Tag Archives: business plan

Strategic Planning; Waste of Time, Obsolete: Dead as a Roadmap for Shaping the Future of Business…

Strategic planning is a waste of time: Oh, it might do good for some business but the idea should be scrapped in favor of business practices that embrace; flexibility, agility… that’s because most strategic plans just don’t work… strategic planning has become a ritualistic process where discussions are held in thoughtful tones, while most participants secretly suspect that nothing will really be decided or changed…

According to J. Brian Quinn; a good deal of the strategic planning is like a primitive ritual rain dance– there is a lot of dancing, waving of feathers, beating of drums… there is an almost mystical hope that something good will come out of it– you pretend to make strategy and then pretend to implement it… the process involves too much paper, too much time, too many nodding heads, and far too many poorly informed so-called experts… it’s anathema to even question the validity of the strategic planning process, but it’s time to challenge reality.

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According to Henry Mintzberg; strategic planning discourages change, narrows a company’s vision, limits flexibility and it’s, in fact, oxymoronic. The process fails more often than not; it just doesn’t work anymore, and it can be downright dangerous… However, many experts believe that planning is fundamental to success, but it’s naive and counter-productive to assume that traditional strategic planning, as we know it, is the answer… Flexibility, agility, fluidity, and not strategic plans are the keys to success in the modern business world… It’s a digital world: The Internet and affordable high-speed technology have radically reduced time lines, and profoundly changed the way you need to operate, and the way you need to plan…

In the article Can Strategic Planning Pay Off? by Louis V. Gerstner, Jr. writes: One of the most intriguing management phenomena of the late 60s and the early 70s was the rapid spread of the strategic-planning concept… Few management techniques have swept through corporate and government enterprises more rapidly or completely. Writer after writer has hailed this new discipline as the fountain-head of all corporate progress. In 1962, one published report extolled strategic planning as– a systematic means by which a company can become what it wants to be…

Five years later, it was called– a means to help management gain increasing control over the destiny of a corporationBy 1971, praise of strategic planning verged on the poetic; it had become– the manifestation of a company’s determination to be the master of its own fate to penetrate the darkness of uncertainty and provide the illumination of probability… It’s not surprising, therefore, that one company after another raced to embrace this source of managerial salvation…

Hence, it seemed appropriate to ask some chief executives whether strategic planning has lived up to its advance billings. Three anonymous reactions were as follows; strategic planning is basically just a play thing of staff… and, it’s like a Chinese dinner: I feel full when I eat it, but after a little while I wonder whether I’ve eaten at alland, strategic planning is a staggering waste of time and money… Some CEOs, of course, would disagree with these comments, but the fact remains that in large majority of companies strategic planning tends to be an academic, ill-defined activity with little or no bottom-line impact… Nothing really new happens as a result of the plan, except that everyone gets a warm glow of security and satisfaction now that the uncertainty of the future has been contained: Unfortunately, warm feelings do not produce tangible business results…

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That is, the strategic plan should clearly set forth the critical issues facing a company or division in terms of alternative courses of current action… And, if there are more than five or six issues, then they are probably the wrong ones… also, if the decisions do not involve major risks or investments and/or changes in competitive posture, or if the decisions do not have to be made now, then they are the wrong decisions… This is the creative leap that too many managements fail to make in strategic planning. They fail to ask; What do we do now as a result of this plan? They fail to recognize that the end product of strategic analysis should not be plans; but– decisions, actions… Hence, strategic planning should be more like; strategic agility and that means– it’s risky; it’s difficult; it requires leadership

In the article What Makes Strategy Fail by Ruth Tearle writes: Many senior managers are very cynical about the strategic planning process… The usual commentary is that strategic planning is a waste of time; the agenda is just like last year where we achieved nothing… there was no real direction, nothing was ever implemented. For many observers strategic planning is a process of having many great ‘pretenders’ and the end result is a sham. Time spent away at fancy retreat where nothing gets achieved, and employees throughout the organization continue to complain about the lack of direction… How do you know if the strategy retreat is ‘pretence’ or ‘success’? How do you know if the retreat delegates are only just great ‘pretenders’? Consider, for example:

