Primary areas a successful business plan should address.
It’s that time of year again when we begin focusing on what could be, while remembering what was. In other words, it’s time to put together next year’s business plan.
Perhaps I’ve been involved with business plans for too long. When I think of forecasting out 12 months to 18 months – into what seems like the distant future – I find it very difficult to stop thinking (obsessing) about everything bad that happened in the recent past. Like many in our industry, especially those in smaller companies, I have to work hard to stay focused on the future and its possibilities instead of dwelling on the past.
But how do you plan for the future while still trying to understand the immediate past? How can you satisfy all the stakeholders’ questions and expectations when you have yet to satisfy your own? Regardless of the final format or specific audience, the annual business plan boils down to addressing four primary areas: market, capability, performance and people.
The market is what drives your company, and in recent years, it has probably caused more heartache (or is that heartburn) within our industry. Is the market growing, shrinking or just moving? Should I concentrate on one market or should I diversify? And who cares anyway, isn’t it all about having more customers? The answers are yes, yes and yes!
We all need customers. The question really should be Do you know what your customers really want? If you understand what market(s) your customers participate in, you will most likely understand what market(s) you should focus on. Learn the dynamics, the customer base and the end markets. The rest will become easier–not easy, but easier.
One of the primary questions that thinking through market types and customer needs moves you toward is Do you offer a capability that is in demand? We need to sell our capabilities, but we also need to be committing some resources toward expanding them to stay competitive. Without your customers’ input, the road forward can be fraught with expensive boondoggles that generate nothing but costs and losses.
Capability is thinking through what you have, what you need, how you attain it and how it is preserved. This sometimes includes capacity but always includes cost containment (reducing waste and/or increasing yield). It is easy to have big dreams about capability, but if you follow your dreams, they could easily become financial nightmares. Understanding need vs. dream is the key.
Capability should lead to thinking about your company’s overall performance. There are many key performance metrics: on time delivery and yield/scrap are the two most common and most focused on. Equally important, but less popular, areas to analyze include inventory turns, customer retention, the days sales in receivables and overall cash-flow. Superb on time delivery and zero scrap are great, unless you are ticking off customers with arrogant service, blowing through cash by selling to deadbeat customers or building costly reserve inventory “just in case.” Without cash, you are out of business – period!
Top performance requires focusing on all of the above, and so much more. Employees need to understand which performance metrics are key to your company’s survival and that compromise may be necessary for all metrics to improve. Understanding the important numbers to focus on is just as important as understanding the customers’ needs, the markets and the capabilities that are demanded to be active and viable in those areas.
Thinking through all of the above, market, capability and performance, boils down to the most important aspect of planning– people!
I think it’s part of human nature to worry about customers and the incoming order board, as well as to dream about capability and to boast about an over-the-top performance metric. Unfortunately, for many, it is not human nature to think about their people (employees) during the planning process. Everyone thinks long and hard about employee benefits, especially when medical costs and payroll taxes skyrocket. The problem is that we are thinking about cutting instead of adding. We are quick to recall the last time an employee screwed up, but rarely do we remember when an employee performed above and beyond our wildest dreams.
As you plan for 2010, spend some time thinking about the most important resource you have – people. Keep in mind what can be done to cut costs, as well as what can be done to improve morale and involvement, to enable employees to assist in building capability, to improve performance and to wow the customer?
If you only have the time or desire to focus on one area while piecing together your business plan, spend that time thinking about the people who work for you. The people you employ are the key to your future and will be the key to achieving market success, developing competitive capability and delivering outstanding performance.
Peter Bigelow is president and CEO of IMI (www.imipcb.com); This email address is being protected from spambots. You need JavaScript enabled to view it..
