If you are a CEO or an entrepreneur, you are expected to come up with a business plan. As a CEO, the strength of the business plan has major influences on the level of trust you will get from your board of directors, especially if you are “new” to the organization. If you are a founder of a start-up, a well-written business plan is a must if you need funding to grow your business.
Despite this, many CEOs and entrepreneurs take this process lightly. It takes time from the “real” business; and it often feels more like a “sales document” than a realistic plan for the business. But instead of looking at the business plan purely as a sales document or necessary evil, we can see the business planning process as an opportunity to “stop and think” and get our priorities right.
“In preparing for battle I have always found that plans are useless, but planning is indispensable.”
I have found that the process of planning (as Dwight D. Eisenhower would put it) is “indispensible”. It forces you to stop and ask critical questions about your business.
The first group of important questions is related to the purpose, or the very existence of your business – Why do we exist? What value do we offer to our clients? How do we make money?
The second group of important questions is related to execution – Do we have the right people? Do we have a clear management model (who is accountable for what?)? Do we have a clear connection between performance and rewards? Do we prioritize our use of resources? Do we act as we say? Do we act fast enough? Do we mange potential risks? Do we keep things simple? Do we measure the right things?
I agree with Percy Barnevik (the former CEO and chairman of ASEA Brown Boveri (ABB)) that “strategy is 10 percent Vision and 90 percent Execution”. The business plan can be an essential management tool to set objectives and priorities for the business. But in order to be so, it must be more than a “strategy statement”, or “sales document” for potential investors. If your business plan is not supporting the execution, the day-to-day work, the value will diminish considerably.
As a CEO for the last 12 years, I have been responsible for developing a business plan every year. I have been fortunate to have some really smart and experienced people on my board of directors; and I have also had many opportunities to present business plans to bankers. I have improved over the years and I believe we have written some pretty good business plans that we can be proud of.
Having said that, I haven’t always been successful in the implementation of the business plan. I have made three mistakes that I think are very common.
1) I started too many initiatives that were not clearly communicated to all staff.
If you are a leader, you need to define a few (3-5) clear initiatives and ensure a disciplined implementation of those initiatives. Ask yourself if your business plan can be summarized into a few key initiatives and if these initiatives have been communicated clearly to all employees.
2) I failed to define what we were NOT going to do.
As Michael Porter rightly pointed out, “the essence of strategy is choosing what not to do”. Look at your market segmentation, product portfolio, marketing mix, sales activities, then ask yourself – what are we not going to do?
3) I focused on what before who.
Execution is the result of hundreds of decisions made every day by people acting according to the information they have and their own self-interest. If you don’t have the right people or your people don’t know where you are going, you will probably fail in your execution.
If you get these three things right, you will beat your competition every day, because most of your competitors (if not all) will get this wrong!