accountability, and execution.”
In this chapter, we’ll examine in detail the components of an effective OPSP, and how JSJ and tens of thousands of other firms have used it to drive engagement, alignment, and focus throughout their organizations. But first, we want to introduce a simplified version of the OPSP: the Vision Summary. Many companies can start with this and then progress to the more comprehensive OPSP as their sophistication in strategic planning increases.
The Vision Summary provides a simplified OPSP framework for companies just getting started with implementing the Rockefeller Habits and for firms with 50 employees or fewer. For larger firms that are taking advantage of the more detailed aspects of the OPSP, the Vision Summary provides a one-page format to communicate key aspects of the company’s vision to employees, customers, investors, and the broader community.
At scalingup.com, you can download a copy of the Vision Summary without the Gazelles logo in the upper right. Then list the following for your company:
• Core Values
• Purpose
• Brand Promises
• Big Hairy Audacious Goal (BHAG®)
We detailed these strategic components of the Vision Summary in the two previous chapters in this “Strategy” section. They represent the key components of the company’s vision that every employee should know and understand thoroughly, making this summary useful as a key onboarding tool for new employees.
Under these components is a place to list the strategic priorities. In the first column, list the three- to five-year Key Thrusts/Capabilities from the OPSP. These are the handful of major medium-term priorities, which we will describe in more detail later.
In the middle column, list the year’s #1 Priority and the Key Initiatives necessary to achieve it. And in the last column, list the quarter’s #1 Priority and the “Rocks” required to reach this goal. We will provide more detail on how to set these priorities in “The Priority” chapter.
These strategic components and priorities provide a quick snapshot of the company’s vision. Underneath them is a place for every employee or team to personalize the plan. There, they can list a handful of key performance indicators (KPIs), priorities, and a Critical Number for the quarter, which should support and align with the company’s vision. These come from decisions made when completing the last column of the OPSP, and we detail them later in this chapter, as well.
We encourage team members to post this Vision Summary in their cubicles, their offices, or the cabs of their sanitation trucks as visual reminders of the organization’s strategic plan and their part in making it a reality.
Many people have dreams. However, a vision is a dream with a plan: a One-Page Strategic Plan.
To flesh out the vision, you need to answer seven basic questions: who, what, when, where, how, why, and the often challenging question, “But should we or shouldn’t we?” These questions anchor the seven columns of the OPSP. If you ever feel confused by the terminology that comes with strategic planning, always come back to these seven simple questions.
“A vision is a dream with a plan.”
The terminology can be hard to follow. We are working to get our industry to align around a common language, agreeing on standard definitions of vision, purpose, values, priorities, etc. We are also using the OPSP to integrate the various visioning frameworks of thought leaders like Jim Collins, Gary Hamel, Jack Stack, and Stephen Covey, to name a few.
The tool is designed to align both horizontally and vertically, providing a logical framework to organize your strategic vision and guarantee that you have all the pieces to make it whole. The physical structure of the OPSP forces prioritization and simplicity. There’s not a lot of space to write, so you must be concise.
As you fill in the document, think of it as a giant crossword or Sudoku puzzle. Figure out what you can, and let that help you determine the rest (e.g., Purpose and Brand Promise will triangulate back to the BHAG®). “Get it down; then get it right” is our mantra. A good plan now is better than a great plan too late.
There is one other important design element to the OPSP. Jim Collins discovered that enduring companies operate with a dual dynamic that he labeled “preserve the core/stimulate progress.” This duality is built into the OPSP. The first three columns describe the core, which holds steady over time. The balance of the plan, as you move right, becomes more dynamic, stimulating progress to meet the trends, opportunities, and challenges of the marketplace.
