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The Core Components of Business Strategy

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In nearly every engagement where my goal is to craft strategy, I arrive at a point where my collaborators or clients and I need to create a narrative of the good thinking the emerged during the many processes we linked together and begin writing a master document, sometimes call a Strategic Plan. This article covers the foundational elements of the process, discusses strategic context, outlines the possible components of strategy, reviews some the important decisions that need to be made along the way, and concludes with a discussion of the difficult transition from strategy crafting to implementation.

Foundational Elements

There is a wide variety of strategic planning documents, some are short while others lengthy, some are mostly text while others feature graphics and pictures, and some are directive while others philosophical. Yet with all of the variation some commonalities shine through. The foundational elements arise from questions and considerations derived during the strategy crafting process. This section covers the early considerations and strategic context important to developing a useful strategic plan.

More often than not, those seeking to develop a strategic plan envision a single, lengthy tome that reads like a book and provides all of the collective actions necessary to achieve greatness over a defined period of time. This sort of master operating manual for the future is the hope that entices both planners and executives. Many hold on to their dream of creating such a document. In reality, these kinds of strategic plans are doomed to being marooned on bookshelves for a number of predictable reasons. While they may be grand documents shortly after being written, they exist in a changing world and lose relevance with each passing quarter and year. Vague visions lack the detail to be actionable. Individual strategies move at their own pace and become out of synch. Resource estimates made at the point of planning quickly show their error during implementation. Staff and leaders move in and out of positions and lack the knowledge of what they are doing and why. As my colleague Don Norris likes to say, “these kinds of plans quickly turn to fairy dust” and become forgotten.

My foundational principle is to consider a strategic plan not as a single grand document but as a system of living documents of many different types developed for a variety of purposes. Here is a listing of some of the possible elements in the system of documents that become a strategic plan:

  • Purpose and Assumptions – the beginning assumptions of the planning process that include things like foundations upon which strategy is based, part of current plans that should be tested moving forward, recognized conditions or commitments that are believed to be unchangeable, known future states that must be accommodated in emerging plans and actions, and beliefs about what is possible in the future. This document should answer the question, why planning now?
  • Strategy – this is the heart of the strategic plan and includes components such as mission, vision, values, strategies, goals, actions, outcomes, the planning horizon, and the strategic context. I explain each of the these elements more fully in the sections that follow. For many, this is what comes to mind when a strategic plan is mentioned.
  • Imagery – I like to challenge organizations to choose to create a single page graphic or image that represents the entire strategic plan. While I sometimes experience resistance to over-simplifying, I have found that in the end, this single page image becomes the most used and referenced document in the time that follows the planning period. Executives can quickly review their strategy with their employees, boards, customers, and publics.
  • Implementation or action – many planners and leaders know that actions need to accompany strategy or little to nothing gets done. Given that, you would be surprised at how many strategic plans do not include sufficient detail on implementation to fully execute strategy. Beyond the specific actions required to achieve each strategy of a plan, implementation depends on how the actions are sequenced, the length of time allowed for any one action to be accomplished, who will complete the action and ensure it gets done, and what outcomes should be observed once the action is complete.
  • Financial or funding – an even more overlooked element of a strategic plan is an honest estimation of the resources required, both human and financial. So many plans exist as organized dreams with no practical connection the realities of the complexities of resourcing implementation. New strategies are often layered on all existing operations asking individuals to go from 100% to 125% of workload. Equally disastrous is a strategic plan that creates unfunded mandates. A more sound approach is to include an integrated, aligned financial and resource strategy that accompanies vision and goals.
  • Communication – plans can be developed in any number of ways, some written by a small but wise group, others through broad participation and input. With the latter approach, communication is part of the process from the beginning. With the former, the success of the effort is highly dependent on how the plan is communicated and accepted by those that are tasked with implementation and action. I like to suggest that communication plan accompanies the strategy, action, and resource elements in a system of documents.
  • Units, division, or specialty areas – many individuals in organization ask how does this affect me or my department during the planning process. Strategy can exist at such an abstract organization or ecosystem level that there is no way for individuals to understand what to do. Implementation and action plans help this, but the best strategic plans ensure vertical alignment. This is the connection from top to bottom in the organization. Some strategic plans require aligned sub-plans from each of the organization’s units, divisions, or speciality areas.