  • Delegates who:­ Pretend to be there. Pretend to listen. Pretend to ask questions. Pretend to contribute. Pretend to act in best interests of the organization, while cleverly sabotaging the process…
  • Leaders who: Pretend the purpose of the retreat is to allow the group to co-create a strategy. Pretend that simply presenting a strategy to the teams is enough to excite and inspire them. Pretend it’s possible for a team to develop a vision of the future without considering how the future may be different from today. Pretend it’s possible for a group of bored people to create a brilliant strategy, which will excite and delight– customers, employees….

In the article Strategic Plan: Neither Strategy Nor Plan But Waste of Time by Benjamin Ginsberg; It would be incorrect to assert that strategic plans are never what they purport to be, i.e., blueprints for the future. Occasionally a business plan does, in fact, present a grand design for next decade… A plan that is actually designed to guide an organization’s efforts to achieve future objectives… Such a plan typically presents concrete objectives, a timetable for their realization, an outline of the tactics that will be employed, a precise assignment of staff responsibilities, and budgets… Whether one agreed or disagreed with the goals stated by the plan, there could be little disagreement about the character of the plan…

However, this ultimate plan is usually indistinguishable from dozens of other plans, which were probably copied from still other plans… Usually there is nothing new or different, it just a rehash of the same old rhetoric… this inter-changeability of visions, underscores the fact that the precise content of most business strategic plans is pretty much irrelevant… Plans are usually forgotten soon after they are promulgated, and no one can remember much about any of those plans… These plans are not a blueprint for the future, instead they are management tool for the present… The ubiquity of traditional planning is another reflection and reinforcement of the continuing realization that many leaders are out of touch with the reality of the changing world…

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However, it must be remembered that the underlying objectives of the strategy planning process is as important today, as ever.  It’s still critical to establish and communicate the strategic direction of a business… and if business competitive environment is static and pretty much as assumed by business leadership, then traditional strategic planning process will likely produce the desired results… But herein lies the failing; the business environment is no longer predictable, and it’s changing at rate faster than the planning horizon, which requires a new way of thinking– it requires a focus on ‘agility’ as the strategic imperative…

According to Denise Lee Yohn; the amount of disruption in today’s markets (and speed at which it happens) requires a very different planning approach… Instead of setting a definite strategy and following it through at all costs, companies should focus on– strategically adapting-to and excelling-at whatever path they find themselves on…

Developing strategic agility starts with changing many of the traditional thought bubbles (i.e., beliefs, assumptions, rules…) about the strategic planning process… According to Fred Pidsadny; focus on how the business must shift and adapt to stay competitive, or better yet to disrupt and leapfrog the competition, and once you determine necessary course corrections, take action ‘immediately’– don’t wait for next strategic planning session… Today’s market leaders must be– fast, agile, and able to change course with a minimum of disruption– strategic agility, fast execution– must be Priority #1.

According to C. Eric Brown; Don’t overly complicate it. Don’t over-think it. Create a relevant strategy, define the tactics, measure progress… then change it, if it’s not working… There is no natural cycle of when to define and refine strategies; strategic planning, monitoring– must happen whenever necessary, anytime, all of the time… Creating strategies that are truly adaptive requires that you give-up on many long-held assumptions, and focus on answering a series of specific interrelated questions about the organization’s strategic direction, for example; what vision to pursue… how to make a difference… how to succeed… what capabilities it will take to get there…

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It’s time to radically change the way you think about business; In the book, ‘Execution: The Discipline of Getting Things Done’, they say– So much thinking has gone into strategy that it’s no longer an intellectual challenge; rent any strategy you want from a consulting firm… In the book, ‘Confronting Reality’, it argues that the methodologies used to plan the future of business have steadily drifted away from reality and the strategic plans of most companies just don’t work…