To summarize, the OPSP process provides the organization with:
1. A framework that details your corporate vision.
2. A common language with which to express that vision.
3. A well-developed routine for keeping the vision current.
To get started with the OPSP, download an editable document, available in various languages from scalingup.com. If you print it out, place the first page to the left of the second page. This will give you a continuous single-page document on an 11-by-17-inch (A3) piece of paper. It will be helpful to have a physical copy as you read this chapter (a three-quarter-size copy appears at the front of the “Strategy” section). A sample completed plan can also be found at scalingup.com.
NOTE: The OPSP is for internal consumption. It’s designed to help a team get the technical aspects of the strategic plan correct vs. craft marketing messages (e.g., taglines). However, once you construct the plan, it will be faster and less costly, if you are using an outside marketing or ad agency, to create the external messaging to communicate your vision to employees, customers, and the broader community.
OPSP Experiences: Holganix, Markitforce, and Towne Park
Barrett Ersek, co-founder of natural-lawn-care firm Holganix in Pennsylvania, has created five companies over 20 years, his first when he was 17 years old. He describes the OPSP and other strategic habits of this methodology as a blueprint for what he needs to do to grow his business. “When I was in my 20s, I was running a business with a checkbook in my back pocket, and then for the first time in my life, someone gave me an instruction booklet,” he says.
For Alan Higgins of Australia-based Markitforce, a point-of-sale and warehouse fulfillment firm, the OPSP is an “automatic decision-making machine.” The founder and chief engagement officer notes: “If there’s ever a fork in the road or a decision to be made, we refer back to the tool to see if we’re on strategy. If we’re not, we chat about whether we should walk away from the opportunity.”
The OPSP is one of the most valuable tools at 9,000-employee Towne Park, a hospitality services firm based in Maryland, according to founder Jerry South. “It allows me to think strategically about the business and compartmentalizes some of the big decisions we are wrestling with and breaks them down to bite-sized pieces,” South says. “Plus, it creates the clarity needed around what’s important in the business.”
Let’s walk through the seven columns of the OPSP:
Column 1 (Should/Shouldn’t): Lists a handful of rules defining the boundaries for decision-making — the Shoulds or Shouldn’ts represented by the Core Values.
Column 2 (Why): Expresses the impact the company wants to make in the world (or neighborhood), providing the meaning — the Why — behind everyone’s efforts. It requires two main decisions:
• Purpose (often referred to as “mission”): the aspirational North Star or Southern Cross providing direction to the business
• BHAG® (Big Hairy Audacious Goal): the measurable piece of the Purpose that the business can achieve in the next 10 to 25 years
Column 3 (Where): Defines Where the company is headed in the next three to five years. Includes a description of the Sandbox in which the company wants to play (e.g., in terms of customers, geography, and product/service mix) and its measurable Brand Promises to those customers. It also summarizes a handful of major Capabilities and Key Thrusts the company must pursue.
Column 4 (What): Describes What results need to be achieved in the next 12 months. These are driven by a measurable #1 Priority (Critical Number) and a handful of “Rocks” (see Pages 132-133).
Column 5 (How): Details How the company plans to achieve its vision, focused on a measurable “next step” 90-day #1 Priority (Critical Number) and a handful of “Rocks.”
Column 6 (Finish Lines and Fun): Describes the theme, celebration, and rewards associated with the #1 Priority for the quarter or year. The theme celebrations give everyone a definitive finish line and a chance to have some fun.
Column 7 (Who): Delineates Who is accountable for various aspects of the OPSP, detailing the KPIs, Rocks, and Critical Numbers for each employee or team. Last, the When question is represented by each column’s time frame.
Alignment and clarity start at the very top of the OPSP with the Organization Name. Organizations must align around a name that customers and employees (including the receptionist answering the phones) can remember and say. Finding that everyone called the company FedEx, Federal Express changed its name. Minnesota Mining and Manufacturing worked for a while, but the corporation is 3M today. HVLS Fan Company, whose large industrial fans were designed to be high-volume and low-speed, adopted the name Big Ass Fans after years of having customers use that moniker instead. Today, the business — recently renamed Big Ass Solutions — is one of the most widely recognized, fastest-growing companies in its niche. Other companies have exceedingly long and complex names that include generic terms like “Group” or “Inc.” which no one ever uses. Consider dropping those extra words.
