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CONNECTED PLANNING SECONDEDITION RonDimon
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ISBN9781119485803(hardback)
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Formymomanddad,Gwen&Colin“Bill”Dimon,whoconnected metotheworld.
FOREWORD: CHRISTOPHERNECKxi
FOREWORDFROMTHEFIRSTEDITION: GEBHARDRAINERxii
PREFACExv
ACKNOWLEDGMENTSxxiii
CHAPTER 1 What’sBrokenandWhat’sPossible?1
Strategy-ExecutionGap1
BucketsofPain5
Impact6
Notes7
CHAPTER 2 ConnectedPlanning9
CHAPTER 3 APlanningOperatingSystem13
Context14
Impact15
Responsibility15
ThePlanningOperatingSystem16
MacroandMicro25
TheMiddle26
Summary27
Notes28
CHAPTER 4 Debate:WhatCanWeDoandWhatShouldWeDo?29
People31
TheProcess33
Scenarios35
Resilience38
Drivers:WhatMovestheNeedle?39
DebateManagement41
EnablingTechnologies44
PotentialQuickWins44 Summary45
Note46
CHAPTER 5 Commit:WhoWillDeliverWhat,byWhen?47
Accountability50
GamingtheSystem53
EnterprisePlanningandForecasting54
EnablingTechnologies58
IngredientsforYourEPMRoadmap58
PotentialQuickWins58 Summary59
Notes60
CHAPTER 6 Visualize:WhereAreWe,RightNow?61
ManagementbyException63
YourPointofView65
InformationQualities68
InformationDelivery70
ManagementandStatutoryReporting74
SustainabilityReporting77
EnablingTechnologies81
Rationalization83
PotentialQuickWins83 Summary84
Notes84
CHAPTER 7 Understand:WhyDidWeGettheResultsWeGot?85
BusinessQuestions86
PatternsandNewInsights90
BigDataandPredictiveAnalytics99
DataVisualization101
EnablingTechnologies102
ComponentsforYourConnectedPlanningRoadmap102
PotentialQuickWins103
Summary104
Notes104
CHAPTER 8 Execute:FromInsightstoActionstoResults105
The10-StepInsightProcess105
EverythingIsConnected108
SalesPerformanceManagement110
SalesOperationsPerformance111
Order-to-CashPerformanceManagement113
SupplyChainPerformanceManagement115
MarketingPerformanceManagement121
Summary124
Notes126
CHAPTER 9 Strategy:EveryoneAlignedtotheRightOutcomes127
TheLanguageofStrategy127
FunctionalValueMaps128
Optics:LineofSight130
MetricsEqualFocus132
Profitability134
StrategicFlexibility135
ClosingtheGap136
Summary138
Notes138
CHAPTER 10 DigitalPlanning139
CloudComputing140
Blockchain141
RoboticProcessAutomation142
CognitiveTechnologies143
PredictiveAnalytics145
Cybersecurity146
Notes147
CHAPTER 11 BringingItAllTogether149
Alignment150
ACommonBusinessLanguage157
MaturityIsintheArrows159
ReturnonInvestmentandTotalCostofOwnership162
StandardArchitecture164
YourConnectedPlanningRoadmap166
OrganizationalReadiness:TheConnectedPlanningCenterof Excellence169
ParalyzedbyFeuds?170
ConnectedPlanningandIncentivePlans171
HowDoYouGetStarted?172
Summary173
Notes176
APPENDIX:ANEPMMATURITYMODEL177
BIBLIOGRAPHY183
ABOUTTHEAUTHOR187
INDEX189
FOREWORD I’vespentthelast30yearsresearchingandwritingwithintheorganizational domain.Duringthistime,Ihaveeducatednearly70,0000aspiringbusinessmenandwomeninthefundamentalsandtheoriesofmanagementand leadershipandhowtoputsuchknowledgeintoreal-worldpractice.One conceptthathasbeenthefocalpointofmyresearchandteachinginvolves thetopicofself-leadership.Self-leadershipisanempowermentprocessof leadingyourselftoovercomeobstaclestoyourgoals.Inthesamewaythat oneneedstobeself-leadingtofinishagruelingmarathon,anorganization mustbeself-leadinginordertoexecuteitsplansinanefficientandeffective manner.Whatdrivesself-leadershipatalllevelsinanorganization?The peoplewithintheorganizationofcourse—andthosepeoplemustbeinvolved intheplanningoccurringinanorganization.Withoutaplan,anorganization hasnodirection.Withoutaplanthatinvolvesemployeesatalllevelsofthe companyandthusencouragingself-leadership,anorganizationnotonly hasnodirection,butithasuncommittedemployeesthatlackthepassion andenergyneededforsuccess.AsDr.LaurieBuchananoncestated,“No involvementmeansnocommitment—noexception.”
