2000 Regency Parkway Suite 420

Cary, NC 27518

Call Today

1 (919) 460-8180



(919) 460-8180   |  info@strategymanage.com

Why Strategic Planning Fails – Part 1

Why Strategic Planning Fails – Part 1

by | May 30, 2018 | Uncategorized

Gaining Senior Leadership Support

My father gave me an important piece of advice once that I will always remember.  “Always have the right tool for the job!”  Of course, I had to re-learn that lesson through the years a few times, but it really is good advice.  Most things that I have been successful at in my life have been because I did it the right way and using the right tools.  In the military they teach us to follow the process and meet the standards.  Of course, there are exceptions to any rule, but generally there are proven approaches available that help guide us to effectively and efficiently accomplishing what we undertake.

At the Balanced Scorecard Institute, we have the “Nine Step Process” to building a strategic management system.  We believe in this approach and we have helped hundreds of clients develop comprehensive strategic plans with a management system that enables them to effectively execute strategy.  I myself have worked with over 80 organizations and have seen very successful strategic planning efforts and also those that were less so!  I wanted to share some observations as to where those that were not as successful went wrong along the way.  Over a series of seven blogs I wanted to share with you a handful of observations that could hold back a successful strategy initiative.  The seven that I will share are not meant to cover every potential pitfall, but they are definitely some of the most common fails I have seen in my experience.

The first pitfall has to do with not gaining Senior Leadership support before you begin the effort.  One of the first principles we stress in our Balanced Scorecard Professional Certification program is that if the leaders are not out in front of the strategic planning effort, it has zero chance of being successful.  I once had an executive approach me during our first break at a strategic planning offsite and tell me “I don’t like where this is going!  If I want them to have a strategy, then I will give them one!”  I was a bit taken aback and explained that if he was just to “pontificate” his strategy for his team to execute, then he would not be generating the needed buy-in to execute the plan later.  It would be his plan and his alone.  While he ended up eventually coming around, it could have been catastrophic if the key leader was not on board with the process and approach.  Additionally, not only should leaders be “okay” with developing strategy, they must be the biggest cheerleaders and talk about it in meetings, town halls, board meetings and any other opportunity they have to share the organization’s path forward.  Everyone needs to understand that the leaders completely support the effort, and the strategy will be executed.  Everyone involved must understand that there is “no turning back” and that its time to get on the bus!

If this pitfall sounds familiar, then you might be interested in our Balanced Scorecard Professional Certification course where leadership development, communications and change management action is discussed and becomes part of the strategy process or our Strategy Execution—Success Through Leadership workshop which addresses major obstacles and challenges faced in strategy efforts, and techniques on how to overcome them.

Over the next few blogs we will explore six additional potential pitfalls I have seen that hold organizations back from realizing the many benefits to developing a strategy and a supporting strategic management system.

You can read Part 2 here.

Which Tax Change Means Reassessing YOUR Strategy?

Which Tax Change Means Reassessing YOUR Strategy?

by | Apr 19, 2018 | Uncategorized

Tim Johnson noted in his recent strategic planning article that 85% of Fortune 500 companies from 1955 no longer exist today. This is because they failed to keep up with a changing world. The assumptions upon which they based their strategy on were no longer valid due to a change related to either market demands, customer needs, or technology. If your organization wants to avoid a similar failure, it is critical that you periodically evaluate the strategic environment that you work in and make sure that your strategy is not based on similarly invalid assumptions.

The new tax law that was passed in December 2017 in the U.S. offers an example of a change that could possibly disrupt a key assumption you might have made when you developed your strategy. While most organizations will not make any major changes in this case, it still helps demonstrate the types of strategic questions that you might be asking yourself if you work in certain sectors.

Do you work in the non-profit sector? Since the standard deduction has been raised significantly, some fear that there be a decline in charitable donations. This aggravates the problem that has arisen with the generational change happening across our society, where those who have been the strongest donors in the past are aging and passing on to a new generation that likes to give in different ways. The strategic question you may ask is, where can we make up for projected shortfalls in revenue? How must our contribution mix be changed in the future?

