[MUSIC] And welcome to module three of the essentials of management and strategic planning. My name is Marlon Ole. And in this module, we're going to focus on strategic planning. What is it? And how can you use that to improve your business? So in this module, we're going to talk about strategic planning. Some people really struggle with this concept, what is strategic planning? So we're going to talk about what it is, and how it can help to improve your business. There is an old saying that is, if you're not growing, you're dying. And so we have to remember that when we're looking at our businesses, I've had some of my clients say, can I just stay here where I am? I really like the size of my company, which is fine. But you have to really be careful about this, because it's true that if you're not growing, you could be dying. And believe me, your competition is working to help you with that. So we need to be if we're not growing our business, we need to look at at least improving our business, so we can stay in business. So most businesses have the same cycle or similar cycles where initially, when you first start the business, you may lose money in the first year or two, then you start as the revenues go up making money. And as the revenues continue to go up, you continue to improve your profitability, and then you hit a wall. And to some businesses, when they hit this wall, they fail. However, some get over the wall and then again go through the same thing. The revenue goes up, and up, and profitability goes up along with the revenue, hopefully, and then you would hit another wall. And with every wall, businesses struggle, and sometimes with every wall, there is the danger of not making it over that wall. So how do we make sure that when we hit that wall, we get over the wall? Many times, businesses grow organically. Maybe you have a great idea, and you start out of your garage or you have a partner, and you have a plan, and you get going. And you may even have a business plan, but that is not the same as having a strategy. So why don't we talk about what that means? We need to think about what we can do differently to improve and grow our business than what we are doing. So the article in the Harvard Business Review talks about a strategy not being the same thing that we were doing before, but really stretching to trying to do something different, bigger, harder. And that is going to help us to get over the wall, and grow the business. So you may think, gosh, it's going to be easy to come up with a strategy, however it's not. That is not the same as a strategic planning meeting and getting all of your key executives involved in your strategic plan. So we're going to look at what a strategic plan really looks like, what's involved, and how that can really help your business. This is such an important step in strategic planning. If you don't have a vision that's already defined and visual, then let's talk about what that looks like. What do you want your business to look like three years from now? And who's going to be there to help you? Does your executive team know what your vision is, or are they guessing? Have you communicated that to them, or do they think it's all about just money? What is your vision, and how clear is it to your staff? You think you'd be surprised at how many businesses get started, and are going without really identifying and defining the purpose. So they may have something in their head, the business owner may have something that they're thinking. This is what the purpose of the businesses, and assume that all of the employees understand and know the purpose of the business. You'd be surprised at how many employees do not know what the purpose of the business is. So we want to make that very clear, what is your purpose? What do you want your business to before and about? And we're going to use Apple as an example, because I think that's such a clearer vision. Originally, Apple had to have a computer on every desk, and it was really very visual. You could just see computers on every desk in a classroom. You could see it, and it was pretty clear and evident for the employees of Apple to see, they have changed, though. They have changed their vision to bringing the best user experience to its customers through innovation, hardware, software, and services. I don't think that's as clear as an Apple on every desk, but they have had some success, of course, in the original vision. So now how would we make this new vision a little more clearer, a little more visual to all of the employees? What do you think? I think this vision is a little clearer, and this is a perfect example of a vision that could be the potential for a hospital, or an assisted living facility, or some personal service business. We serve from our heart to be the first choice for Orange County families, and you have a picture of a heart, and that's something that the employees could remember. We serve from our heart to be the first choice for Orange County families. So this is something where a picture and vision goes together, easy to remember, and it's very clear. So this is Nike's vision, their purpose statement. Our purpose is to unite the world through sport to create a healthy planet, active communities, and an equal playing field for all. Great, this is wonderful and it definitely shares a story, but is it something that the employees can remember? Well, for one thing, it's kind of long. Is there a way that we could make this shorter so that all the employees could remember it? Because you don't want to have a vision that if you ask all of your employees, so what's the vision of my business? They have to stop and think and say, well, something about healthy planet, active community, I don't know what it is. You want your employees to be able to remember your vision. We want to make sure that our vision is clear, something that our employees can remember. So if Nike's purpose statement was active community, equal playing field for all, that's something that the employees could remember. And that's a big goal, right? Equal playing field for everybody, right? That's really tough, and it's not about money. Our employees are not going to necessarily be driven by my profit, right? What do they care? They care maybe about their own pockets, but to have a bigger purpose is something that is definitely more motivating for all of our employees. And if we get the right vision or purpose statement. >> Then we're going to have success because we're going to have employees that are driven by our vision. So here is an example of a couple of vision statements that are definitely easy to remember and