For each of these elements, I like to answer each a number of questions that helps determine if we need a document or if the issue may be addressed in another way or in another document. What is the name of this document? Names are important when working with a system of documents. Further considerations are how they hang together and how they are sequenced. Who is the audience? Not every part of the strategic plan is acceptable or necessary for every audience. In many plans for example, implementation details need only be viewed by employees and managers, while important strategic statements like vision and values need to be shared very broadly. Also, some documents may need to have multiple versions for multiple audiences. What outcome does it drive? Each document in the system should exist for a reason and beyond that it should drive some kind of outcome or impact. What are the contents? This goes without saying, but we need to be thoughtful about the length and contents of each document. Short and concise is better than the alternative. And finally, how does the system of documents hang together. This has gotten much easier now with hyperlinked online material than it was in the days of bound paper.

I often use the following graphic in a strategic planning session I call the drafting workshop where I work with the plan writing team to begin to organize their thinking about the system of documents that might emerge from the planning process. Sometimes I will construct and complete a grid containing each of the questions as rows and the documents as columns to better understand the system of documents the make up a strategic plan.

All of these considerations cannot be fully addressed at the onset of a strategic planning engagement, However, without a full vetting of the possibilities, we often end with misunderstood expectations, or even worse, a failed planning process. However, with a honest dialog about the system of documents that should result from the planning process, potential is created, and the organization is better positioned for success in the process.

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About the Author

This article was written by Robert Brodnick , a strategy consultant who bring the best of thought-leadership and practice-leadership to help organizations spark thought and ideas, design and achieve their future vision, and navigate change as they focus, strengthen, and transcend current limitations.

 

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Startups

Top 10 Mistakes that Startups Make

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As we know there is no limit to the ingenious ways people find to royally screw things up – as a start-up or anywhere else. As one expert puts it, experience is what you get when you fail to get everything else you wanted so, in lieu of learning the hard way, learn from others! In order of importance, most important to least, I’ll cover some of them:

Mistake #1 (The Worst): Burning Your Bridges

Paraphrased, this came out more as “live by your word and act with integrity”. Interesting #1, this, because its not limited to startups, obviously. In the world of startups, however, there are many inexperienced people, sometimes significant personal money at stake, lots of uncertainties and a huge amount of trust needed between investors, boards, founders and employees to pull it off.

This can cause people to behave, lets say, in a manner which is less than desirable or ethical. And outsiders sometimes take advantage of this (example quoted: Facebook’s and Microsoft’s habits of structuring acquisitions to offer more value to key people they want to keep going forward, vs. the deal already agreed between the investors and the founders/employees).

The point comes down to this. As you go into this with your team – all of the stakeholders – keep your word, make sure everyone feels good and properly treated and take care of your reputation. If you shake hands and then do something different it will come back to haunt you.

Mistake #2: Not Focusing Nimbly

Focus is critical in startups. Its very easy to get distracted, or overreact to outside factors. That said, the reality is that things change as you go along. So you need to be highly focused, yet nimble enough to change tack if something happens to significantly impact your plan. Fact is, many successful startups never set out to do what they ended up doing.

Ann Miura-Ko from her investments: Chegg was Craigslist for Colleges – until Facebook started doing it, so now it’s textbook rentals for students; Circle of Moms was started as Circle of Friends by two young, single (no kids) guys as a way to create groups on Facebook, so when Facebook started doing the same thing they focused on Moms as one of the key active large groups that formed under their prior plan. (Hmm, notice a theme in Ann’s investing??).