Do you sell luxury goods? One accountant I spoke with who had done a year-by-year comparison said that clients that make more than $750k per year were getting quite a windfall, while the middle brackets were coming out close to even. Another friend I know who does million-dollar home remodeling said that he as already seen an uptick in business. The strategic question here is, how can we tap into the increase in capital available across certain industries?

Do you work in, or sell to, the Federal government sector? Non-defense spending is down for multiple reasons already – a huge reduction in revenues will likely only reinforce this trend. The strategic questions might be how can we increase our efficiency or improve our quality to reduce our cost structure? Or should we refocus on different sectors?

Are you an accountant or a tax lawyer? At least in the short term, some folks can plan for a big boost in business as they help everyone figure out what to do. The strategic questions here are, where are the biggest targets of opportunity? How can we align our services and branding to align to these changing market conditions?

Is your business connected to divorce, education, or the moving industry? Do you sell meals and entertainment to corporations? Do you sell depreciable property? Specific issues have been highlighted in the news that could affect very specific industries: alimony deduction rules have changed; 529 College Savings Plan’s can now be used for education other than just colleges; moving expenses are no longer deductible; rules for corporate meals / entertainment expenses and deductions for depreciable property changed significantly. Any of these changes could have an impact on certain organizations. In all these cases, the strategic questions revolve around, how can we succeed considering these changes?

Are you an architect or engineer? You’ll need a team of certified tax lawyers to help you decipher the new pass-through portion of the law, but I’ve already heard of organizations trying to add engineering services to their product line to gain certain tax advantages. Maybe this opens the door for partnering opportunities, or maybe a new consulting service offering to help organizations navigate in a new market place for them?

The point of this blog is not to educate you on the new tax law, as this is just a few highlights of the change. The point is that you might need to reassess your strategy depending on your organization and the assumptions on which you have based your strategic priorities. If any of the considerations listed above are relevant for your organization, I’d recommend you talk to a tax lawyer about the details and then consider what changes might be needed. There might be implications for some of the KPI targets you have set as you emphasize one strategy over another. There might be initiatives that need to be added or removed from your priority list. In some rare cases, there might be reason to refocus your efforts on a different strategy altogether. The key is that you continuously assess your strategic environment to see if any of the assumptions that were made to formulate strategy have changed, as you don’t ever want to be one of those organizations that gets left behind by a changing world.

Obfuscating Objectives

Obfuscating Objectives

by | Feb 15, 2018 | Uncategorized

One of our clients decided to build their strategy map and balanced scorecard themselves after some training. They created a draft strategy map with 12 strategic objectives, linked together in a cause-effect chain–the strategy map–that showed how value was being created for their customers and the owners of the business. A few months after the training, the number went from 12 objectives to 32. Why? – a lack of discipline around the strategy development process and a feeling by a few folks who did not attend training that “more is better”.

How many strategic objectives should there be on a strategy map? Ten, fifteen, twenty? Are more objectives better? How many are too many?  How few are too few?

A strategy map is a visual representation of a strategy—it’s a hypothesis of what an organization has to do to create value for its customers and owners. For a private sector business, the owners are the shareholders; for a mission-driven organization — nonprofit or government — the “owners” at the end of the value chain are the benefiting stakeholders, e.g., members of an association, citizens of a government.

Strategic objectives, when connected in cause-effect links, represent a strategy hypothesis that can be tested and progress monitored using strategic measures of performance—KPIs—developed as part of the strategy development process. A good strategy map requires good objectives.

