Have you ever wondered what makes the difference between a great strategic plan and one that isn’t?
Business owners and entrepreneurs like you create plans all the time (whether they’re written down or not is irrelevant—a plan is a plan whether it’s intentional or not, written down or not—it’s still a plan). Some of those plans work. Most don’t. The question is, “Why?” Why don’t most strategic plans drive significant growth?
- Is it because there’s some secret system out there that produces great plans that most people don’t know about?
- Is it because there’s some course or book out there that most people haven’t read or taken that if they did would magically produce a better plan?
- Is it because there’s some genetic predisposition that only a few people have that most people don’t that only allows the few to create great plans?
No. The difference between creating a bad plan, an average plan or a great plan is primarily related to one thing and one thing only—and it’s not some secret process.
The difference between an optimal strategic plan and a less than optimal strategic plan is related to the thinking that went into creating it. In other words, the number one secret to creating a great strategic plan is …
“The quality of the thinking that goes into creating a strategic plan determines the quality of the strategic plan itself.”
The obvious question from that statement is, “How do I know if the quality of my thinking is high enough to produce a great strategic plan?”
Fair question. The problem is that very few people have ever been trained to think strategically. Think about it. When was the last time anyone trained you in how to think like a strategist? Or when was the last time you read a book on how to think strategically? My guess is the answer to both of those questions is, “Never.” Hence the problem.
Which creates another interesting problem because one of the keys to building any highly successful and scalable business is to develop a series of strategic plans that position you and your company to win in your marketplace (i.e. to grow and take market share year after year).
So, how can you begin to think more strategically in order that you can produce a more optimal strategic plan for this coming year? Well, here are three hints to get you started in the right direction.
I. Challenge Assumptions Continually
One of the reasons why so many business owners and entrepreneurs create less than optimal plans is because they start their planning process by assuming that their assumptions are correct/valid. In other words, they begin by assuming that the way they think their market works or the way the world works or the way their company works is the way it is.
On the other hand, what all great strategic thinkers do is they challenge the assumptions of that market or industry or business. Why? Because it’s in the challenge of the assumptions that most breakthroughs occur. For example, if individuals and businesses didn’t challenge assumptions over the past century we’d still be riding horses, sending mail by courier, reading books by candlelight and using leeches to cure most of our diseases.
That same idea of challenging assumptions is the same idea that can make a difference in your business. Why? Because every business (including yours) operates on assumptions. To make this idea of thinking strategically more operative, write out the assumptions your business operates on and then challenge them, “Does this have to be this way?”
For example, one of my long-standing clients is a company called, TruPlace. They primarily create virtual floor plan tours for listing agents of residential properties and homeowners and property managers of vacation rental properties. A couple of years ago we were working on their strategic plan when I asked them a question, “How long does it take from the time a listing agent calls your office until a photographer is assigned, the photos are taken and the virtual floor plan tour is up online for that agent?”
They responded, “Seven to ten days.” I asked, “How does that compare to your competitors? Are you faster or slower or the same?” They said, “The same. We all take about seven to ten days. You have scheduling issues. Location issues. Photo issues. It takes time to create the floor plan. Time to enhance the pictures that are then stitched to the floor plan. Then you have quality control checks, etc. So, it takes all of us around seven to ten days.”
Knowing a little about real estate agents, I figured that seven to ten days was not something they’d like. So I asked, “What if we could get it done in 24 hours?” “It can’t be. We just walked through why it can’t be done in 24 hours.” I said, “I know, but what if it could be? Would that give us a competitive advantage over all of your competitors?” Their answer, “Absolutely.”
Now, how they pulled that off is another important question—but it’s not a strategic level question (i.e. not a valid question for today). The strategic thinking that led to that idea (which is valid for today) was all about challenging an assumption (it takes seven to ten days) and then linking that idea to a competitive advantage that the buyers in that market would urgently want and love.
So, as you look at your business, what assumptions are you and your team making about your market, your competitors, your process, your products and services, your prospects and customers, etc, that you can challenge?
The more you get in the habit of challenging assumptions, the better you’ll be at strategic thinking. And the better your thinking, the better your plan.
II. Look for Big Gains
One of the other major mistakes that a lot of business owners and entrepreneurs make when they’re creating their strategic plans is that they start from last year’s plan and think, “How can we do what we’re currently doing, just a little bit better this coming year?” This is the kind of thinking that produces sub-optimal strategic plans. It’s also why most businesses are plateaued or in decline (or grow by one or two or three percent per year). This is not strategic level thinking.