Focusing nimbly was also defined by one panelist as being able to say what you do clearly, in one sentence. Focus certainly, not sure about the nimble …

Mistake #3: (Not) Letting Your Investors Become Your Trusted Advisors

This one actually focused more on developing the right dynamic between you and your Board/investors. A consistent theme was along the lines of “well, you (the CEO/Founder) are in charge and you need to run the company”, with of course the caveat that if we don’t like what or how you do it then we’ll take you out. Reality is that you need to pay a lot of attention to who you take as your investors and how the dynamic will play out. Many investors have two completely different sides – when things are going well, and when things are not. So check out both sides with people who have worked with both sides – before you take the money.

If you need more help from your Board or investors its OK – to a point. Introductions to potential partners? Great. Taking over running the business – not good. It all depends on the timing, the relationship and the needs. Generally investors want you to listen to what they have to say, but not be told what to do (otherwise they should get someone else). So you have to figure it out but with their advice and input.

This also helps with one key point: never surprise your Board! Always keep them in the loop, knowing what’s going on.

Mistake #4: Not Having Trusted (Valuable) Advisors

Naturally I like this one (becoming a trusted advisor – and earning that role – is one of the ways I help startups myself). And I agree with it because even experienced entrepreneurs don’t know it all. They tend to know a few things well, and the rest has to come from around them – the team, the investors/Board and the trusted advisors.

In this case “trust” means “valuable”. They need to add true value. If they are just names on paper to look good then they’re just endorsements -and largely worthless. They need to be real help to you. You should hire an advisor the same way you hire an employee – carefully, with reference and other checks. Paid or unpaid, cash or stock, depends on the value and the role.

However advisors will get frustrated and move on if you don’t know how to use them, receive the advice and know how to parse and act on it. This does not mean blindly following the advice. But if you ask for advice then please accept it and decide how you will use it. And don’t try and do it all yourself.

Mistake #5: Not Recognizing When to Supplement or Shrink the Team

Founders who fear bringing in the right people at the right time are a problem. “When I find someone as smart as me then I’ll bring them in” – wrong! Engineer founders generally don’t know how to build sales and marketing. The culture you want determines the kind of people you hire. You should always be hiring or shrinking – but make sure the people are the right fit (don’t hire guys with machetes if you are already on the highway). Personal characteristics and motivation are always the most important, not the specific skills – you can learn the latter but not the former.

Mistakes #6 and #7: Not Having a Real Plan – and Not Knowing Where You Are On Your Roadmap

A key emphasis here was to insure you figure out what type of business you are building – a big or small company, a home run or a single. This is really important because it determines much of what you do – and who you hire and whose money you take. The reality is the vast majority of startups that succeed turn out to be single. Very few ever IPO (fewer than ever). Most will get acquired if successful. And for you as a founder you may be a lot better off taking smaller money from angels or smaller vc’s, controlling your destiny more and getting a larger share of a smaller business (and more total dollars) than someone who swings for the fences and even if successful gets a very small piece of that bigger business. Regardless, you need to build your business to be independent, not just to be bought.

Always have a clear plan – but be nimble enough to change it if you need to. If revenues are less than you planned then you need to find new growth or cut expenses. This is partly why investors bet on people – things rarely go according to plan and how the people handle it is key. Knowing where you are on your roadmap then becomes key – is your hypothesis (for that’s what it is) working or not? By the way – as I’ve written about before – tying funding to milestones is wrong, not just because its a cheat on valuation by the investor but because you may need to change the plan and the milestone becomes a millstone.

However metrics are important. Here’s what we said we’d do. Here’s what we did. Here’s what we’re going to do next. It’s your feedback mechanism. Why is something drifting? Be ready to reset if needed, or take other action. Be super transparent, regular, communicative and avoid surprises.