According to Tom Peters; it’s foremost task, responsibility of the current generation of leaders to re-imagine the entire business process… To that end, it’s necessary to break away from that which does not work, and reinvent the process of creating strategies… According to Dwight D. Eisenhower; plans are useless but planning is everything… and you must be ready to adapt to whatever curveballs the twenty-first century sees fit to throw…

Marketing Authorities and Economists Think Differently: How They View– Market Structure Vs. Market Segmentation…

Market structure: Many companies look to market structure and market segmentation to better understand the composition of markets and to identify and profile groups of people (i.e., potential customers) to grow their business… but is  ‘market structure’ the same as ‘market segmentation’ or do they differ?

Market structure is often defined as interconnected characteristics of a market, such as; relative strength of buyers and sellers, degree of collusion, types of competition, differentiation, barriers of entry… Whereas, market segmentation is defined as process of subdividing, targeting a mostly homogenous market into clearly identifiable segments having similar need, want, characteristic, demand… In segmentation the objective is to design a market mix that precisely matches the expectations of the customers…

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According to Jeanne Grunert; economists and marketing people each define the terms a bit differently: Economists look at the overall market structure with the goal of defining and predicting consumer behavior… Whereas, marketing professionals seek to define the market structure to create competitive strategies as part of their overall marketing plan…

Economists examine market structure to help with decision-making and they seek to analyze broad trends in order to better understand consumer motivation… While marketers also look at trends, but they defer in that economists tend to focus more on the big picture… The economist want to know more about how this information affects large segments of various populations. Whereas, marketing is keen to understand the information, but apply it to their company’s specific marketing strategy…

Economist define market structure according to how an industry– that’s serving a market– is organized, and these structures typically include:

  • Monopolistic competition: Type of imperfect competition such that companies sell products, services… that are not identical with each other, but competitive… they are differentiated from each other by branding, pricing, quality… hence, they are not perfect substitutes…
  • Oligopoly: Market is controlled by small number of companies that together have the majority of market share… Duopoly: Special case of oligopoly with only two controlling the market.
  • Monopsony: Only one buyer in a market…
  • Oligopsony: Many sellers but meet only a few buyers…
  • Monopoly: Only one seller of a product, service…  Natural monopoly: Serves the entire market demand, typically at lower cost than any combination of two or smaller, and more specialized companies…
  • Perfect competition: No barriers to entry, an unlimited number of sellers and buyers, and a perfectly elastic demand curve…

Marketing, in contrast, defines market structure a little differently, when they know that an industry is organized as describe as one of the above restructures, i.e.,  oligopoly, perfect competitive… typically they will dig deeper into industry, searching to better understand other factors, such as; nature of competition, vulnerability, customer behavior, price sensitivity… Understanding the market structure and landscape helps marketers develop relevant and effective marketing strategies… Hence, defining a structure from marketing perspective tends to seek answers to questions, such as:

  • What are the key motivational drivers that determine how, why, what… consumers buy?
  • How do product, service… packaging, features, brand, pricing… and other factors play into the consumer decision to buy?
  • What and where are the opportunities for growth in an industry through major innovation?
  • What are the key market differentiators and competitive factors?
  • Where are the key market opportunities, threats, risks?

Defining market structure isn’t always easy. Definitions remain fluid and subject to change even among various functions-groups within a company…  and it’s common that different companies view the same market structure differently… As may be observed, both marketing and economists confuse the terms; segments and structures, so much so that the line between the two is nearly obliterated. You can have a conversation with some of these people and, at the end, not only will you not know what they are talking about, but you feel completely confused about both subjects…

In the article What Can Economics Learn From Marketing Market Structure Analysis?  by Charles Fischer writes: The concept of market structure is central to both economics and marketing. The problem for economists and marketing professionals is that a meaningful operational definition of market structure is elusive… Each discipline takes a different methodological approach toward the definition… and each has its own strengths, limitations.