The “Organization Name” line can be used to signify whether the strategic vision applies only to a division or department within a firm. At JSJ, each of the six companies will list its respective name (e.g., “Sparks, a JSJ Business”).
Finish the title area by adding your own name and the date. A few key points:
1. Some of you have names that are difficult to pronounce and spell. It might be best to simplify them, like many of our clients in Malaysia who go by their initials (hi, H.K. and C.K.!) or like my friend Nick Alexos, whose original name was Nicholas Alexopoulos. Or mimic performers and consider adopting a more memorable and business-friendly nickname (Gordon Sumner is known the world over as Sting).
2. To eliminate confusion over whether the month or day is listed first in the date, we suggest trying the global standard used by Cisco: the two-digit designation of the day, followed by the three-letter designation of the month, and then the four-digit designation of the year (e.g., 02 Feb 2022.)
We hate to be so picky, but alignment starts with getting agreement on the organization’s name, your name, and the format of the date.
Along the bottom of the OPSP is a place to summarize the company’s top three inherent Strengths/Core Competencies and Weaknesses. There is also room to highlight the top six trends that will likely hit the company and its industry like meteors. These serve as the foundation upon which the Vision is built. Later in this chapter, we’ll introduce a new one-page SWT tool to help you fill this in. It supplements the age-old SWOT that companies have used for decades.
Moving up to the body of the form, list the firm’s Core Values in the first column. These three to eight phrases broadly define the shoulds and shouldn’ts that govern your company’s underlying decisions and describe the personality of the organization. “The Core” chapter discusses in more detail Core Values and how to use them to drive the people (HR) systems inside your company.
NOTE: Do not feel compelled to call these concepts Core Values. Label them however you like: beliefs, rules, the HP Way. The key is to figure out what they are so your team can utilize them to keep the culture strong and drive decisions as the company scales.
If the first column represents the soul of the organization (or organism), then column 2 presents its heart. Column 2 answers some very basic Why questions: Why is this company doing what it’s doing? What’s its higher purpose? Why should I have passion for what we’re doing?
It also provides a clue as to why certain seemingly small incidents send the founder into a tirade, while other situations, which may be bigger and more costly, slide by almost without comment. For example, Gazelles’ Purpose revolves around the word “freedom.” A situation that challenges our freedom, such as unnecessary bureaucracy, absolutely brings up the hair on the back of Verne’s neck.
Find what rankles the CEO in your firm, and you’ll have a leg up on figuring out your company’s purpose. An example is Wal-Mart’s purpose: “To give ordinary folks the chance to buy the same things as rich people.” Sam Walton, founder of Wal-Mart, was bothered by the inequality between the rich and poor and had a passion for giving people in rural areas access to reasonably priced retail goods.
Again, “The Core” chapter provides more detail on how to determine the company’s Purpose and how to use it to create a stump speech the leadership team can use to ignite employees’ hearts.
Under the Purpose on the OPSP, you’ll see an “Actions” section. It’s easy for companies to create a list of Core Values, Purpose, and BHAG®, and then forget them. This “Actions” box is meant to drive a quarterly conversation about what’s necessary, in the short run, to keep these long-term Vision items alive in the company and generate a handful of actions to bolster these core elements.
We had a client with a Core Value that emphasized the importance of having some “serious fun” as part of its culture. Having just gone public (which is no fun), the executive team decided at the next quarterly planning session to present the employees with a foosball table as a symbol that they didn’t want to lose this fun aspect of the culture just because they were now part of a public company.
This is the kind of specific action item you would list under “Actions” in the Purpose column — specific ways to reinforce the Core Values, Purpose, and BHAG® in the next 90 days.