Theplanningsystemiswhereanorganizationdefinesanddecideswhat itwantstoaccomplishandwhowilldotheworktomaketheaccomplishmenthappen.Inaplethoraoforganizations,planningsystemsdonotfosterself-leadership.Peopleareoftendraftedintoaprocessthatisdisjointed, unorganized,manuallytedious,andpolitical.Itismanytimesfacilitatedby differentpointsolutionsandlegacytoolsthatdon’tspeakthesamelanguage. Ratherthandebatingtheartofthepossibleforthebusiness,teamsoftenargue aboutthesourcesofdata,assumptions,anddrivers.Thecurrentplanningsysteminnumerouscompaniesisatop-down,nonempoweringdragonculture, morale,andorganizationaleffectiveness.Howisanorganizationabletoleverageitsplanningsystemtoovercomeimpendingobstacleswhentheplanning systemisanobstacleitself?Howisanorganizationgoingtoremaincompetitiveinthechaotictimesoftoday?Thesequestionssuggestthatinorderto thrive,companiestodayneedtothinkaboutplanninginadifferent,innovative way—planningthatencouragesindividualstoleadthemselvesandbepartof theplanningprocess. ConnectedPlanning isawonderfulstepinthisdirection.
InaConnectedPlanningenvironment,theanswertothequestion“what’s possible?”comesfromamuchmoredemocraticdebatethanwhatweareused toseeing,involvingstakeholdersatthetopoftheorganizationandthesubject matterexpertswithbootsonground.Thisbeginsacycleofcollaborationand
calibrationthatleadstonewinsights,enablinggreateragilityandresilience. Inthewordsofatimelessproverb,“Ifyouwanttogofast,goalone.Ifyou wanttogofar,gotogether.”
Today’smarketplaceisfraughtwithstiffcompetition,pandemic,and increasinglyuncertaingeopoliticaldynamics. ConnectedPlanning provides theframeworkforleaderstoadoptandimplementanagiledecision-making environment—anenvironmentthatencouragesemployeestoleadthemselves whiledrivingtheorganizationforwardamidstthevelocityanduncertaintyof themarket.
ChristopherNeck,PhD AssociateProfessorofManagementandEntrepreneurship
Tempe,Arizona October2020
ForewordfromtheFirstEdition IhavebeeninvolvedwithwhatisnowcalledEnterprisePerformanceManagement(EPM)inonewayoranothermyentirecareer,whetheritwasin financialreportingandanalysisorformulatingstrategyforourglobalbusiness.Iamastrongproponentofclosingthegapbetweenhigh-levelstrategy andday-to-daydecisions,andofcompletingthecyclefromadecisiontoits effectiveness.Alltoooftenwedevisegreatplansandsetouttoexecutethem andthengetovercomebyeventsorsidetrackedwithoutcomingbacktosee howrelevantourplanswereorhoweffectiveourdecisionsare.
Currenteconomicdemandsandcompetitivepressurenowrequirethat wepaymoreattentiontothiscycleofStrategy,Plan,Execute,Analyze,and Improve.Wemustbemoreflexibleandadaptableandbeabletoreactto changingmarketconditionsandcustomerpreferences.Andwemusthavea newlevelofaccountabilityatalllevelsofourorganizations.Andwithmore matureandadvancedEPMtoolsandthevastamountsofdataatourdisposal, thereisnoreasonweshouldnotbeusingthistogiveusmoreinsightintothe businessandmakefaster,betterdecisions.