Objectives are used to identify measurable strategic intended results; develop KPIs that measure strategy progress; identify, prioritize and track actionable initiatives; build employee accountability; and communicate corporate vision and strategy internally and externally. We’ve identified a set of best practices for creating strategic objectives and strategy maps from our training and consulting engagements worldwide:

  • Objectives are not start/stop activities or projects (those are initiatives)…objectives are continuous improvement activities that work together to produce value
  • Twelve to 14 objectives are a good number for a corporate strategy map (organization size doesn’t matter here)
  • Objectives indicate action and the potential for continuous improvement (Remember: strategic objectives are the DNA of your strategy—they make strategy actionable and understandable throughout the organization.)
  • Objectives should be balanced among the four perspectives in a scorecard
  • Objectives are “altitude sensitive”—if the strategic altitude is too high, it’s hard to translate “lofty” language into employee action…if too low, objectives will be framed in operational, not strategic, language
  • Prioritized strategic initiatives, linked to each objective, should propel the organization forward toward its goals and vision
  • Objectives should be measurable based on the associated intended results, to monitor progress toward accomplishment

Arguably one of the most important contributions to the science of management in the past two decades, strategy maps communicate the organization’s value proposition with clarity, both internally to employees so they can see how they “fit” in the organization, and externally to boards and other stakeholders.

Get strategic objectives and your strategy map right and your balanced strategic plan and strategy story will come alive quickly and clearly. These tools can help take your organization to the next level of performance.

You can learn more about strategic objectives and strategy mapping by reading our book, The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard, or by attending one of our worldwide training classes.

Strategic Planning in the Healthcare Industry

Strategic Planning in the Healthcare Industry

by | Dec 7, 2017 | Uncategorized

Over the last 10 years we have seen a tremendous change in the healthcare industry.  Whether it is a shift in philosophy to focus on more value-based care or navigating the impact of implementing the Affordable Care Act here in the United States, significant shifts and changes have occurred and are occurring every day.  Given the relative unpredictability of how the healthcare market will change, is there really any use for those in the industry to go through a strategic planning initiative?  The answer is of course yes, but the real question is “how?”

To be successful in the future, no matter how turbulent the path forward may be, organizations need to create a vision based on the best future assumptions they can identify.  With any strategic planning effort is it really important to have at its foundation key assumptions about how the world will be different.  Organizations then can describe what they need to look like given those future assumptions, and then design a strategy to help them bridge the gap between where they are today and achieving that future success.  But if all our assumptions of the future are up in the air, then how can we really build a strategy effectively?

I would argue that in industries that are experiencing a lot of change it is even more important to be strategic!  Yes, there are many unknowns given the relative volatility of the US political landscape as it pertains to healthcare.  But there are some key assumptions that can be made that are relative certainties regardless of any potential future political or regulatory shifts?  If we can identify those “most probable” assumptions in the healthcare industry or in our particular marketplace, then it would be worth our time to identify them and begin building our response strategies accordingly.  I would like to present the follow set of ideas as examples of assumptions that most participants in the healthcare sector need to consider over the next five years and could be the basis for strategic discussion.  These are not meant to be all inclusive, but merely to demonstrate that there are fundamental assumptions that can be identified even in a marketplace where significant uncertainty exists.

The need to provide ever increasing quality patient care will continue.  The focus over the next five years will continue to be on delivering highly impactful, cost-effective healthcare.  Whether it is driven by key stakeholder requirements or customer expectations, we know that successful players in the healthcare industry will be those that can generate healthy outcomes for their patients.  Fundamentally having strategies built around improved effectiveness and efficiency in delivering quality patient care will be a fundamental requirement in the future.  No real surprises but any strategic discussion in the healthcare sector must begin with patient care!  The point is that the ability to differentiate regarding healthcare outcomes will be the bases for any future success in the industry.

Changing in customer volume and demographics will continue. The fact is that the US population is going to continue to grow over the next five years.  In May of 2017, the US passed the 325 million mark and is expected to be over 332 million by 2020 (US Census data).  That means essentially there will be more people needing care in the future with some healthcare markets seeing fairly dramatic increases in patient populations.   We have seen a significant impact in demographic shifts in the US over the last five years and this trend will continue over the next five years as the increases in Hispanic and Asian demographic groups continues at a high rate.  How will these assumptions impact capacity requirements or service delivery requirements within the healthcare sector?