The Profit per X and BHAG® (Big Hairy Audacious Goal) were discussed in detail in “The 7 Strata of Strategy” chapter. To review, the Profit per X is a single KPI that represents the company’s primary economic engine (e.g., the driving element of the business model). Southwest Airlines, for example, has a relentless focus on profit per airplane vs. other airlines’ focus of profit per seat or profit per mile. The BHAG® represents the quantifiable 10- to 25-year target that aligns with the Purpose and Profit per X.
The key is for everything to align in column 2 and tell a compelling story that excites and engages the people to scale up the business. For a moving example, watch this five-minute 25th-anniversary tribute to Southwest Airlines’ employees featuring then-President, CEO, and Chairman Herb Kelleher: http://tiny.cc/Southwest-tribute
As we move to column 3, the plan becomes more detailed, listing specific financial targets and priorities over the next three to five years. These define the “camps” on the way to Everest (BHAG®), recalling the analogy shared in “The Overview.”
The first decision is choosing whether to look ahead three, four, or five years. The key question to ask is, “In what time frame do we plan to double the revenue/size of the company?” If the plan is to grow at 15% per year, then you’ll double in five years. If it’s 25% per year, then choose a three-year time frame. If you’re growing 100% per year, then your company is living in “dog years,” when one year is like three to five for everyone else. In this case, choose a one-year time frame for column 3, a quarterly time frame for column 4, and a one-month time frame for column 5 (your month is like everyone else’s quarter).
Since everything between the BHAG® and the next 90 days is a WAG (wild-ankle guess), the three- to five-year financial targets might as well be aspirational and aggressive. Specifically, looking at the top of column 3:
1. Future Date: Set the ending date for this medium-term planning period (e.g., 31 Dec 2019).
2. Revenues: Consider hitting a target revenue that’s twice what it is today. Again, this is the definition of a camp on the way to your Everest: the point at which you’re going to double the size of the business next.
3. Profit: Consider targeting three times industry average profitability. This is the definition of a great vs. good company, so go for it!
4. Mkt. Cap/Cash: If you lead a public company, set a goal for what the company will be worth (market cap). If you’re at a private company, set a target for how much cash you would like to have in the bank or the market share you’d like to own within your industry.
Next, summarize the Sandbox in which the company plans to play over the next three to five years. This is a summary of Stratum 2 off the 7 Strata worksheet: a short description of the core customers (Who and Where) and What it is you plan to sell them.
Then jump to the bottom of the column and clearly articulate the key needs you’re going to satisfy for this Sandbox: the measurable Brand Promises. Note these specific metrics in the Brand Promise KPIs (Kept Promise Indicators) box. Recall from the last chapter how Rackspace measured Fanatical Support in terms of answering customer calls within three rings. FedEx’s promise of 10 a.m. delivery and Oracle’s Exadata 5x promise are additional examples of Brand Promise KPIs.
Once you’ve decided on the financial targets, Sandbox, and Brand Promises, choose the three to five Key Thrusts/Capabilities the company must pursue over the next three to five years. These might include a number of important acquisitions or the launch of a new product or service line. They might also represent a dramatic refocus of the core business, like Steve Jobs’ decision, when he became Apple’s CEO in 1997, to pull it out of all of its current business lines and focus on producing just two desktops and two laptops.
For Gazelles, some earlier Key Thrusts/Capabilities included international expansion outside of the US and Canada; the launch of a software-as-a-service offering to support our methodologies; the creation of a high-end membership organization; a significant global expansion of our coaching organization; and the creation of an online learning platform.
These examples represent the kinds of significant medium-term priorities that a company should list in column 3 and are meant to provide a clear strategic direction for the next several years. To support the company’s efforts, assemble a board of advisors. Recruit the smartest people you can find to advise you on each Key Thrust/Capability. It’s always helpful to learn from those who have already been Where you’re about to go.