AtHyatt,weuseourEPMcapabilitiestooptimizeallofourresources inpursuitofourgoalofbecomingthemostpreferredbrandineachcustomersegmentthatweserve,notjustforourguestsbutalsoforourmanagers, associates,andinvestors.Thegeneralmanagersatourfull-serviceownedand managedhotelshaveanaveragetenureofmorethan21yearsatHyatt.They aresupportedbyregionalmanagementteamsthatuseinformation,planning,
analytics,andwhat-ifmodelingtosupportourgeneralmanagersinachieving theirgoals.EPMisoneofthefoundationalelementsofoursuccessandhelps usfocusonourmissionofprovidingauthentichospitality.
EPMisnotjustanothermanagementfadoranothertechnologybuzzword.Thisisdoingcommonsense,fact-basedmanagementright.Inthisbook, RonDimonshowsusawaytothinkaboutEPMholisticallyanddirectlyconnectsittowhat’simportantinthebusiness:sustainablydeliveringstakeholder value.ThebookprovidesaframeworktohangyourEPMroadmaponto,and helpsyouprioritizewhat’snextonyourjourneytomanagingandimproving performance.Iwishyouluckonthatjourney.
PREFACE Thisisthesecondeditionofthebookoriginallyentitled EnterprisePerformanceManagementDoneRight publishedin2012.Sincethattime,muchhas changedintheworldofconnectingstrategywithimprovedperformance: new,cloud-based,in-memorytechnologieshavebeenadoptedbythelargest organizationsintheworld,moreunstructureddataandwaysofhandlingit, andanevenfasterpaceofbusinessdisruptionandcompetition.Sincethefirst editionwaspublished,I’venoticedmoreemphasishasbeenplacedonthe planning,modeling,andanalyticscomponentsofEnterprisePerformance Management,asorganizationsareeagertoimprovetheirabilitytoreact quicklytochangingmarketsandcustomers,changingcompetition,and changingemployeeneeds.Thedesiretoimprovereadinessforchangeas acorecompetencyamongmyclientsisdrivingmoreinterestinplanning processesandtechnologies.
What’schangedinthesecondedition:
■ Thereismoreemphasisonthedebateandcommitsectionsofthe EnterprisePerformanceManagementframework.Iamusingtheterm “connectedplanning”toemphasizethat;
■ Thereislessemphasisonthestatutoryconsolidationandreporting process,astheaudienceforthisislimitedtotheFinancedepartment, andConnectedPlanningappealsmoretobusinessmanagersand teams;
■ ChaptershavebeenreorderedtoprovidebetterflowoftheConnected Planningprocess;
■ Anewchapterondigitalplanning,andthosenewtechnologiesthat impactplanningandforecasting,hasbeenadded;
■ Asmostplanningsystemsarenowcloud-based,ormostorganizations aremovingtothecloud,thecloudarchitecturediagramshavebeen removed;
■ Whiteboarddrawingshavebeenupdatedandstandardizedbythe steadyhandofMeredithDimon,GreenwarePressStudios.
WhoShouldReadThisBook?
ThisbookisforCFOs,CIOs,theirdirectreports,andanyorganizational visionaryoraspiringleaderwhowantsto“bringitalltogether”andcreateanactionablevisionandplanforimprovingreadinessandperformance.
ThebookisalsointendedformanagerswhowanttounderstandConnected Planningandhowitcanhelpthembebettermanagers.Myhopeisthatany studentofplanningandforecastingcanlearnandapplyatleastafewideas fromthisbook.
ConnectedPlanning isessentiallyaboutthreethingstohelpyouimprove yourmanagementoperatingsystem:
1. AFramework. Thisisthemanagementoperatingsystemforyour businessandshowshowallofthepiecesofConnectedPlanningwork togetherasoneholisticprocess.Itismostusefulasalong-term, high-levelConnectedPlanningvision.
2. EnablingTechnologies. Withintheframework,Ishowwhatpieces youneedtoputintoplacetodeliveronthenecessaryplanningprocessesandhowtoconnectthem.
3. AFreshPlanningRoadmap. Thisisinsightonhowtoprioritizeall thosepotentialplanningandforecastinginitiativesgivenyourstrategic businessobjectives,andhowtheyaresupportedbyenablingtechnologies,eventuallybeingfulfilledonyouraspirationalConnectedPlanningframework.
OverviewoftheContent Thebookisorganizedinto11chapters:
Chapter1:What’sBrokenandWhat’sPossible? Thischaptergives youanoverviewofthepromiseofConnectedPlanning.Ithelpsyou understandwhatproblemsthisdomainwascreatedtosolveandhowwell it’sbeensolvingthem.