Economics is concerned with broad socio-economic,  micro-economic issues, e.g., competitive fairness, predatory pricing… Whereas, marketing is more concerned about the managerial aspects of market structure… Although, each discipline touches on the primary domain of the other, the primary distinction between the two is just a matter of relative emphasis… 

In economics, markets are classified according to the structure of the industry serving the market… Industry structure is categorized on the basis of market structure variables which are believed to determine the extent and characteristics of competition… In the traditional framework, these structural variables are distilled into the following taxonomy of market structures:

  • Perfect Competition: Many sellers of a standardized product, service…
  • Monopolistic Competition: Many sellers of a differentiated product, service…
  • Oligopoly: Few sellers of a standardized or differentiated product, service…
  • Monopoly: Single seller of a product, service… for which there is no close substitute…

These four market structures each represent an abstract (generic) characterization of a type of real market… Market structure is very important because it affects business outcome through its impact on the– motivations, opportunities and decisions of economic players participating in the market… A key element of the economic market structure is product substitutability, which is strategically linked to market definition… however, this also complicated by the fact that consumers have their own perceptions of product substitutability…

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In the article Market Structure Analysis by Steven Struhl writes: Some of the confusion surrounding market structures arises from the fact that two contrasting traditions of– marketing and economics– have embraced it… Comparing and contrasting the marketing vs. economic methods are briefly summarized as:

  • Marketing approach: Basic elements– analyze the relationships among– target markets and segmentation, potential customers, competing brands, risks, opportunities, business strengths and weaknesses, pricing strategy…
  • Economic approach: Basic elements– analyze the trends of buyers and sellers, extent to which products, services… are substitutable, analysis of comparative costs, market barriers to entry, extent of mutual interdependence– extent to which buyers and sellers depend on each other…

One important point that the economists have in common with marketers is that they include demand elasticity and cross-demand elasticity (or words meaning the same thing) in market structures. Also, how economists get to their answers is usually very different from marketing practices, for example; economists can do much of their work without ever talking to an actual person, and some even act as if asking people what they do or think is, in fact, superfluous to understanding what is happening in a marketplace.

This may seem slightly ridiculous, but we should remember that these people win ‘Nobel’ prizes, while humble marketers and market researchers do not, but perhaps they are onto something… The basic consideration in market analyses is reaching a definition of exactly what constitutes the market… Traditionally this is done by focusing on these factors:

  • Degree to which products, services… can substitute for each other, based on consumer perceptions…
  • Extent to which products, services… are intended to serve similar purposes…
  • Impact of products, services… on each other and as measured by elasticity of demand and its effects on each other, as well as cross-elasticity

In typical marketing approaches, it always start with the consumers… but, to reach an overall market structure, the needs of each consumer must be aggregated… This is an aggregated list of each consumer’s– behaviors, perceptions… The  two main aggregation methods are:

  • Behavioral aggregation; (linked to studying market impact)…
  • Subjective aggregation; (linked to the extent to which products, services… can substitute for each other, ratings, opinions, and perceptions)…

Aggregation is problematic: One question often asked is– what happens when aggregation consists of many idiosyncratic consumer opinions; in other words, how do you meaningfully aggregate all the individual consumer choices or opinions when these often reflect great diversity?  Since most marketing authorities do not consider market structures to be the same as market segments, hence finding segments almost always is taken to mean looking for groups that fit these following criteria:

  • Defined product, service… related needs different from those of all other groups…
  • Characterized or identified specific customer– needs, wants…
  • Reachable selectively (or targeted) through communications and marketing efforts…

Different segments of a market, may structure a market differently, since their needs are different… A clear understanding of a market’s structure and segmentation is paramount to understanding it’s– needs, buying processes, preferences, value perceptions, revenue potential… but then, as important, translating these insights into an actionable strategy is precursor to developing a successful business…

The Struggle for the Right Business Model: Distraction or Imperative for Creating and Sustaining the Business?

“Past success stories are generally not applicable to new situations. We must continually reinvent ourselves, responding to changing times with innovative new business models.” ~Akira Mori

A business model describes the rationale of how an organization creates, delivers, and captures value; economic, social, or other forms of value. Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the design or architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit. This reflects management’s hypothesis about what customers want and how they want it, and how the enterprise is organized and how it makes a profit.

