The Whiteboard: It's time to plan strategically for sustainable competitive advantage
A lot of businesses and nonprofit organizations are doing strategic planning these days.
Executives, board members, staff and consultants put hours into the process, and yet, the results often fail to make much of a dent in the status quo.
This is often blamed on poor plan execution, which certainly is a big problem, but I think much of it is rooted in a lack of understanding of what we are trying to do.
Ask a leadership team why we spend time and money on strategic planning. Some will say it is important because it is the one time a year when the team works on the business as opposed to working in the business. Others will say it is important to have a road map or that strategic planning is a best practice.
These things are true. They sound good. But they don't get to the heart of the matter. The reason for strategic planning is to achieve a sustainable competitive advantage. It is about sustained performance superior to competitors. Everything else is rhetoric.
A sustainable competitive advantage is what allows the leader in a growing, profitable market to fend off new entrants and keep the lead. Nokia didn't have it and gave the cellphone market to Apple. Apple didn't have it either, and now Samsung is on the rise.
In a market that isn't growing, a sustainable competitive advantage allows a company to grow faster than the market at the expense of its competitors and to be more profitable than they are. I wouldn't call books a growth market, but Amazon.com grew by selling books and drove competitors like Borders out of business.
Maybe a sustainable competitive advantage doesn't sound altruistic enough for many nonprofits, but the economic realities are just as brutal, perhaps more brutal, than in the business world. There is a finite pool of donor money. Nonprofits that deliver services clients and donors value highly, in a superior way, and which are superior financial stewards will thrive. Those at the other end of the spectrum live hand to mouth or not at all.
If we agree on the goal of sustainable competitive advantage, then elements of the strategic planning process will take on a different look.
Vision statements will be free of fluff and happy talk. Fluffy "We will be preferred" turns into specifics: "We will be the leader in our served markets, measured by sales, with profit margins at least 5 percent above the industry average." We won't anchor our plan to a semantic debate about what "preferred" means, because we can't allow semantics to enable self-delusion.
Our goals won't be the typical slam-dunk extrapolation of average sales growth or profitability. They will be stretch goals, because we know that organizations don't achieve sustainable competitive advantage by resting on their laurels. They achieve it by constantly changing and innovating, with a laser focus on results.
Slam-dunk or status quo goals encourage status quo thinking. We need breakthrough thinking to stay on top, and we need the pressure that stretchy goals apply to the entire organization.
Increasing our nonprofit donations by 3 percent annually doesn't stimulate much innovation. Inflation of 2 percent accomplishes two-thirds of the task. Increasing by 6 percent annually is a different story. That might take new donors, new events and new ideas. That is what we are after.
The ubiquitous SWOT analysis changes, too. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. The strengths and weaknesses are internal to the organization, while the opportunities and threats are external. It's not unusual for brainstorming teams to fill numerous flip charts with long lists. Like the planning process, it often seems to be done because it is part of the ritual.
The SWOT, along with knowledge of customers and competitors, is a very critical piece in the foundation of the strategy. The laundry list produced by brainstorming must be reduced to a SWOT where each item is truly relevant. Listing "our good people" as a strength makes everyone feel good, but if our people aren't a cut above the competitors', how do we leverage that into an advantage? Being average isn't relevant.
It's important to identify real strengths, those that make a difference in the competitive race and where we really are superior. We can build on those.
The same goes for weaknesses. Which are the few that really put us at a disadvantage? We need serious plans to improve. That should be a short, focused list.
Opportunities and threats similarly should be focused, relevant and significant.
Too much of what I see is like punching a dance card. Tweaked the vision? Check. Brainstormed the SWOT? Check. Nice achievable goals? Check.
That won't get you a sustainable competitive advantage, and if that isn't what you are after, what are you doing?
Richard Randall is founder and president of management-consulting firm New Level Advisors in Springettsbury Township, York County. Email him at email@example.com.