Mistake #8: Being Penny-WIse and Pound Foolish

As a financial advisor and CFO to startups of course I have to echo the starting point on this one – the panel’s statement that you need to have a good CFO or Controller. It’s still a surprise to me that so many startups don’t have either one – and in fact frequently don’t even have a good bookkeeper or basic financial information available. The panel view was that you need someone on board who doesn’t want to spend money BUT the real key is someone (CEO’s are often not the right ones) who can help make the right trade-offs. After all, saving $5k a month in online marketing is a false economy your total burn is $150k/month and not spending the $5k means you take X months longer to make your target. Not having a top sales person is a bigger mistake than having a colour copier. I’ll repeat a personal view here: the right financial person on board (emphasis on RIGHT) will pay for themselves many times over in better business decisions and return on investment.

When you have raised money (see below) then have self-control and don’t defocus. If your plan said you would spend $Y on marketing and you raise the money you needed then don’t go spend that $Y on swanky new space instead.

Mistakes #9 and #10: Never Be In The Position Where You Have No Money; Don’t Raise Too Much or Too Little

Sounds obvious. Amazing how many don’t figure it out. Cash is the rocket fuel so you need to raise it. Be sure you know you much you need to get to the next key funding milestone – then raise more because it will take longer than you think to achieve that milestone. But also, raise money when you can, not when you need it. Timing is a key factor – not just in your business but when the market is more ready to supply funds is critical.

Be forced to make tradeoffs and prioritize. Be very lean during product development and market discovery, then accelerate to ramp up the customer acquisition and returns.

Raising lots of money at a high valuation means you need to have a big exit. This will NOT happen for most companies. Solid singles (an exit in the $50 – $100m range) are a great result for most people. When raising money don’t obsess on valuation. Take a reasonable valuation and focus on increasing it solidly between rounds. Down-rounds are viewed very negatively (in fact they can be the kiss of death).

Finally, raise money strategically. This means raising based not just on cash needs. You need to have in mind what business you’re building over the longer haul, who the investors are and what they bring to the table that can truly help move the business froward. Yes, terms are important but get a win-win-win out of it.

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About the Author

This article was written by Philip Smith of Silicon Valley Frontlines, he provides consulting to startups and emerging companies.

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How Huawei plans to win the Western Markets

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Some Chinese high-tech companies may be bigger than you think. The e-commerce giant Alibaba has a market capitalization of over $400 billion. The social media and gaming company Tencent is not far behind, and nearly a billion people use its WeChat messaging service. Baidu is the world’s second largest search engine, and is increasingly strong in the key sector of artificial intelligence. Despite their size, these companies are largely invisible in the West because their massive successes are almost entirely restricted to China.

That’s partly because they offer software and services, neither of which travel particularly well thanks to the cultural baggage they bring with them. Chief among those is that the Chinese government has access to all of a company’s user data, and can impose any restrictions that it wishes on the use of software and services, as this blog reported earlier this year. More recently, Alibaba was instructed to remove unauthorized VPNs from its Taobao e-commerce platform. These are not aspects that are likely to endear Chinese software and services companies to Western users worried about privacy and censorship.

But there is another Chinese IT giant – Huawei – still relatively unfamiliar in the West, that is having far more luck in selling its products into markets outside China. It has achieved that because it is a company that produces hardware based on international standards, and largely running open source software. As well as the general benefits of adopting open standards and open source, this approach may also be an attempt to allay earlier fears that Huawei hardware might contain backdoors available to the Chinese government.

In the West, Huawei is probably best known for its mobile phones. Recent market research suggests that it has overtaken Apple as the world’s second-biggest smartphone manufacturer by sales after Samsung, with particular success in Europe. However, for several decades after its founding in 1987, its main product line was telecoms equipment. A measure of its success is that in 2012, it overtook Ericsson as the world’s largest telecommunications equipment manufacturer.

Huawei today employs 180,000 people, many of whom hold shares in the company, which is still privately held despite its size. Last year, its revenue was around $75 billion, with a profit of $7 billion. In 2016, approximately 80,000 employees were engaged in R&D, comprising 45% of its total workforce. Huawei’s R&D expenditures that year were around $10 billion.