Labor supply changes.  The US has seen labor supply grow by 2.6 percent per year over the last decade, but that trend will not continue.  Rand researchers (Karoly & Panis, 2004) have postulated that the growth of labor supply will only be around .04 percent over the next decade and will be even smaller the following decade.  Also, while the trend has been a more aging workforce over the last 20 years this will also change with the workforce being more evenly balanced across age groups in the future.  How will this impact the availability of skill workers and experience levels in the healthcare industry?  What does this mean for how we need to recruit and retain of workforce?

Continued increase on wellness and prevention.  Significant increase in innovation with regard to nutrition for example will be driven by increase consumer demand for wellness. Patients are sharing that they want advice on weight management and diet therapies (PwC Health Research Institute, 2016) for example leading to increased focus on these services within the industry.  Smoking cessation and fitness programs are other programs that are already tied to health outcomes and will continue to be important in the future.  How will this trend impact the future services healthcare practitioners will provide?  Or the information they make available to their patients?

Emerging technologies in the healthcare marketplace.  PWC reports that “the US health industry lags behind other industries, such as retail and telecommunications, in deploying emerging technologies, including artificial intelligence, drones and virtual reality but that this trend is about to change.” (PwC Health Research Institute, 2016).  Accenture reports that “the global healthcare industry in the year 2020 will be a highly connected environment powered by large data networks, cloud computing, and mobile devices. There will be widespread increases in the number of connected healthcare networks providing seamless integration between care providers, patients, pharmaceutical companies, health insurers, and other invested parties anywhere in the world. Care within this model will become more patient-centric, less expensive to provide, and more innovative.” (Meissner, 2013).  These assumptions would call for a need to invest in breakthrough technologies that impact how patient care is provided and operational business processes are managed moving forward.  This will also impact the types of skills needed in the future within the industry.

Rising operating costs driven by government regulations and expanded capacity requirements will impact the financial viability of healthcare systems (Jonash & Ronanki, 2015).  Healthcare CEO’s and COO’s must find innovative was to drive revenue and decrease costs.  How will rising costs impact the future viability of healthcare providers?  How must they change how they do business?  In what areas must they innovate to reduce costs?

I share these discussion points as merely a sampling of assumptions that could be discussed by healthcare industry players in formulating their 3-5-year strategies.  With proper research conducted, there are dozens of additional assumptions that we could discuss to really understand the future of the healthcare industry.  I provide these few ideas as evidence that even in an industry that is experiencing rapid, constant change, there is a need to really understand how the world will be different in the future.  To do so, we must first understand what assumptions can be made and set out to use a strategic planning framework to understand how our healthcare organization must transform in the future in the face of those assumptions.  Once we are able to articulate that future successful state, we can then work to understand what must be accomplished to get from where we are today to achieving the needed transformation that must take place in the next few years – our strategy becomes the path and the plan to future success.

Sources:

Jonash, Ben & Rajeev Ronanki (2015). The convergence of health care trends: Innovation strategies for emerging opportunities. Retrieved from: https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/convergence-health-care-trends.html?id=us::3bi:confidence:eng:cons::::qQmDoWY2::77378163007585:bb:::nb

Karoly, Lynn A. and Constantijn (Stan) Panis (2004). The Future at Work: Trends and Implications. Retrieved from: https://www.rand.org/pubs/research_briefs/RB5070.html

Meissner, Armin (2013). The Global Healthcare Industry in the Year 2020. Retrieved from: https://www.mddionline.com/global-healthcare-industry-year-2020.