Moving to column 4, if you’re going to get to your next camp, What are the #1 Priority and Key Initiatives for the company year — sometimes referred to as OKRs (Objectives and Key Results)? Addressing this starts with setting some very specific and expanded financial outcomes at the top of the column. Feel free to edit or add to the categories listed (e.g., some of you might not have significant inventory; tracking staff utilization instead might be more appropriate).
Next, jump to the bottom of the column and determine THE Critical Number for the year: “the main thing that will be the main thing.” Yes, we recognize that your metrics are all critical, but this Critical Number designation is specific to one metric each year. “The Priority” chapter will walk you through this Critical Number decision for the year and for the next 90 days (columns 4 and 5) and explain how to set Critical Number targets: Super Green, Green, and Red. Think of them as giving your team the chance to earn a gold, silver, or bronze medal this coming year.
In general, you’ll pick a Critical Number that will address either an opportunity or a challenge on the People/Balance Sheet side of the business (e.g., reduce employee turnover, improve customer service scores, or dramatically reduce a credit line with the bank) or the Process/Profit & Loss side (e.g., improve gross margins, reduce production cycle time, or increase sales close ratios). And depending on which side you choose, you will want to pick a counterbalancing number from the other side to monitor (e.g., you want to improve relationships but don’t want to give away the store, or you want to improve processes but not damage relationships along the way).
Last, move to the middle of the column and ask, “What are a handful of Key Initiatives we must complete this year to achieve our financial outcomes and hit our Critical Number?” Think of these initiatives as your corporate New Year’s resolutions (Less is more) and plan to revise them each time you close the books on your fiscal year — or as the marketplace demands — while keeping an eye on the longer-term goals.
“Less is more.”
These are NOT a random set of priorities. Choose them to achieve the Critical Number. Again, jump to “The Priority” chapter for more details.
Column 5 mirrors column 4, only it details How you’re going to contribute this quarter to accomplishing the one-year goals, driven by the Critical Number and Rocks for the next 90 days. Given this short time frame, management should have sufficient clarity and foresight to set financial outcomes precisely (at the top of the column) and a Critical Number (at the bottom of the column) that the company can achieve.
KEY: The quarterly Critical Number represents a key step in achieving the annual Critical Number. For instance, Verne’s brother-in-law worked for a company that set a specific cash target for the year. He then chose a Critical Number in process improvement for the quarter. The goal was to reduce the dollars spent on parts to repair machines, therefore saving significant money for his division and contributing to the cash goal.
Last, choose a handful of Rocks* — priorities that must be accomplished to achieve the quarterly financial outcomes and Critical Number. Again, less is more. Finally, place the initials of the person accountable for each Rock in the small corresponding “Who” box.
Think of these Rocks as a series of three to five simultaneous 13-week sprints that provide focus and direction to the rest of the organization.
*Rocks: This term honors the late Stephen R. Covey, author of The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change. He would demonstrate how, if you have a limited amount of time (a bucket) and put in a bunch of pebbles first (email, distractions, etc.), there’s not much room for the big important stuff (Rocks). But if you reverse the process — take care of the big things first — then there’s room for all of it. To see an excellent demonstration of Covey’s rock analogy, go to YouTube and search “Big Rocks in First” and watch the six-minute video with your team.
We will cover details for the Theme column, including some theme examples, in “The Priority” chapter. To give you a quick overview, the idea is to build a fun and memorable theme around the Critical Number from the Quarterly column. Specifically, starting at the top of the Theme column 6:
1. Deadline: Normally the end of the current quarter (e.g., 31 Mar 2015).
2. Measurable Target: The quarterly Critical Number from the bottom of column 5.
3. Theme Name: Brainstorm a fun and relevant title for the Quarterly Theme. Current movie or song titles work well (Fast & Furious is always popular). Or try a play on a common phrase, like The City Bin Co.’s “Life Begins at 40” (the goal: generate 40,000 euros more in monthly earnings).
4. Scoreboard Design: It can be a hand-drawn chart on the wall or a whiteboard, or a more elaborately printed or electronic version. You ultimately want something visible so everyone can see the score, which is updated daily or weekly.