The popularity of the term “business model” is a relatively new phenomenon and it rose to prominence only towards the end of the 1990s. This surge coincidences with the advent of the Internet in the business world and the steep rise of the NASDAQ stock market for technology-heavy companies. Oddly, the number of times the term “business model” appeared in business journals follows a pattern that resembles the shape of the NASDAQ market index. It is not quite clear what to conclude from this observation besides the fact that the topic of business models probably has a relationship with technology.

In the article Business Models on the Web by Michael Rappa writes: Business models are perhaps the most discussed and least understood aspect of the web. There is so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means. In the most basic sense, a business model is the method of doing business by which a company can sustain itself — that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain…

“… all too often, a successful new business model becomes the business model for companies who are not creative enough to invent their own. ~ Gary Hamel

In the article Focus on Business Model Innovation and Increase Growth by Gunjan Bhardwaj writes: Business model innovations come from new entrants, but incumbent firms can also reinvent their business model to stay competitive and to outperform competitors. What is a business model? A business model can be defined as the combination of “who”, “what”, “when”, “where”, “why”, and “how” a company provides its customers with its products. Business model innovation is the discovery of a new way to do business in an already existing business, or in a new start-up business.  Creating a new business model means to discover new sources of revenues; thanks to new technology, changing demographics or consumer behaviours…

According to the observations of ‘Mitchell & Coles’, who have studied several successful public companies, the most effective firms were making important business model shifts every 2 to 4 years. Continuing business model innovation is essential because it can help companies to prosper… Firms should learn to cannibalize their own businesses before the competitors do. In addition, when a firm changes several aspects of its business model, it makes its business model innovation very hard to duplicate by competitors and benefits from significant growth and increasing profitability.

In the articleFree: a Tactic, not a Business Model by Anne Zelenka writes: Every time an economic bubble develops, many will tell you how “this time it’s different,” how “this time the rules have changed.” The lie of the Web 2.0 bubble is that ‘free is the way to succeed in the new economy’: That’s not true. The rules of economics have not changed. The best way to make money in the new economy, in the Web 2.0 economy, comes down to the same fundamental business model that has always existed: create something of value for people who will pay for it.

Fred Wilson, venture capitalist(VC), wrote in defense of free: “free is a great way to make money. You just have to know how you are going to get paid for being free”. To be fair to VCs, they’re not advocating doing everything without pay. They’re suggesting ‘free as a tactic’ towards getting paid in other ways; through advertising, or by premium services (as in a freemium model), or maybe even through being acquired by another  company. “Free is only a tactic, not a business model”.

In the article5 Business Models for Social Media Startups by Jun Loayza  writes: During the first Internet boom, the most common business model was probably, “get a ton of traffic, then figure out how to make money”. Today’s social media startups are finding unique ways of generating revenue from the very beginning. Here are a few of the revenue models:

  • Freemium Model: Offer a basic service for free, while charging for a premium service with advanced features to paying members.
  • Affiliate Model: Drive traffic, leads, or sales to another affiliated company’s website.
  • Subscription Model: User pays a fee, generally, monthly or yearly to access a product or service.
  • Virtual Goods Model: User pays for virtual goods, such as upgrades, points, gifts, on a website or in a game.
  • Advertising Model: Sell advertisements against their traffic; the more traffic and the more you can charge for ads.

