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The new rules of business planning

Apr 1, 2001 12:00 AM


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THE FACT IS, CUSTOMERS AND PROSPECTS MAY NOT CARE WHAT YOUR COMPANY DOES BEST

Probably no practice is as widely misunderstood and poorly executed as business planning. Here, successes and failures have nothing to do with company size: Some Fortune 100 companies are awful at planning and fail to understand its objective. I've seen brilliant — and brilliantly executed — plans written on napkins, and I've seen nonsense enclosed in impressive leather binders.

All business conduct and strategic decisions should emanate from a differentiated strategy — “the what,” or the unique benefits a supplier delivers to a targeted marketplace. Only after a differentiated mission or direction has been adopted can planning (“the how”) be attempted. Trying to plan without a differentiated strategy is like learning to swim in a pool without water.

That strategy or mission must emanate from the top — it reflects the value system of the ownership. Creating it is not a prerogative, but an important obligation, of ownership.

LOOK 6 MONTHS OUT

Planning, well done, is applicable to every company, regardless of size, product, age or any other characteristic. Unfortunately, 400-page textbooks on the subject, as well as arcane articles and seminars, have created the impression that an Ivy League MBA and a Fortune 500 company are required for a good planning process.

The notion of long-range planning should be re-examined. In today's environment, a long-range plan can be a decision about dinner. The effort needed to develop a three- or five-year business plan is unlikely to be worth the time. In fact, a company planning to engage in formal business planning for the first time should think in terms of a six-month plan.

Having said this, a company should consider scenarios that may occur during the next five years. What, for example, would be the course of action if the company's largest account moved or went out of business? How should the company react if a major competitor installed a certain piece of equipment?

The effect of business planning is greatly diminished if budgeting precedes planning. Budgeting is based heavily upon history. To a large extent, it reflects business as usual — unless it is preceded by a cogent business plan. After all, what is the company budgeting to do?

WORSE THAN NO PLANNING AT ALL

Beyond failing to create a differentiated strategy prior to planning, the most common, serious problem is not basing a plan upon marketplace perception or upon the needs of existing and prospective customers.

I cringe when I hear a participant at a planning meeting say, “Let's discuss what we do best.” If it's a printing company of any size, you can safely bet that “what we do best” is black ink on 60-lb. offset with a two-year turnaround time.

The fact is, customers and prospects may not care what your company does best. The only thing that counts is the needs of the buyer community, in general, or specific customers, in particular. A planning process that proceeds without a profound organizational understanding of the needs, perceptions and status of customers may actually be more dangerous than no planning at all.

Too often, the mindset of those directly involved in planning is to stand in the company and analyze the marketplace. It may be more helpful to mentally stand in the marketplace, look back at your company, then ask, “Why should I do business with them?”

LIMIT CHAOS

The planning meeting itself shouldn't be a free-for-all. There should be ground rules. At the very least, civility should be ensured. It is wise to have a facilitator; a scribe who will take and publish minutes; and a gong-keeper with the authority to cut off conversation that is accusatory, hostile, or is rooted in the past and contributes little or nothing to a forward-looking plan of action.

Another ground rule: Silence indicates assent. It's intolerable for a participant to claim after the meeting that he or she didn't really agree with the adopted plan but went along with it.

Consensus is a dangerous outcome of a business planning meeting. Agreement, not consensus, is the desired outcome.

Finally, the planning process becomes only an academic exercise if the outcome is not integrated into day-to-day management. Don't even consider formal business planning without a commitment to doing it right.