simple. But big goals, Alzheimer's Association a world without Alzheimer's disease? It seems like it would be almost impossible, but a great vision to have Facebook connect with friends and the world around you on Facebook. So they're short enough for people to remember, but big enough to drive motivation, I want you to be clear about your vision, what is it and is it something your employees can remember? So we have a couple of examples here in Apple on every desk, a world without hunger. I have a friend that has a roofing business, and he wants a roof for every family, a family for every dog. These are really visions or purpose statements that employees can remember, and this will help you motivate your employees. If you have a vision that is easy to remember, visual something that they can care about. Then they will remember your vision and be motivated by it, once you have your vision, then let's look at your current strategies. Are they a stretch, or are you just focusing on doing the same thing you always have done? And how did you create your strategies? Did you have good information when you generate as strategies? Did you have some background? And did you do this with the executive team? That's pretty critical and then are they measurable? Do you know when you're going to hit that target? So and does your executive team know what that target is? So all of these really important questions and what we're going to do is dig into this a little bit further. So we've developed a vision, we talked about that, how you're going to get the vision. And so once we get the vision, we need to make sure that we communicate that to our key executive staff. So that they have focused and they know what's going to be the most important thing for the business. And after we do that, then we develop a plan around the vision with 3 to 5 strategies, and I say 3 to 5, because we want to make sure we maintain the focus so a lot of business owners look at. They want to do 10 great amazing things or even 20 and what will happen is you'll probably get nothing done because you're going to be too scattered. It's really important to maintain focus on 3 to 5 key things that we're going to do to drive the business, I talked about the vision not being financial. However, we can, as a strategic options, have financial as one of our strategies, along with some of these others markets you're operating efficiencies. These are some of the basic strategies that companies can focus on and components of these strategies to improve their business. So for most companies, if they go after one of these strategies, they will be able to grow their business. There are other strategies as well, but these are really some of the primary strategic options we can look at. When I talk about financial, there are three primary focuses for financial, I'm going to increase revenue or I could increase gross profit, what does that mean? It means I'm going to reduce the direct expenses, that I incur to drive my revenue or I could reduce my expenses, which is going to do what? Improve my net income, so I can look at each of these components to see if there is something I can do that is beyond what I'm doing right now. To improve my revenue, increase my revenue, increase my gross profit, which could be a combination of increasing revenue or reducing and or reducing my cost of goods. Or lowering my expenses, which would increase my net income, so hopefully all of these would increase my net income. But this is where we look at financial and I could have a strategy around any one of these three to have some improved financial success. So market share can be a strategic focus, are you looking at the right customers or is there a different customer base that you might try to reach out to? So one of the things that we wanted to do was to expand our market share. And so we created an office in a new geographic location, that helped us to expand our market share, and that was fairly successful. So, I might look at the pricing and I am I using the right pricing plan to reach the right customers? What is the most profitable? So the new office that we created within an area where we could get a higher and or a customer that could pay more, and so that was more profitable for us. Now, not every strategy that you go after is going to be successful and that is one of the points of the Harvard Business Review article. You've got to be willing to take some chances, to do something different, and not try to accomplish more success from doing the same old thing. So what product am I generating or selling is another strategy, I might look at my product line and decide that I want to generate. I want to do something similar, but not exactly the same related to my product which would be horizontal in the same type of product. Or maybe I want to create something that supports my current product, which is a vertical growth. So I want to do something that is similar to my products, or supporting my product so horizontal or vertical. Or maybe I'm looking at my product line and I want to reduce my overhead in some way. So, that would be around my specific product profitability, so all of these things relating to my product might be strategies that I look at. As far as it's growing my business, you can have a people's strategy and what does that mean exactly? There is a book called Top Rating that you can review and that helps you understand, what are some of the things that you can do with your people? Training is one of the things I recommend first, probably one of the easiest things to do. As far as the strategy is concerned, you may want to improve your diversity and certainly that's an important thing in business today. And I think business owners are really surprised at how improving diversity improves the overall business and then how about if you're going after a different customer? So, in running the business, we decided to have a Hispanic business, so every employee in that business had to speak Spanish. And so that was an approach with because we had a different customer, we needed to make sure that we had the right people To serve that customer. So people definitely is a choice for strategic planning. We used to grade our people from A, B, and C, and we can look at the C players then decide, well, are they going to step up the plate? Or are we going to need to replace those C players and try and find A players? And Jack Walsh used to say to get rid of the bottom 10% of your people, I did not, and do not agree with that. But I do think that we ought to always look at our people and see if we can improve the quality of the people within our business. Whether