In the article “Business Models by Dick writes: Focusing on business model too early can hurt a company’s prospects. When asked about Google’s lack of a clear business model, when he  originally backed the company, John Doerr is said to have responded “With this kind of traffic, we’ll figure it out”… Be laser focused on having your company be passionate about product and passionate about customers, you don’t need to be passionate about revenue until the business model reveals itself. You try different things…

So, we come to this curious world in which some people say “sure that’s great, but what’s the business model” while other people are saying “don’t worry about the business model right now, grow, grow, grow”…

In the articleWhat is a Business Model?” by Audience Dialogue writes: When designing a new business, the model it uses is likely to be a crucial factor in its success. The other type of business that needs to worry about a business model is a business in a steadily declining market. ‘Chesbrough & Rosenbloom’ point out that “while the term ‘business model’ is often used these days, it is seldom defined explicitly“… Roger Clarke created a framework for e-business models with four questions, and answers to these questions would form a business model:

  • Who pays? (e.g. consumer, producer, or third parties?)
  • What for? (e.g goods, services, expertise, assurances of quality or security.)
  • How much? (e.g. currency)
  • Why? (e.g. perceived value)

In the article What is Business Model?” by Umair Haque writes: Business model converts innovation to economic value for the business. The business model spells-out how a company makes money by specifying where it is positioned in the value chain. Simply put, a business model describes how a business positions itself within the value chain of its industry and how it intends to sustain itself; that is, generate revenue. “The classic business model that has dictated the structure of traditional companies is so at odds with contemporary economic currents that is must and will disappear”…

In the article The Best Business Model in the World by Robert Pozen writes: The best business model is also the simplest: make stuff that’s insanely great: That is, it amazes, enriches, and inspires. That kind of stuff doesn’t need a hard sell, a new market, or a convoluted product range. It just needs — to be. Business model innovation is often self-defeating and self-destructive. The real problem with business model innovation is that it dilutes the incentives to make good stuff in the first place…

In the article Reinventing Your Business Model by Mark W. Johnson, Clayton M. Christensen, and Henning Kagermann writes:  One secret to maintaining a thriving business is recognizing when it needs a fundamental change. Apple introduced the iPod with the iTunes store, revolutionizing portable entertainment, creating a new market, and transforming the company.

Apple did something far smarter than take a good technology and wrap it in a snazzy design. It took a good technology and wrapped it in a great business model. This model defined value in a new way and provided game-changing convenience to the consumer.

Business model innovations have reshaped entire industries and redistributed billions of dollars of value. Retail discounters such as Wal-Mart and Target, which entered the market with pioneering business models, now account for 75% of the total valuation of the retail sector. Low-cost  airlines grew from a blip on the radar screen to 55% of the market value of all carriers. Fully 11 of the 27 companies born in the last quarter century that grew their way into the Fortune 500 in the past 10 years did so through business model innovation…

“In all enterprises, it’s the business model that deserves detailed attention and understanding”. ~ Mitch Thrower

In the article 5 Influential Business Models by Jane McGrath writes:  A business model can make or break a company, no matter whether its product is fantastic or just mediocre.  Henry Ford, famous for using the assembly line in his car factories, neither founded the world’s first car company nor invented the assembly line.

Borrowing the idea originally used in the meat-pa­cking industries, Ford was able to go after a new market in his industry to great success. It goes to show that in the dog-eat-dog world of business, it’s often not as much about the product as it is about the process.

Bu­siness strategy may not be a science, but using the right method with the right materials in the right place at the right time can create explosive results. What’s particularly fascinating is how companies ride to success largely on the strength of their business models.

Some of the most interesting business models are: Dell [‘just-in-time’ manufacturing]; Amazon.com [direct-to-consumer service];  McDonald’s Corporation [ real estate, fast-food assembly-line, franchising];  Microsoft [operating system, personal computer, non-techie-community, Office suite]; Wal-Mart [retailer, no-frills-low prices, rural areas]…

Getting the business model right is often the difference between surviving or not, between being truly transformational or simply incremental. Many business models in the private sector must demonstrate simplicity, precision, and focus that can be communicated in just a few words… Business models are as relevant to the public sector as they are to the private sector…

“This leads to the question of whether business model innovation and strategy is really just the same thing. Certainly successful business models should also have sound strategic principles behind them and one of these is the central concept of ‘fit’. This is an old idea made popular by Michael Porter in the 1980s and it is really about lining up all of your business operations behind a central logic of value creation” ~Tim Kastelle and John Steen