5. Celebration: The Quarterly Theme gives you a reason to host an event to either celebrate the accomplishment of a big goal or commiserate. It can be as simple as a barbecue in the parking lot, or it can be a significant trip. It is even more fun if you pick a celebration destination that aligns with the theme (e.g., a “Fast & Furious” theme culminates in a go-carting experience).
6. Reward: This might be prizes that align with the theme, or it can include a monetary incentive.
The key is giving your team finish lines and an opportunity to have some fun together.
Once the vision has been set, sit down with each individual or team in the company to establish what they can do over the next quarter to help the organization succeed. This creates “line of sight,” through which everyone is able to see how his or her daily actions link to the company’s goals. In some cases, doing a great job so that others are free to focus on a special initiative might be sufficient. Specifically, look at:
1. Your KPIs: Every employee or team should have an ongoing KPI or two that enables them to quantifiably answer the question, “Did we have a productive day or week?”
2. Your Quarterly Priorities: In addition to an individual’s ongoing work, what are a few priorities for the quarter that will raise his/her performance or drive a special project that aligns with the employee’s Critical Number and the #1 Priority of the company?
3. Critical Number: What is the single most important quantifiable quarterly achievement for that person or team that will help the company achieve its vision?
One of the keys to keeping people engaged is making a connection between their day-to-day efforts and the goals and vision of the company. If everyone can accomplish one thing in addition to his or her daily job, that’s a dozen improvements every quarter, or hundreds, depending on the number of employees.
To realize a vision, you need people doing stuff! Otherwise, the vision is just words on a piece of paper. These two main components — People and Process — are listed just above the main body of the OPSP.
On the left side, we have listed the three main groups of People involved in any business: employees, customers, and shareholders. The goal is to continually improve the company’s Reputation with all three as you balance the potentially competing demands between each group.
On the right side, we have listed the three main Processes that drive any business: Make/Buy, Sell, and Recordkeeping. The goal is to continually improve the company’s Productivity in all three as you balance the potentially opposing demands between each process.
The big challenge is balancing the competing demands among all six, like juggling spinning plates. You want to keep all the people happy (Reputation), but you can’t give away the store (Productivity). You want to continually improve your Processes to drive better results, but you don’t want to greatly upset any of the groups of People as you do so. Maintaining this balance between the demands of the People and Process sides of the business, as you scale up your Reputation and Productivity, requires frequent feedback and metrics to keep you from dropping any plates.
To complete the top portion of the OPSP, choose one or two KPIs you can track weekly to monitor the company’s Reputation with all the stakeholders and the Productivity of the three main processes. Here are some suggestions:
Employees: Happiness and engagement scores (TINYpulse and Atlassian have simple systems for tracking these)
Customers: Kept Promise Indicators and Net Promoter System scores
Shareholders: Cash and company valuation
Make/Buy: Speed of processes (Lean), costs, and quality measurements
Sell: Close ratios, sales cycle, and revenue metrics
Recordkeeping: Relevance, speed, and accuracy of data
A Better Balance
The Balanced Scorecard™, popularized by Robert S. Kaplan and David P. Norton in their book by the same name, has been an industry-standard performance management tool for more than two decades. We align with Kaplan and Norton on the People side of the equation, emphasizing the need to balance the demands of employees, customers, and shareholders equally. Where we diverge is on the Process side. Kaplan and Norton lump all the processes into a single fourth category, whereas we break it into its three components: make/buy, sell, and recordkeeping. We believe this adds balance to the People side of the business. In the end, they balance four components, while we balance six.
Many nonaccountants struggle with understanding the basic functions and structures of a balance sheet and an income (profit & loss) statement. Considering the People and Process sides of the business from an accounting perspective often gives them a better grasp.
