Business Plans vs. Strategies

• The failure rate for new businesses is 50% within the first five years and 66% within 10 years.

Planning and Strategy

• A Plan is a structured, step-by-step roadmap to achieve a goal.
• A Strategy provides broad, long-term direction for decision-making.
• Plans are tactical and Strategies are visionary.
• Tesla's strategy involves accelerating the transition to sustainable energy, and their plan includes starting with luxury EVs (Roadster) and using profits to fund mass-market models (Model 3).

Strategy vs. Plan in Business

• McDonald's strategy aims to be the dominant fast-food chain by focusing on convenience and affordability.
• McDonald's plan in 2020 was to streamline menus, improve digital ordering, and expand drive-thru lanes.

Strategic Planning - 5 Key Steps

• Establish the mission, vision, and values to define what the company stands for.
• Assess the current reality to understand the present situation.
• Formulate the strategy and plans to determine where the company wants to go.
• Implement the strategy to execute the plans.
• Maintain strategic control to ensure the company is on track.

3 Benefits of Strategic Planning

• Provides direction and momentum, preventing reactionary behavior.
• Encourages new ideas, aligning innovation with competitive advantage.
• Develops a sustainable competitive advantage that is valuable, rare, and difficult to imitate, differing by target market.

Mission, Vision, and Values in Planning

• Mission Statement (Why): Defines the organization's purpose ("What is our reason for being?").
• Vision Statement (Where/When): Describes the organization's aspirations ("What do we want to become?").
• Values Statement (Who): Represents the organization's core beliefs and principles guiding behavior.

Types of Planning

• Strategic Planning (1-5 years): Top management sets long-term direction.
• Tactical Planning (6-24 months): Middle management translates strategy into department-specific goals.
• Operational Planning (1-52 weeks): First-line managers handle day-to-day execution.

IKEA's Example

• Mission: Offer well-designed, functional home furnishings at affordable prices.
• Vision: Create a better everyday life for many people.
• Values: Cost-consciousness, simplicity, and sustainability.

Long-Term vs. Short-Term Goals

• Long-Term Goals (Strategic Goals): Span 1-5 years, focused on achieving company-wide strategic objectives.
• Example: Walker & Dunlop's goal to increase annual revenue to $2 billion by 2027.
• Short-Term Goals (Tactical & Operational Goals): Span months to a year, aligned with achieving long-term success.
• Example: Walker & Dunlop's short-term goal to increase revenue from $1.3B to $1.4B by expanding brand reputation and customer base.

The Means-End Chain

• Goals are linked across different levels of an organization.
• A low-level goal, like a customer service team responding to an inquiry within 24 hours, supports a higher-level goal of achieving 90% customer satisfaction.
• This, in turn, helps achieve long-term revenue growth.
• Strategic Goals drive Tactical Goals which lead to Operational Goals.

Operating Plans & Action Plans

• Operating Plan: Breaks long-term goals into short-term targets and defines how resources are allocated.
• Action Plan: Details specific tasks, tactics, and deadlines to achieve an objective.
• Example: For a company expanding internationally, the Operating Plan assigns budgets and locations, while the Action Plan sets key hiring and logistics steps.

Contingency Planning

• Plans often face disruptions like economic crises, supply chain issues, and political instability.
• Contingency Planning prepares alternative strategies for unforeseen challenges.
• Example: Air France-KLM's fuel hedging strategy protects against price volatility from geopolitical events.
• Effective companies anticipate risk and build adaptability into their plans.

SMART Goals

• A SMART goal is Specific, Measurable, Attainable, Results-Oriented, and Time-bound.
• SMART goals provide clarity and focus, ensure progress tracking and accountability, and increase motivation and alignment with long-term success.
• Without SMART Goals, goals remain vague, leading to poor execution, low motivation, lack of progress, and difficulty in evaluating success or making adjustments.

Goal Setting Theory - The Goldilocks Principle

• Effective goals should be challenging but not impossible.
• Too easy goals lead to low motivation and effort.
• Too hard or impossible goals cause frustration and disengagement.
• Optimal goals encourage high commitment and peak performance.
• People perform best when goals are difficult but attainable, pushing them to maximize effort without feeling overwhelmed.
• Instead of "increase sales by 5%" (too easy) or "increase sales by 50%" (impossible), a realistic stretch goal would be "increase sales by 20% within 6 months with enhanced marketing and customer engagement strategies."