Chapter2:ConnectedPlanning. Anewchapterinthesecondedition thatgivesanoverviewofConnectedPlanning,thecomponents,andother definitionsthathelpreadersnavigatetherestofthebook.
Chapter3:APlanningOperatingSystem. ThisisthecentralframeworkofthebookandofthemodelforConnectedPlanningasaprocess.Eachofthecornerstonesoftheprocessareexploredinsubsequent chapters.
Chapter4:Debate:WhatCanWeDoandWhatShouldWeDo? OneofthemostoverlookedcornerstonesofConnectedPlanning,modeling“whatif”scenarios,isthetopicofthischapter.Enablingarobust, fact-based,opendebateinthecompanyhelpsitprepareforavarietyof possiblefuturesandhelpsitmaximizethevalueofitsassetsandminimize risk.
Chapter5:Commit:WhoWillDeliverWhat,byWhen? There’smore toConnectedPlanningthanonlyplanning.Thischapterdescribessome betterpracticesandshowshowplanningshouldbeconnectedtotheother areasofthemanagementoperatingsystem.
Chapter6:Visualize:WhereAreWe,RightNow? Oneofthemost commonneedsofConnectedPlanningisvariancereporting.Ithelps answerthequestion“whereareweandhowarewedoing?”atapointin time.Thischapteroutlineshowreportingandvisualizationhaschanged tobemuchmoredynamic,howitmustdelivermoreinsightthanever, andhowitcannotliveinisolationfromtheplanningprocess.
Chapter7:Understand:WhyDidWeGettheResultsWeGot? ConnectedPlanningasaprocessnotonlyhelpssettargets,italsohelpsexplore andunderstandwhyyoumet,exceeded,ormissedthosetargets.This chapterexploresapproachestounderstandingresultsthroughbusiness questionsandincludestheideasbehind“BigData”andpredictiveanalytics.
Chapter8:Execute:FromInsightstoActionstoResults. Chapter8 isacollectionofConnectedPlanningusecasesacrossavarietyofbusinessfunctions,includingSalesandMarketing,SupplyChain,andHuman Resources,andprocesseslikeorder-to-cash.Fromthischapteryousee howConnectedPlanningcanbeappliedtoanyareaofthebusiness... notjustFinance.
Chapter9:Strategy:EveryoneAlignedtotheRightOutcomes. ConnectedPlanningworkswhenit’salignedwithandinsupportofanorganization’sstrategicobjectives.Chapter9coversseveraltopicsonaligning connectedplanningtostrategyincludingtheever-popularProfitability Management.
Chapter10:DigitalPlanning. Anewchapterinthisedition,Chapter 10givesanoverviewofnewerdigitaltechnologiesthatcansurroundand improveConnectedPlanningecosystems.
Chapter11:BringingItAllTogether. Chapter11isallaboutdevelopingyournext-generationplanningroadmapbasedontheconceptsand practicesdiscussedinthisbook.IthelpsyousellConnectedPlanning internally,tiesupafewlooseends,andaddresseswhatittakestobecome worldclassinConnectedPlanningadoption.
SoWhat? Typically,budgeting,planning,andforecastingarethoughtofassolely FinanceorInformationTechnologyinitiativesandcaneasilybeputinthe
“operationalefficiencythroughautomation”bucketofbenefits.Whichisjust afancywayofsayingacorporatecost-cuttingprogram.However,inorder forConnectedPlanningtoreallymatterinthebusiness,ithastohavea directimpactonmorethanjustoperatingmargins.Ideally,itshouldprovide yourdepartment,businessunit,andcompanywithoneormorecompetitive advantagesintheareasof:
■ Customeracquisitionandretention
■ Productinnovationandprofitability
■ Peopleproductivity
■ Supply-chainefficiency
■ Marketingeffectiveness
■ Overallsustainableexecutionofstrategy
ItisnolongeranIT-ledareabutratherajointIT,Finance,andBusiness concernthatimpactsalloftheseperformanceareas.