Let’s look at the People side of the business. Track how the cash flows through the business with this equation:
Customers: |
Cash from anyone who pays you |
minus (-) |
|
Employees: |
Cash to anyone you pay (“employ”), such as traditional employees, contractors, suppliers, partners, etc. |
equals (=) |
|
Shareholders: |
What is left to pay back investors, banks, sweat equity, etc. |
The balance sheet simply documents who owes you, whom you owe, and what is left over. It also notes how much cash you have. The goal is to generate sufficient cash to fuel growth as the company faces the First Law of Business Dynamics: Growth sucks cash!
Now let’s look at the Process side of the business. Track how the business generates profit through these factors:
“The First Law of Business Dynamics: Growth sucks cash!”
Make/Buy: |
The processes that generate expenses |
Sell: |
The processes that generate revenue |
Recordkeeping: |
The processes for tracking all of these transactions |
“The Second Law of Business Dynamics: Buy low, sell high!”
The profit & loss (P&L) statement simply documents the revenue and expenses and determines if there is a profit. The goal is to abide by the Second Law of Business Dynamics: Buy low, sell high!
What’s sad is that companies unknowingly violate this fundamental every day. In “The Accounting” chapter, we’ll discuss why the #2 weakness of growing companies is the lack of sufficient financial data. You need data detailing the profitability of every customer, product, service, salesperson, location, etc., so you can see where the business is making a profit and where it is not.
In the end, the financial goals of the company are to collect cash from customers fast enough to pay everyone it needs to employ and to reward the shareholders — and to sell things for more than they cost in order to generate a sufficient profit. Leaders must manage this balance between generating Cash and Profit, which mirrors the equilibrium between keeping the People happy and the Processes productive.
NOTE: You can download a detailed bonus chapter on how to prepare for and run a strategic planning offsite, including a sample of a completed OPSP, from scalingup.com.
To complete the OPSP, JSJ Corporation finds that surveys are valuable tools. When it comes time to do a SWOT analysis, JSJ goes straight to its customers for feedback that influences its planning decisions. And to make the right calls about talent development, the company surveys its employees for insight.
CEO Jacobson believes that giving his team a chance to step back from the business and get reinspired has been vital to its planning process. JSJ typically sends its leadership team and members of its business team to Fortune’s Leadership Summit in the spring and its Growth Summit in the fall. JSJ’s senior team arrives a day and a half early to do a deep dive into the OPSP and make updates. “It forces a discipline of getting away and taking the time to think deeply,” says Jacobson.
To mirror JSJ’s routine, there are four main activities in preparing for a strategic planning session (quarterly or annual):
1. Managers at all levels gather feedback from employees and customers.
2. Middle management completes a SWOT analysis and submits a Top 3 Priority list.
3. Senior leadership completes a SWT analysis and submits a Top 3 Priority list.
4. Everyone aims to keep learning and growing as a team.
Nothing can emerge from the collective brain of the team that doesn’t enter it first. JSJ sparks its team’s thinking through the reading and executive education delivered in Gazelles’ book club and participation in Fortune magazine’s Summits. It also taps into the many decades of experience that company employees have accumulated.
The first preparatory activity is to send out a short Start/Stop/Keep survey to all the employees:
1. What do you think [company name] should start doing?
2. What do you think [company name] should stop doing?
3. What do you think [company name] should keep doing?
These are broad enough to solicit responses ranging from “We need a new microwave in the break room” to “We need to start looking at robotics technology.”
Ask the same three questions of your customers. It could be a random sample if you have thousands of retail customers; or it might be more appropriate to have account managers query business-to-business customers face-to-face or over the phone. Use your best judgment, but be sure to incorporate customer feedback into the process.
The weekly routine of collecting and reviewing ongoing feedback from customers and employees will also feed into the decisions made during the planning process. We will outline more details of these ongoing routines in “The Data” chapter.
We’ve observed for decades how market-leading firms eventually fall behind start-ups because they are blinded by their current reality. This is what Harvard Business School professor Clayton M. Christensen labeled the “innovator’s dilemma” (detailed in his book by the same name).