The fruits of that investment were revealed at Huawei Connect 2017, its massive annual conference that this year saw 20,000 participants from over 150 countries, and which I attended last week (disclosure: Huawei paid for my travel costs). As the conference motto “Grow with the cloud” underlined, Huawei is placing public and private clouds at the heart of its strategy.

According to one of Huawei’s “rotating CEOs“, Huawei aims to be a key player in one of the five global cloud systems it predicts will coalesce, rather as airline alliances have created three main global carrier groups. Huawei placed great emphasis on what it called the “intelligent cloud”, which runs artificial intelligence software on the cloud platform. Specifically, at its conference the company launched what it called “the industry’s first all-cloud, network-wide smart video cloud solution.” This, it said, “provides a strong computing engine that supports public safety video application services and accelerates video application innovation to help public safety organizations better serve and protect citizens.”

Such “smart video” capabilities form an important component of a larger concept, the “smart city“, which is now one of the hottest marketing buzzwords in the high-tech world, along with its variant, the “safe city”. A brochure available during the Huawei Connect conference entitled “The Road to Collaborative Public Safety” defines three aims of the safe city: being able to detect threats as they emerge; being able to collect, share and analyze city data; and allowing the authorities to identify threats and then act in real-time. Huawei’s brochure says that there are already more than 100 safe city implementations using its products in 30 countries, covering 400 million people.

A key element of Huawei’s safe city system is “intelligent video surveillance.” This offers scene search in order to track particular elements in the video feeds, and video synopsis, which can summarize hours of surveillance videos into key clips for human analysis. Other features include “entity recognition”, behavior analysis and crowd counting. Extra features that can be added go beyond video surveillance to include data from Internet of Things devices to detect chemical, biological, radiological and nuclear material, radar and electro-optics, and monitoring of social media feeds. According to Huawei’s text:

“Public safety is more than current safe city. It is about preventing and solving crimes, reducing loss of life and property. Public safety is also about minimizing disruption to life. Public safety is beyond detection and response; it includes prevention and bringing life to normalcy. It encompasses digital security, health security, infrastructure safe and personal safety.”

As that hints, this includes predictive policing, or “PredPol” as the brochure terms it, which “involves analysis of data to predict the next crime, with the objective of preventing it.”

The ideas and technology behind the “safe city” sound troubling, not least from a privacy viewpoint. But in truth, much of this is already happening in the West. For example, CCTV cameras are routinely keeping tabs on our every movement, especially in countries like the UK, which has millions of the systems in place. As this blog has reported, facial recognition systems are also being used in the UK and elsewhere. The only difference between this and what Huawei offers with its safe city systems is that the latter is completed integrated and probably works rather better. Indeed, it’s easy to see Western governments that already carry out mass surveillance of their citizens acquiring Huawei’s products in order to upgrade their snooping capabilities.

The problem is not so much with Huawei’s application of powerful cloud and AI technologies to surveillance, but the bargain it implies – the bargain that we have all, to varying degrees, accepted. The deal is that if we allow the government to watch our every move, it will keep us safe from all those lurking dangers in the modern, uncertain world. Politicians everywhere shamelessly play on our fears to justify intrusive surveillance laws. So it should come as no surprise that many people are happy with the roll-out of CCTVs or suggestions that end-to-end encryption should be banned – after all, if you are a law-abiding citizen, you have nothing to hide, right?

In China, government surveillance is baked in to every online service, not just in safe cities. But again, the situation outside China is not that different: everything we do on Google or Facebook is tracked and analyzed for the purpose of selling advertising. As we now know from Snowden’s leaks, under the Prism program, the US government taps into that commercial surveillance data to gather intelligence. So the only difference between China and the West is that the former does not attempt to hide the fact that it spies on its citizens, while the latter tries to deny it. Similarly, Huawei has no problem openly offering its new AI-enhanced cloud-based surveillance systems, while its Western rivals are doubtless doing the same, but keeping quiet about it. The real issue is our meek acquiescence in the continual roll-out of privacy-harming technology by both governments and companies everywhere.

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About the Author

This article was written by Glyn Moody of Privacy News Online.

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