What does solving a jigsaw puzzle have to do with strategic planning?
And what’s the best and fastest way to solve a jigsaw puzzle?
According to jigsaw puzzle experts, it’s best to have 2 or 3 people working on it. You start first by assembly the edge pieces (the frame), the sort the interior pieces by significant colors or identifying marks. Assemble the obvious and easy pieces first like those with text or simple color patterns. Lastly put together the hard stuff.
They also have two other suggestions: take occasional breaks so you can come back with a fresh set of eyes; and assign certain areas to specific people.
From 50,000 feet, that’s exactly what strategic planning looks like…
In the previous post we framed the puzzle by having Sales tell us what they were seeing in the market. We’ve just taken a break so that we could come back with fresh eyes and it’s time to start working on the interior.
Let’s jump in to step 2…
The Strategic Planning Frame
We heard from Sales at the beginning of October.
The main reason behind the break in strategic planning is to give time for ideas and assumptions to be tested and for thought to be applied to each phase.
At this point going into November 1st, Operations has had the chance to think about and test any assumptions that were made in Sales’ strategic plan. Now they’ll be presenting their picture.
Since Operations has to deliver a profit on the plan every day they need to give feedback and ideas on it as well. If you’re a small company and you don’t have a large operations team yet you’ll simply take off your sales hat and put on your ops hat for this part of the process.
The Operations View of Growth
When you want to make sure you’ve got the right piece in the write spot what do you do? You ask someone else for their opinion.
In a business if you talk to the operations folks they’ll tell you that Sales guys are free spirits and Operations are the reality guys. Sales people like to have infinite amounts of product instantaneously available. Operations is supposed to deliver a profit every day. Success lies in balancing these two.
In the previous post one of the things we required from your sales team was that they needed to present ideas about where growth should come from. Initially we put limits on Sales and told them they had to show where growth could come from without increasing investment in new equipment.
What does this mean for Operations?
That means you’re going to be trying to do more with the same. And that means Operations needs to know their capacity limits…
For every place where your sales team made an assumption your operations team needs to go through and test that assumption independently. This is that second set of eyes making sure the piece fits.
Operations is answering the same question that Sales was working on (where can growth come from without additional investment?) and they will present how much growth they can accommodate if the machine that is your business is pushed to its present limits.
This is real simple. We just want to know how much unused capacity there is in your business. Can Operations deliver what Sales was thinking?
The second question that Operations needs to answer has to do with the expense of expanding your geography or footprint.
If Sales came back and suggested that a second store on the opposite side of town was your next move then Operations now has to show what that would cost in terms of equipment, people, inventory, and overhead.
Expanding your footprint has an operating and financial impact. Your operating team will need to calculate the investment and ROI.
Lastly, Sales presented some suggestions with regard to new products or services. They presented what they projected the ROI and operating profits would be for each of these. And just like with the previous two questions, your operations team should come back with their independent development, costs, profit, and ROI projections for these ideas.
Required Investments for Your Strategy
Now that we’ve addressed the growth assumptions we’ve got to deal with the condition of the business as it operates today.
Nothing lasts forever and that is particularly true when it comes to computers, machinery, and facilities. It’s likely that you have some expenses or investments that you need to make in the coming year just to maintain the status quo.
Employees and Strategy
Operations has to deliver on commitments that the company makes.
You need to think strategically about your employees in the coming year. This is about the skills you have versus the skills you need over the next 1 to 3 years.
Have you discovered that you need a particular skill and so therefore you’re going to need to either hire some additional talent or train the talent you’ve got? Do you have enough employees to begin with? Has a key employee announced that they’re leaving and so you need to find a qualified replacement? Do you need the same skills in the new person that you had with their predecessor?
Operations should spend some time reviewing and thinking about your team and what needs to be done to make it better. A discussion about your team should be included in the operations presentation for the strategic plan.
Capital Equipment and Strategy
Very similar to how you reviewed your employees you need to take a look at your current equipment, computers, software, and facilities.
Which one of these things is on its last leg and must be updated? Is there any key piece of equipment (computer or machinery) that is operating at its maximum capacity? Are your facilities still good enough for this year and the next few years?
Operations should review all of this and make specific recommendations in their plan for the coming year.
Inventory and Strategy
How did you do on delivery to your customers last year versus your goal? Were you perfect or did you fall down a couple times?
Operations should start with any major event where you had a delivery problem. For a retail business this means not having the right inventory mix or the necessary amount of inventory on the shelf. For a service based business we’re talking about not having enough excess or idle capacity when the need spikes.
As you move into this part of the evaluation don’t fool yourself into thinking you need to have an infinite amount of inventory collecting dust or people standing around doing nothing waiting for something to happen.
What you need to do is strike a balance and that’s what Operations should be looking for in presenting their suggestions.
If you’re a seasonal retailer do you need to adjust your inventory mix a little differently? If you provide a service do you need to adjust your headcount next year to compensate for changes? Maybe you could improve revenue by adjusting your hours of operation…
Productivity and Waste Elimination
So far we’ve talked about growing the business and we’ve talked about investments to keep things running smoothly. And there is one more area that Operations should always talk about.
Its Operation’s job to make sure that your business makes money every day. Part of doing that is continuously looking for productivity improvements and ways to reduce waste in your business.
Operations is by definition inwardly focused to deliver on the brand promise of your business. Therefore, productivity and waste elimination is how Operations grows profits.
I have no doubt that you and your team have seen ways during the year that they could improve the efficiency of the business and reduce waste in your processes.
Now is the time to have them submit their recommendations for investments that would result in improvements. Operations should have at least a few ideas that will pay for themselves in the next 24 months.
This process isn’t limited to just processes. Operations should look through the profit and loss statement make sure that they are bidding out services and raw material vendors on a regular basis.
Rank the Opportunities
Finance will spend time over the next month doing their evaluation on the guidance from both Sales and Operations.
At this point in the process you’ll want to rank the guidance and opportunities provided by Operations starting with the “have to’s” first.
The “have to’s” are items such as replacing equipment that is close to or past it’s useful life, and issues like replacing key people who have left or have forecasted to you that they’re leaving.
From there you should rank Operation’s evaluation of the Sales suggestion based on ROI, required investment, and how closely they connect to the business and strategic plan.
The third grouping of projects for the year is your productivity and waste elimination projects for the year.
For December…
The December meeting will be the longest. Generally it is twice as many hours as the either of the other two meetings. So if you had budgeted 4 hours for Sales and Operations each, you should set aside a full day for the Finance plan.
Be prepared to spend the first half of your session on December 1st hearing about the Finance department’s presentation for the coming year’s strategy. You’ll spend the second half of the session committing to specific programs and lining out major milestones for the coming year.
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