So why do leaders miss seeing sweeping global trends that are about to broadside them? We put a big part of the blame on the standard SWOT analysis. It’s time to update this methodology.
Almost by definition, the SWOT process drives leaders to look inward at both their company and industry challenges, creating what we term “inside/industry myopia.” The traditional SWOT analysis, while helping executives see the forest and the trees, tends to lead them to forget that there’s a world outside the forest. The SWOT, with this introspective focus, isn’t the right tool to spot the trends in other industries and distant markets that CEOs must factor into their plans.
We don’t want to throw away the SWOT. It still has its place in the strategic planning process. It’s an excellent tool for gathering ideas and input from middle managers, who are more internally focused and closer to the day-to-day operations of an organization.
For senior leaders, we propose replacing the SWOT with the SWT: an updated approach that identifies inherent Strengths and Weaknesses within their firms while exploring broader external Trends beyond their own industry or geography.
As we’ve mentioned several times, the strategic planning process comprises two distinct activities: strategic thinking and execution planning. Strategic thinking is coming up with a few big-picture ideas. Execution planning is figuring out how to make them happen.
The traditional SWOT is a great tool for execution planning — the focus of middle management — resulting in a laundry list of accolades and fixes. However, for the senior team, the SWOT can be a trap. It tends to pull executives down into operational issues, distracting them from the much bigger forces around the globe that can take the company by surprise if it is not prepared.
Therefore, to anchor strategic thinking, senior leaders need to complete the SWT. It will help them face the brutal facts about the company’s inherent strengths and weaknesses, and the global trends threatening to wash over their industry.
Let’s look at the components of the SWT.
In addition to sizing up the immediate opportunities and threats that the SWOT tends to surface, the senior team needs to rise above all of this. Leaders should look at major trends, such as significant changes in technology, distribution, product innovation, markets, and consumer and social developments around the world that might shake up not only the business but the entire industry.
Forget about the competitor down the street. Is there a company on the other side of the globe that might put you out of business? Is there a new technology coming onto the start-up scene that could lead to an overnight change in the way all companies must do business? How is robotics changing the very nature of work? These are the kinds of questions the strategic thinking team must explore.
Choose four to six trends most likely to shake up your industry and business, and list them on the bottom of the OPSP. Recalling Jim Collins’ dual dynamic, mentioned earlier, these trends are meant to anchor the “stimulate progress” right side of the OPSP.
Like an individual, an organization has innate strengths and weaknesses. Coping with them is less about changing them and more about playing the hand the organization was dealt.
For instance, Verne led the five-year strategic planning process for Benjamin Franklin International School (BFIS), which his children attend. It will always lack a large corporate or government base from which to draw funds. Students are situated in Barcelona vs. Madrid, an inherent weakness not easily changed by the school.
In turn, an inherent strength for the school is its fashionable location. This has continually driven enrollment from the families of Silicon Valley entrepreneurs, helping BFIS thrive during one of the worst economic periods in Spain’s history.
Like the trends, this handful of inherent strengths (core competencies) and weaknesses needs to be determined and listed on the bottom of the OPSP. Given their relative permanence, they anchor the “preserve the core” side of the OPSP, on the left.
In summary, to feed the strategic planning process properly, the key is using different techniques to mine ideas from all levels of the organization. With frontline employees and customers, ask the Start/Stop/Keep questions. With middle management, require a standard SWOT and inquire about their top three priorities for the quarter or year.
And demand that the senior team go deeper and broader using the SWT. Knowing what trends are going to shake up your industry — and having a plan for dealing with them — will help you stay ahead of the competition, and sniff out new rivals who want to take over your turf while you can still do something about it. At Amazon, one of the questions founder Jeff Bezos asks his team each week is what competitors have entered their market in the last seven days!
Again, go to scalingup.com to download a more comprehensive, step-by-step guide for preparing and running a strategic planning process, along with a sample OPSP.