RevenueGrowth Oneofthefirstareasofthebusinesstolookatforfinancialperformanceand competitiveadvantageisrevenuegrowth.Thereareavarietyofwaysthat ConnectedPlanningcanimproverevenuegrowth,including:
■ Betterfocusonsalesproductivitythroughmorerelevant,expedient salesforecasting
■ Bettersalesvelocitybyfocusingeffortsonthebest-sellingproducts, bundles,andchannels
■ Maximizedrevenuebymodelingproduct,bundle,andchannelprice mixes
OperatingMargin Especiallyinadowneconomy,withtheautomaticreactiontocutcosts,ConnectedPlanningcanhelpensureyoucutthe“right”costsandthattheremoval ofthosecostsdoesn’tadverselyimpactprofitablerevenueorfuturemarket share.ConnectedPlanningcanimpactthisareainmanyways,forexample:
■ Understandingcustomerandproductprofitabilityallowscompaniesto focusonmarketingandsellingtheproductsthatgivethebestreturn.
■ QuicklymodelingNewCoscenariosinapendingacquisitionandbasingthosemodelsonhistoricaldataandactualconstraints(byproduct, bygeography,bycustomersegment,etc.)cangiveamoreaccurate pictureofavailablesynergiestosettheexpectationsofthestreet.
CashCycle Acceleratingyourcashcyclegivesyoumoreconfidenceinworkingcapital, betteropportunitiesforinvestments,andimprovesoverallefficiency.ConnectedPlanningeffortscaninclude:
■ GatheringandsharinginformationonDaysSalesOutstanding (DSO),DaysPayableOutstanding(DPO),andDaysinInventory (DII)—deliveredtotherightpeopleintheorganization(andtiedto employeerewards)—canhaveapositiveimpactoncashcycle.
■ Cash-FlowforecastingandWorkingCapitalanalysiscanhelpimprove thecostofcapitalanddebtratiosandcanreducerisk.
AssetUtilization Ensuringthatassetssuchasplants,productionlines,orequipmentarebeing employedinprofitableactivitiesisthewayofanefficientorganization.AcoupleofwaysthatConnectedPlanningcanimpactyourreturnonassetsinclude:
■ Modelingcapacitytoensureyouhavetherightequipmentavailability, manpower,andoutputoryield
■ Scheduledversusunscheduledrepairanalysistoshowhoweffective yourpreventativemaintenanceprogramsare
CustomerSatisfaction Makingsurecustomersareattractedtoyourcompanyandproductsandthen retainedformaximumlifetimevalueisoneofthegoalsofmostorganizations. ConnectedPlanningcanhelpensurethatthishappensby:
■ Showingifthere’sacorrelationbetweencustomersatisfactionlevels andcustomersupportstaffing
■ Analyzingcustomersatisfactionscoresbyproductandproductlifecycle overtime,showingrootcausesfordeclinesinproductsatisfaction
■ TrackingaplantoimproveNetPromoterScorebydepartment
EmployeeEngagement Withmoreawarenessandaccountability,employeesatalllevelsoftheorganizationcanmakedecisionstoimproveboththetopandbottomlines.
■ ConnectedPlanninghelpsshowhowwhatyou’reworkingonisrelated tooveralltargets.Forexample,anaccountsreceivable(A/R)clerkcan seehowthevelocityofreceivablesunderhisorhercontrolcanimpact DSO,workingcapital,andfreecashflow.
■ Itencouragesmoresharingandcollaborationofplans,analyses,and results,andreducestheneedtore-createthewheeleverytime.
OrganicGrowthandOutperformanceManagement TherealgoalofConnectedPlanningistohaveamaterialimpactonbusiness performance,tostandardizeononemanagementoperatingsystemacrossan organization—forbetterperformancevisibility,execution,accountability,and organizationalflexibility.WhatifyouhadastretchgoalofusingConnected Planningnotjustforperformancemanagement,butforOUT-performance management?
HowwouldweuseConnectedPlanningtooutperformyourcompetitors onbothrevenuegrowthandprofitabilityoverthelongterm?
Therearemanywaystodothis:
■ Organicgrowthiskey—anintelligentinvestmentinorganicgrowth mayprovidemorevaluethangrowththroughacquisition.Connected Planningsupportsorganicgrowthinmanyways:
■ Profitabilityplanningwithcustomerandmarketsegmentation: spendingmoreeffortmarketingandsellingthemostprofitable product/serviceofferingstotherightpeopleattherighttimeat therightprice(pricemodelingandanalyticsisakeycomponentof this).