SMART Goals Examples

• General Goal: "I want to run a marathon this year."
• SMART Goal: Complete a full marathon (42.2 km) within the next 6 months by following a structured training plan, running at least 4 times per week, gradually increasing distance, and completing a half-marathon as a milestone in 3 months.
• General Goal: "I want to write a book this year."
• SMART Goal: Write a 30,000-word academic book within 4 months by writing 400 words per day, five days a week, complete the first draft in 10 weeks (20,000 words), allocate 4 weeks for research and citations, and spend the final 4 weeks editing and formatting. Track progress using Google Docs, schedule bi-weekly feedback sessions with a colleague or mentor and submit the final manuscript to a publisher or self-publish by the end of Month 4.

Customer Acquisition in Retail

• Vague Goal: "We need more customers this year."
• SMART Goal: Increase customer foot traffic by 15% within 6 months by launching a loyalty program offering 10% discounts after five purchases, expanding digital advertising with a $50,000 budget focused on local social media campaigns, and running in-store events every first Saturday of the month to attract walk-ins.

Improving Employee Productivity

• Vague Goal: We need to make employees more efficient.
• SMART Goal: Improve employee productivity by 20% in the next 9 months by implementing a performance tracking system that measures task completion rates, conducting quarterly training sessions focused on workflow automation tools, and offering a $500 quarterly incentive for employees who exceed efficiency targets by 10%.

Peter Drucker

• Peter Drucker was Austrian trained in economics and international law.
• He came to the USA in 1937, working as a correspondent for British newspapers and later as a college professor.
• In 1954, he published "The Practice of Management," proposing that management was a major social innovation of the 20th century to be treated as a profession like medicine or law.
• Several ideas that now underlie the organization and practice of management were introduced
• Workers should be treated as assets
• There is no business without a customer
• The corporation can be considered a human community
• Institutionalized management practices are preferable to charismatic cult leaders

Management by Objectives (MBO)

• MBO is a four-step goal-setting process that links individual objectives with organizational strategy.
• Steps: Jointly set objectives, develop an action plan, periodically review performance, and give performance rewards if objectives are met.
• MBO works by creating buy-in and enhancing motivation by linking personal performance to company goals.

Three Types of Objectives in MBO

• Performance Objectives: Define measurable business outcomes.
• Example: "Increase online sales by 15% in the next quarter by optimizing the website and launching targeted ad campaigns."
• Behavioral Objectives: Focus on the actions employees take to achieve results.
• Example: "Ensure all sales representatives greet customers within 30 seconds and offer personalized recommendations."
• Learning Objectives: Emphasize knowledge and skill acquisition for professional growth.
• Example: "All employees will complete advanced Excel and data analysis training within six months to improve decision-making."
• Aligning objectives ensures employees work toward the same strategic goals, enhancing company performance.

Cascading Goals

• Cascading Goals ensures that goals set at the top level flow downward through all levels of the organization.
• Hierarchy: Strategic Goals (Top Management, 1-5 years) - Long-term business direction, Tactical Goals (Middle Management, 6-24 months) - Translating strategy into department-level execution and Operational Goals (First-line Managers, 1-52 weeks) - Day-to-day implementation.

Cascading Goals Example

• A CEO's goal to expand into new markets cascades down into marketing campaigns and supply chain adjustments.
• Strategic Goal (Top Management, 1-5 years): Expand company operations into Southeast Asia, opening 20 new stores in key urban markets within 5 years.
• Tactical Goal (Middle Management, 6-24 months): Develop a market entry plan for Southeast Asia within 18 months by securing partnerships with 5 major local distributors, launching a digital marketing campaign in 3 key cities, and hiring a regional leadership team of at least 10 executives.
• Operational Goal (First-line Managers, 1-52 weeks): Train 200 new employees in cultural customer service standards, streamline logistics to reduce shipping time by 15%, and execute a localized grand opening event for each store.
• Goals must be aligned at all levels to ensure smooth execution from strategy to day-to-day operations.

The Planning/Control Cycle

• The Planning/Control Cycle is a four-step process for ensuring plans stay aligned with business objectives.
• Steps: Formulate the strategic plan, implement the plan, monitor progress, and take corrective action based on data.
• Example: A company tracking sales performance adjusts pricing based on market trends.