PwC Health Research Institute (2016). Top health industry issues of 2017: A year of uncertainty and opportunity. Retrieved from:  https://www.pwc.com/us/en/health-industries/pdf/pwc-hri-top-healthcare-issues-2017.pdf

U.S. Census Bureau (n.d.). Retrieved from: https://www.census.gov/2020census

Why “World Class” Performance Isn’t Measurable

Why “World Class” Performance Isn’t Measurable

by | Nov 14, 2017 | Uncategorized

Let’s say our organization needs to buy a fleet of vehicles and we have two procurement teams. We tell team 1 that we want quiet, blue, four-door, fuel-efficient cars. We tell team 2 that we want world-class, high-quality, great-value, high-performing cars. Then we give both teams a few weeks to find their vehicles. Guess which team will be able to produce measurable results?

Team 1 will have the easier time, as it is clearer what is meant by the criteria provided. Team 2 will struggle because their criteria are too ambiguous. Without further clarifications, “world-class” could be interpreted to mean a hot rod sports car, a luxury sedan, or even a nice SUV. And if the team cannot agree on the specifically desired result, how can it measure success?

This example demonstrates an important principle of good measure design. Before you can design a measure, you first must agree on what result you are trying to achieve. And not all results are created equal. Results written in abstract language are less measurable and harder to implement than those written in concrete language.

Abstract language refers to concepts or vague ideals. Examples of abstract words or phrases include sustainable, innovative, reliable, leadership, quality, effective, leverage, efficient, resilient, optimized, or responsive. Strategic plans are often littered with this type of language, as we aim to deliver best practices, thought leadership or world-class performance. These “weasel words”, as they are often called, are notoriously hard to measure without first translating into concrete terms.

Concrete language is sensory-specific, meaning it describes things you can see, hear, smell, taste, or feel. Because they are observable, concrete results are measurable. Team 1 will have no problem determining the percentage of cars procured that meet their specifications. Concrete results are also more memorable and easier to implement.

So if you are struggling to design measures for your organization, your first step should be to clarify what result you are trying to achieve, in concrete terms.

To learn more about developing concrete results or related measures, please look into one of our KPI training or certification programs or visit kpi.org.

Types of KPIs: The Logic Model and Beyond

Types of KPIs: The Logic Model and Beyond

by | Jun 5, 2017 | Uncategorized

As part of the KPI Basics series of content we are developing as part of the launch of the KPI.org website, I thought I would introduce the different types of key performance indicators (KPIs). As I describe in the accompanying video, like to use a framework called the Logic Model to describe the first four types.

The Logic Model is a framework that is helpful for differentiating what we produce from what we can only influence. It is also helpful for separating between elements that are more operational versus those that are more strategic in nature. For every key process, we spend resources like time, money, raw materials and other inputs. Then every process has measurements that could be tied to that particular process. The outputs of my process are what we produce. Ultimately though, I want to create an impact with my work. Outcomes capture that impact.

Let’s look at some examples of these types of measurements in real life. If I am a coffee maker, my Input measurements might focus on the coffee, the water, or my time invested. My Process measures could have anything to do with the process of making coffee, from the efficiency to the procedural consistency. The outputs of my process would be the coffee itself. I could have a variety of measures around the quality of my coffee output. Finally, my outcome measures would be related to things I can only influence, such as if my audience enjoys or buys the coffee. There is certainly more value in measuring impact than there is operations. If my customer enjoys the coffee I am doing something right. But you really do need a mix of both to truly understand performance.

To fully understand all of the elements of strategy execution, I can then add a few other broad categories of measures to my story. Project measures monitor the progress of our improvement initiatives and projects and can be designed to improve operations or strategic impact. These track things like scope, resources, deliverables or project risk. In my coffee example, I might have a new branding campaign to sell my coffee.

Employee measures tell us if employees are performing well or have the right skills and capabilities needed. I might measure my employees’ skills in making coffee, for instance.

Finally, risk measures tell us if there has been an important change in a risk factor that could have a significant impact on our organization. For example, I might have a risk indicator that tells me if global coffee bean availability becomes a problem.

The information that these different types of measures provide can be used to inform decision making. Using a family of measure like this can broadly inform your entire strategy.

To learn more about Key Performance Indicator development and implementation, please look into one of our KPI training or certification programs or visit kpi.org.

Free 5-Minute Assessment