■ Model,planfor,measure,andmanagecross-sellingandup-selling efforts.Useanalyticstounderstandwhichcross-sellingand up-sellinginitiativesworkandhowtheycanbereplicated.Tiethis intothepricingmodelsaswell.
■ Looktoadjacencies,forexample,bundleswithpartnerproducts/services(e.g.,Nike + AppleWatch).Thesecancapturenew marketsandpullalongsalesofyourproducts.Includingexternal parties(suppliers,partners,resellers)inyourrollingrevenue forecastingprocessgivesyoumorevisibilityintoopportunities.
■ Marketexpansion:ConnectedPlanningincludesmultidimensional modelingofdifferentscenariosthatcanberisk-weighted,so,for example,ifyouwanttoexpandtoanemergingmarket,youcanfactorinriskfromcurrencyfluctuations,governmentregulations,and otherassumptions.Onceyouhavedebatedandselectedtheright model,youcanusethatasthebasisforacapitalexpenditureplan, revenueandexpensebudget,andworkforceplan.
■ OtherareasforConnectedPlanningtocontributetoout-performance includesupportingandinterconnectingknowledge-intensiveintangibles(intellectualproperty[IP],patents,copyrights,strongbrands) tofinancialandoperationalkeyperformanceindicators(KPIs)—thus linkinginnovationtotheentirebusiness.
IfyouwantaquickwaytostartusingConnectedPlanningtoimpactthe topandbottomlines,simplyaddanewcategorytoyourrevenueforecast: from“worst-case,”“probable,”and“commit”toa“stretch”(upside)number, andstartmanagingtothat.
Planning,asitiscurrentlypracticed,isstilllargelyacollectionofsilos. It’stimetobringitalltogether,tointerconnecttheprocesses,tobuildona common-rulesandmetadataplatformandtoturnplanningintoasophisticatedmanagementoperatingsystem.
MyhopeisthatyouembracetheManagementOperatingSystemand useConnectedPlanningtodrivevalueforyourpeople,yourcustomersand vendors,yourmarkets,andallofyourstakeholders.
MyhiddenagendaistohelpmovetheConnectedPlanningmarketcategoryforwardthroughmoresophisticatedadoptionandbyshowingmore correlationtoimprovingperformance.Ataminimum,thatwouldinclude:
■ Makingitaclosed-loopprocess,notfragmentedsilosandinitiatives
■ EncompassingallareasofthebusinessincludingSalesandMarketing, Operations,andDevelopment,notexclusivetoFinance
■ Includingcognitiveandpredictiveanalytics,notjustFinancialPlanningandReporting
■ Usingitasaplatformforcontinuousimprovement,bettertransparency,collaboration,andwhatauthorDanielPinksaystruly motivatesus:Autonomy,Mastery,andPurpose1
Note
1.DanielH.Pink, Drive:TheSurprisingTruthAboutWhatMotivatesUs (RiverheadPress,2009).
ACKNOWLEDGMENTS TomyfriendSimonTuckerfromwhomIhavelearnedmuchandsharedmany adventuresandlaughs.Muchofthecontentforthisbookwasformedand validatedwhileworkingwithSimononmyriadclients.
ThankstoDr.ChristopherNeckandGebhardRainer(writeroftheForewordinthefirsteditionofthisbook)fortheirforewords.
Tothosewhoencouragedandsupportedmeinwritingthisbook:Rick Cadman,DawnaMacLean,TonyMayo,RohitMillstein,MartyKaplan,and BonnySmith.
TomyearlymentorsfromDeloitteinToronto:JohnGambles,P.Howard Lyons,JimYouldon,andDenmanLawrensonandtoAlanSlaightforletting meworkonhisbookonStewartJames(StewartJamesinPrint:TheFirstFifty Years [Jogestja,1989]).
Tofriendsandcolleagueswhoreviewedthecontent,gavemefeedback, andhelpedimprovetheoverallqualityofthebook,especiallyShawnFrost andFredSandsmark.
TomyeditorsatJohnWiley&Sons:SheckChoandSusanCerra,with muchgratitudefortheirvisionandespeciallyfortheirpatience.
