Ready, Set, Strategize
Strategic planning is one of the big guilt trips of business. Everyone knows you should do it, but the process is intimidating, expensive, and time-consuming. Anyone who's worked in corporate America knows that it can stretch for months, even years. That makes it easy to procrastinate. And even when you do get around to it, the bold strategic vision of five years from now tends to get lost in the day-to-day scramble of right now. It's hard not to wonder: Does strategic planning even have a place in a fast-moving company?
It does if you can keep it simple and fast. So says consultant Keith McFarland, who is one of a number of business thinkers trying to figure out how to transform the strategic planning process into something entrepreneurs can embrace. McFarland, a former Inc. 500 CEO who now leads McFarland Strategy Partners in Sandy, Utah, calls his approach rapid enterprise development, or RED. It's modeled on a popular computer programming technique called rapid application development, or RAD, which relies on prototyping and iterative improvements to complete a project. Just like building a piece of software, developing a business strategy that solves 100% of a problem can take months, says McFarland--and by the time you can deliver a solution, the problem may have changed. With RED, the idea is to produce an 80% solution with the built-in flexibility to adjust it over time. The best part of McFarland's approach? It can be done in just 48 hours.
That approach appealed to Bob Hogan. Back in 2002, he had just engineered a management buyout of his company, AmerCable, from its publicly traded parent, Associated Materials. AmerCable, which is based in El Dorado, Ark., and manufactures industrial-grade power cables for coal mines and deep-sea oil rigs, was in a mature industry and Hogan wanted to find a way to make a big splash. Now, free from its corporate restraints--and lifelines--AmerCable needed a new strategy. Not only did Hogan feel pressure to impress his new private equity investors, he had a considerable personal financial stake in the outcome as well. But how could he justify spending the weeks or even months it would take to craft that plan?
That's when Hogan remembered McFarland, whom he had met at a recent conference for entrepreneurs. He got in touch, and McFarland promised Hogan that he could help him craft a strategic plan in all of three days. A retreat was scheduled at a Texas ranch south of Dallas. Hogan had been involved in strategic planning in the past but had found the process dull, time-consuming, and ultimately not very useful. He was excited to see what McFarland's untraditional approach could accomplish.
Rapid enterprise development encourages both conflict and consensus. "Both stimulate creative thinking," says McFarland, who has led some 80 clients through the process over the past five years. He declined to say what his services cost because it varies with the project, but the price tag can easily reach $40,000. Companies are divided into teams, each of which is charged with identifying, for example, the business's four biggest challenges over the coming year and the five things customers like best about the company. Resource allocation is also a key topic: The group is encouraged to identify the company's top potential profit centers, or where it can get the most bang for its buck. Using such insights as a guide, the group then reaches a consensus on where the company wants to be in five years. The next step, and the heart of the process, is plotting a series of less ambitious, 90-day goals designed to get it there.
The process flies in the face of traditional strategic planning, which emphasizes painstaking research and considerable caution. After all, anyone can come up with a plan in 48 hours, but can you really be sure it's the right plan? Michael Porter, the strategy guru from Harvard, isn't so sure. Without taking sufficient time to reflect or to involve customers, partners, and suppliers, he's skeptical that the strategy would go beyond "glorifying existing biases."
Most leaders know where they want to be in five years, adds David Norton, co-creator of the "balanced scorecard," a strategy-generating tool popular with larger organizations that helps companies measure their performance. The problem is figuring out how to get there--and 48 hours simply is not enough time to solve it, he says. That's why most strategic planning exercises last at least three months. "You need time for people to debate, digest, and to distribute to the rest of the organization," Norton says.
"Nobody has the patience to follow up on old-fashioned strategic planning," says a business owner who crafted a new strategy in days.
To a time-strapped entrepreneur, of course, three months can feel like a lifetime. "Nobody has the patience to follow up on old-fashioned strategic planning anymore," says Dan Bianci, president of Foamade, which manufactures foam components for automobiles in Auburn Hills, Mich. Within weeks of working with McFarland last year, his team had already begun checking off goals like attaining a new product-quality certification and identifying new lower-cost materials. Part of the beauty of the RED system, Bianci says, is that it encourages managers to take immediate action with the expectation that the plan will be modified over time. It's also more democratic than many traditional approaches; it involves rank-and-file employees, investors, and other stakeholders--not just top managers. Hogan brought about 25 AmerCable employees to his session--more than 10% of his work force--as well as a handful of his investors, all of whom worked together to generate goals that employees could commit to because they had created them for themselves.
No one, least of all McFarland, denies that condensing three months of planning into 48 hours is hard work. That's why he injects humor, and a stopwatch, into RED's 15 or so goal-setting exercises. Every exercise is timed and everyone is expected to contribute by stepping up to a whiteboard to list competitors or chart a division's five-year revenue potential. No one is allowed to leave the room until the group reaches consensus, or at least agrees to disagree. "Nobody has time to get bored or to doodle," says Bianci. "You're immediately engaged."
For AmerCable, defining a five-year goal was simple: to become the on-time delivery leader in the power-cable industry and push annual revenue to $100 million. Hogan and his team then hunkered down to slice that vision into a series of 90-day action plans--such as ramping up sales to the robotics segment of the automotive industry and expanding into burgeoning markets such as China. Then came the task of assigning people to act on those goals, committing the company's director of business development, for example, to drum up at least one new international business partner within 90 days. "We came out of there energized and with a sense of purpose," Hogan says.
Now, three years after the initial session, AmerCable has met most of its goals. The company is thriving and, thanks to new sales in China, earned about $80 million last year, 20% more than in 2003 and within shooting distance of its five-year target. The company has done so well that its investors were able to cash out their investment. McFarland continues to meet with Hogan and his team every six months to check in and set new 90-day goals, which he helps AmerCable manage online. Hogan credits the RED process for much of AmerCable's success. "Strategy isn't a cure-all by itself," he says. "At some point, you have to stop talking about the things you should be doing and start doing them."
To read more about Keith McFarland and rapid enterprise development, check out mcfarlandstrategy.com. Harvard University's Institute for Strategy and Competitiveness has articles and research about strategic planning at isc.hbs.edu.
Keith McFarland says he can draft a new strategic plan in just 48 hours. See how.
Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.