Those of us who are strategists are always looking for big gains. We’re looking for sharp right turns. We’re looking for how to grow a business by 30% or 50% or 100% or 500% or more. What we aren’t looking for are small, incremental gains (which is what most business owners and entrepreneurs are looking for).
One of my favorite stories about this idea of looking for big gains comes from one of my first consulting clients, the Maryland Soccerplex (a very cool soccer complex with 24 soccer fields, a large indoor athletic facility, etc.). At the time, they were just under $3M in revenue, had a debt ratio over 40% and were dying. When I met with the Executive Director I asked, “What are some of the ideas you have for how we could dramatically grow your revenues this year?” She listed out quite a few ideas—some of them looked good, other’s didn’t—but I didn’t want to tell her which ones were better than the others, I wanted her to figure that out.
So, I said, “To help us narrow down this list, why don’t we put a revenue number next to each of these ideas. How does that sound?” She said, “Great.” I said, “Well, one of your favorite ideas here is to organize more birthday parties during the week when the Soccerplex isn’t as busy. Let’s start with that one. How much additional revenue do you think we could generate if we really went after birthday parties this year?” She replied, “I don’t know, maybe $10,000.” I said, “Well, let me give you a phrase that will help us moving forward as we decide which ideas to pursue, ‘Birthday parties are not our future.”
Why? Because a $10K improvement on a $3M budget doesn’t move the needle. To get the debt ratio down, we needed to radically grow the Socerplex’s revenues quickly (while renegotiating the terms of the debt) to create some breathing room. Ten thousand dollars wouldn’t make a dent. In fact, that’s the day I came up with my 5% rule. What’s the 5% rule?
“If a growth accelerator doesn’t generate at least an additional 5% over last year’s revenues, it’s not a growth accelerator.”
Why? Because the 5% rule forces you to think of something that’s bigger than just doing what you’re currently doing just a little bit better. On a $3M budget, if a “strategic idea” doesn’t generate at least $150K of NEW revenue, it’s not a strategic level idea. It’s not big enough. And remember, the 5% rule is the bottom/floor. Ideas that can generate 30%, 50% or 100% are even better.
So, as you look at this coming year, what ideas do you have that could generate a big revenue gain for you and your business of at least 5% (or more)?
That’s the kind of thinking that a strategist engages in—and the kind of thinking that you’ll hopefully engage in from this point moving forward.
Oh, and as I said to my good friend, Trish, years ago, “Remember, birthday parties are not your future.”
III. Remember That Strategy and Tactics Are Not The Same Thing
By far, the number one mistake most business owners and entrepreneurs make when they’re working on their strategic plans is confusing tactics and strategy—they’re not the same thing.
Strategy is about what you want to be. Tactics are about how you plan to get there. That means that strategy questions are what questions (“What do we want to be?”) vs. how questions (“How are we going to accomplish that?”).
To help you see the difference, here are a couple of classic tactical choices I find on strategic plans when I’m reviewing someone’s past plans.
- We’re going to engage in six big targeted marketing campaigns this year to generate X amount of money (or customers)
- We’re going to increase our conversion rate from 20% to 25%
- We’re going to outsource our manufacturing of product X to company Y
While none of those are bad tactical choices, they’re not great strategic choices. So, what would be some good strategic choices? Well here are a few strategic level growth accelerators.
- We’re going to move from being a generalist to focusing on one specific niche (you fill in the niche)
- We’re going to develop three strategic partnerships that have the capabilities to distribute our products nationally (vs. just locally)
- We’re going to change our primary software platform in order that we can target larger companies and move our average transactional value from $50K to $250K
Each of these last three ideas are strategic because they emanate from the what question (“What do we want to be?”) vs. the how question. They go to the nature of the company. Are we going to be a generalist or a specialist? Are we going to be a local or a national company? Are we going to work with small businesses or large ones?
In other words, if you want to think more strategically, you want to get out of the habit of asking the, “How can we get this done?” question. Instead, spend more time asking the “What do we want to be?” question. Focus more on the nature of who you’re going to be in the future (which may have nothing to do with who you’ve been in the past) and you’ll be headed in the right direction.
Listen, learning how to think like a great strategic thinker doesn’t happen overnight. Nor can you pick it up by reading just one blog post. But you can begin to move in the right direction. And if that’s what you want to do, then I’d encourage you to practice these three ideas regularly when you’re trying to think more strategically.
- Challenge assumptions continually
- Look for big ideas
- Remember that strategy and tactics are not the same thing
If you simply practice those three ideas, you’ll end up creating a better strategic plan this year. Why? Because the quality of your thinking will determine the quality of your plan. It’s that simple.
To your accelerated success!