Tocountlessclientsthrough30yearsofconsultingwhotaughtmetheir businessesandallowedmetocontributetotheirsuccess.
AlsotoGordDownie,KevinHunter,BrianGinsberg,BillFowkes,Carl Tsenis,CorradoFermo,DickAntalek,BarbaraPaigeKaplan,MadelynReid, CharlotteReid,PatriciaSagara,EdMajors,MarkMacaluso,GraceStubberfield,RolandEdwards,andtomychildren,HarrisonDimon,HeatherSt. Hilaire,RuthDimon,andOliverPeregrin.
Aspecialthank-youtoTristanGaynor,GeorgeHeiler,KevinMurphy, andDaveMcLurgatAnavatePartnersforhelpingcompletethisbook.
Andfinally,tomywifeandillustrator,MeredithDimon,thankyoufor yourlove,encouragement,andinspirationeveryday.
CHAPTER 1 What’sBrokenand What’sPossible? “Findingwhat’swrongandfixingit”versus“seeingwhat’spossible andgoingforit”givetwoverydifferentlives.
—TONY MAYO
Weareinthemiddleofaninformationdelugeandaninsight glut.1
Oursystems,processes,andinformationarestillstrugglingto escapesiloswhentheeconomyiscryingoutforcollaboration,efficiency,and betterresults.
Folksareconstantlyreinventingthewheelatworkandsomelament“if onlypeopleinourcompanyknewwhateveryoneinourcompanyknows!”2 Manycompaniescanbarelyagreeonthedefinitionofacustomer,an employee,orsalesfigures,letaloneagreeonhowtoimprovethem.
Withallthistechnologyandinformationatourfingertips,wearestill makingdecisionsinthedarkandrelyingonourbestguesses.
Certainly,someorganizationsaredoingbetterthanotherswhenitcomes toclosed-loop,fact-baseddecision-making,buttheopportunitytotakeadvantageofallthisdatawehaveisbarelybeingexploited.
Strategy-ExecutionGap Whatisitthatthwartsarigorousprocessofsustainablyexecutingan organization’sstrategy?AsshowninFigure1.1,someofthebarriersinclude thosecapabilitiesthataretheresponsibilityofmanagersandleadersinthe organization.
InMarch2010, HarvardBusinessReview (HBR)surveyed1,075 HBR readersaboutstrategyandexecutionintheirorganizations.3 Only37%saidtheir companiesare“verygood”or“excellent”atexecution.
TheHBRsurveyfoundthatthetopbarrierstostrategy-executionwere:
■ Makingthestrategymeaningfultofrontlineemployees
■ Poorcommunicationofstrategy
■ Lackofaccountability
■ Lackofclearanddecisiveleadership
■ Toomuchfocusonshort-termresults
■ Everyonetoobusy/notenoughresources
■ Resistancetochange
■ Strategygoalsremainvagueandpointless:
■ Leadershipactionsinconsistentwithstrategy
■ Inabilitytomeasureimpact
■ Businessunitswithcompetingagendas
■ Toomuchuncertainty
Inmyconsultingwork,andbeinganemployeeforsmall,medium,and largeorganizations,I’veseensomeofthebarrierstoeffectivestrategyexecution,including:
■ Novettingofthestrategytoseeifit’sactuallydoable(dowehavethe rightcapital,rightproducts,rightmarkets,rightpeople?),andlittle debatetorefinethestrategy.
■ Lowagreementonwhatthestrategyactuallyis—evenamongthe C-suiteexecutives(it’salwaysasurprisetoseethis).
■ Lowconnectionbetweenthestrategicfinancialandoperationalbusinessmodels(madeinthevettingdebate)andbudgets,plans,andforecasts.
■ Lowbuy-intothebudgets,plans,andforecasts(usuallyduetomanagementoverridesafterabottoms-upexercise),resultinginlowbuy-in tothestrategyfromlowerlevelsintheorganization.
■ Lowagreementonwhattherightmeasuresaretoseehowwellwe’re doing,andnovisibleconnectionbetweenthosemeasuresandstrategic objectives.
■ Lowbeliefthatthenumbersseenareaccurate(oratleastthesame version),aswellasalotofmanualefforttogetatthenumbers.