I'm in a service business or a manufacturing business, efficiencies is always a strategy that I can approach. And figure out how I can run my business better, more cost effective, fewer wasted products, fewer wasted time, in every respect. So a black belt, there is something called a black belt, they can come into your business and look at some of the ways you can improve your business. Or maybe if I'm manufacturing, I can look at the machines that I'm using and improve the type of machines that I'm using, the way that the machines are using, the quality of the machines. So that might be a way of improving my efficiencies and attitude that's a whole. I may look at my culture and realize that my culture needs to be improved, which would improve my attitude, which would improve my efficiencies. So efficiencies is also a strategy that your business can go after. It's very important when we're looking on our strategy. So you've just seen some examples of some strategies that you may be able to implement in your business. I encourage you to keep that to only 3 to 5 strategies of things that you can do to improve your business. And just remember, not every strategy is going to work for you. But just realize that a lot of your competition isn't doing this. So 3 to 5 strategies is a good approach to strategic planning. And really, when you are thinking of strategies, I get input from employees, from vendors, from association meetings. I get a lot of ideas of strategies during the year. But when I'm holding a strategy meeting, I definitely do not invite all of my employees. It's good to have input from your employees, but I would not invite everybody to a strategic planning meeting. I would only invite my key people. Now I do know somebody who used a consultant to hold a strategic planning meeting, and the consultant had that person, that business owner invite all of the employees. The result was all strategies related around the employees, of all the wonderful fun things that we could do for the employees, it costs a lot of money, it costs a lot of time. And, by the way, all of those employees left the next year. So please do not include all of your employees in the strategic planning meeting. It should just be the executives of the business. I actually invited a competitor from another state, so that wasn't really a competitor, but somebody in the same business that was growing their business the way I wanted to grow that business, and they were in another state. So I knew of that person from an association meeting, I invited them to our strategic planning meeting. They did so graciously and gave up their time and were complimented that I even asked them for their input into our strategic planning meeting. So just focus on getting 3 to 5 strategies that you're going to work on for your year. How do I measure my success? I measure my success with key performance indicators. And these are the indicators that tell me that I've accomplished something. Whether it's my revenue per man hour or my a number of people satisfied with my services, reduction and waste numbers, these are key performance indicators. So what I want to do is to develop a benchmark, where am I right now in things like my revenue per man hour, my waste numbers. And then, as I implement a strategy, I measure to see how I am improving these numbers. So there are leading and lagging key performance indicators. Leading key performance indicators it's what I'm doing right now to get a result. So I might be changing how I might be looking at the number of calls that I make for a revenue, I might be calling more people in a month, and so that's leading indicator. I might be developing more training hours, and I could measure the amount of training hours that I'm providing my employees. But the lagging indicators are the indicators that results from whatever I've done. So financial statements are definitely a lagging indicator. I have done something during the month, financial statements are prepared after the month is done, and then I can see how well I am doing. But if I wait for after the month is done, there could be some bad results. So it would be a good idea to have some leading indicators, something that you can watch during the month to help you to improve your strategic planning, to help you improve your business. So that the lagging indicators deliver you the results that you would like. Once I have my key performance indicators, once I have my KPIs, what do I do with them? I think it's a great idea to share them with your employees. So your employees should know what you're measuring, particularly if it's measurements of waste, measurements of employee satisfaction, measurements of the number of jobs you're getting, the success with your business. It's great to share that with your employees and then have some levels. So if I reach 75% of my goal, maybe I want to celebrate, and celebrate with your employees, or celebrate with your stakeholders. But which would be, maybe you have shareholders or other owners, but use your key performance indicators to the positive. And you can use your key performance indicators to help people understand maybe when your business is not doing as well, it's certainly a good reason for not giving raises. If I share my reduction or increase my increased reduction and revenue, if my revenue goes down, I let the employees know, hey, I can't give out raises this year. But if my revenue goes up and I'm sharing that with my employees, then I should be able to give raises. But I do caution on sharing financial information. What I shared was number of customers, and that was the key performance indicator that we identified as a goal and we shared. So how do we get there? It's really important to have a strategic planning session. So a strategic planning session, even if you have an idea of what you think the business needs to do. It's really beneficial to get your key executives on the same page because you'd be amazed at how much they can drive the bus on this. And what you need is a team to get you there. And you get the team together and driving in the same lane by having a strategic planning session. So we're going to be talking about that in our next module, how to put together a strategic planning session. But we get together with our team, and that helps us to make the vision clear, make sure that they have the clear vision, make sure that we developed some 3 to 5 strategies together. And then what are the KPIs, and who does what, when, where, how, to make sure we accomplish those strategies? And that's the accountability piece. Our strategic planning session will help us get there. [SOUND]