■ Lowunderstandingoftherootcausesastowhythecompanyachieves, underachieves,oroverachievesresults.
■ Littleconnectionbetweenroot-causeanalysisandtweakingthestrategy(“hey,wearelosingmoneyonproductX,andit’snotaloss-leader, shouldwebeinthatbusiness?”).
■ Lowaccountabilityforresults.Someorganizationsdon’thavetargets orownersfortheirkeyobjectives.
Whenitdoeswork,I’veseenthingslikeaccountsreceivableassociates havingaBusinessIntelligence(BI)dashboardthatshowshowtheyhaveadaily impactondayssalesoutstandingandcashcollections,whichdirectlyimpacts strategicobjectiveslikeprofitablerevenuegrowth.
AccordingtoRogerMartin,DeanoftheRotmanSchoolofManagement attheUniversityofToronto,inhisarticle“TheExecutionTrap,”4 asoperationalandfrontlineemployeeshavetomakedecisionseverydayinvolving customersandoperations,theybecomedefactostrategists.Or,inmyview, atleastdefactostrategyexecutioners,andIdon’tmeantheyhavetokillthe strategy!
Imagineifyournumber-onestrategicobjectiveis“profitablerevenue growth,”andthetargetis10%year-over-yearimprovementinbothrevenue andoperatingmargin.Alsoimaginethateveryemployeeknowsthis—they evenhaveitwrittenonalaminatedcardtheycarryaroundintheirwalletsand purses.Andthenoneofyourcustomerservicerepsgetsaphonecallfroman iratecustomer.Typically,thecustomerservicerepismeasuredoncustomer satisfactionincludinglowcalltime,lowtime-to-resolution,highmarkson thenetpromoterscorescaleforeachinteraction,andsoon.Butwhatifthe phonecallfromtheiratecustomerwasaccompaniedbyadashboardthat automaticallypoppeduponthecustomerservicerep’sscreenthatshowed:
■ Customerlifetimevalue(CLV)(howmuchthecustomer’scompany hadspentonyourproductsandservices)was50%lowerthantheaverageCLV.
■ Costtoserve(theamountspentonsupport,maintenance,returns,etc.) was50%higherthantheaveragecosttoserve.
■ Overallcustomerprofitabilitywasrankedinthebottom10%(thiscustomerwasverygoodatnegotiatingdeepdiscountsonpricesduringthe end-of-quartersalescycle).
Whatwouldyourcustomerservicerepdo?Wouldyouwantthemtotreat theiratecustomerasanyothercustomerandinvestthetimeandmoneyto solvetheirproblemorconcern?Orwouldyouwantthecustomerservicerep toforwardthecustomercallontoaspecialhelpdeskthat,inlinewithyour numberonestrategicobjective,would“fire”thiscustomer?
Weneedabetterdecision-makingandresource-deploymentprocess becausebusiness-as-usualisover.Initsplacewehaveafaster-paced,rapidly changingworld,including:
■ Aneedtobemoreagile,moreresponsive,andmoretolerantofuncertainty
■ Better-informedcustomers
■ Changingmarketandbusinessmodels
■ Structuralchangesintheeconomicsofbusiness
■ Regulatoryrevolution
■ Growththroughacquisitionasthenormalcourseofbusiness
■ Redefiningassetvalues
■ Changingdeliverychannels
■ Vastnewinformationsources
■ Compressedcycletimes
Andthosecompressedcycletimesimpacttheentirebusiness:
■ Timetomarketfornewproductsandservices(concepttorealization)
■ Timetodelivertothecustomer
■ Timetoclosethebooks
■ Timetohirenewstaff
■ Timetodeploynewstaff(on-boarding)
■ Timefornewstafftoreachfullproductivity
■ Timetomakekeydecisions
■ Timetocompletemajorbusinesstransactions
■ Timetoobsolescenceforequipmentandproducts
■ Timetointegrateacquisitions
■ Timetorespondtocompetitiveactions
■ Timetoreturnoninvestment(ROI)(especiallyfornewtechnology investments)
■ Timetoenteranewmarket5
Connectedplanningisonewaytofillthisstrategy-to-executiongap.It helpseveryoneintheorganizationkeeptheireyeontheprizeandseehow theirperformanceisconnectedtothewholeorganization’sperformance.
