- Development of one Most Important Goal
- Creation of business strategies to support it
- Full engagement of stakeholders
- Application of Value Stream Mapping to close operating and strategic gaps
- Identification of an increase of $105M in Enterprise Value
A consumer goods company was approaching $250M in annual revenues and was fighting headwinds in the marketplace and in the company. They were at an inflection point where their systems, processes and organization were struggling to satisfy the needs of the business. The owners felt that their strategic planning process was more of a check the box activity than a serious business process. The owners wanted to redesign their strategic planning process to make it more robust and do a better job of contributing to the company’s needs in the marketplace.
This case study will show how Group50® Consulting uses the Business Hierarchy of Needs® for developing and implementing strategy as outlined in my book: Strategy Realized – The Business Hierarchy of Needs® – Turning Strategy Into Results.
There are 3 levels and 29 elements that every business uses to some level of success. The difference between companies that do a great job at strategy implementation and a poor job is how well these elements are focused on one Most Important Goal. The following diagram shows the progression of each of these elements.
Step 1 is to build a strong foundation by addressing the elements of Level 1. In this case study, the company already had a mission, vision and values in place as well as having a good understanding of their value proposition and some ideas regarding their operating gaps which were defined as frustrations more than root causes. Our first activity was to identify the owner’s Most Important Goal. During our initial discovery session, we learned that the owners wanted increase enterprise value by 50% within 5 years. Working with the leadership team, we were able to help them understand that there were two components of enterprise value as shown below:
|Increasing EBITDA||Increasing the Multiple by Reducing Business Risk|
1. Lower cost of goods and services
2. Move to higher price points.
3. Increase gross margins.
4. Lower overhead as a percent of sales
5. Increase productivity throughout
1. Reduced customer concentration.
2. Supplier concentration
3. Intellectual property
4. Market share
5. Business systems
7. Organizational structure and capabilities
Once that was completed, it became clear to the team that their business strategies had to address both improving EBITDA and increasing the multiple by reducing business Risk. This was a significant change from their current strategy which only addressed pofitability. We then created three strategic planning teams:
- Market facing
- Value add
Note: The logic for this is outlined in more depth in Strategy Realized – The Business Hierarchy of Needs®.
Each team was chartered to create business strategies that would be focused on the Most Important Goal. Once completed, the next steps were to identify operating gaps (Those things they don’t currently do well) and strategic gaps (those things they need to do to implement their strategies and operate the future state of the company). Once completed, goals and objectives for supporting tactics were created for every functional area in the business. The results were tabulated in an easily communicated format called “Where to Play” and “How to Win”.
Once completed, the team was able to move to Level 2 of the Business Hierarchy of Needs®: Knowledge and Change Management. In this level, the three strategic planning teams led the discussion with middle level leaders and key influencers to develop the tactics for every functional area. Their task was to focus the middle level of the organization on the following objectives:
- Creation of a change management plan
- Creation of a communication plan using the “Where to Play” and “How to Win” format.
- Teaching leaders how to cascade objectives and properly review accountabilities.
- Acquiring alignment and agreement with every functional leader on their goals and objectives
- Identifying gaps in the organization structure, and creating tactical plans for closing those gaps over the strategic planning timeframe
- Developing a team optimization roadmap based on the current and future needs of the organization.
- Creating learning maps for stakeholders so they would have the skills required to implement the entire strategy.
After these activities were completed, the organization was able to move to Level 3: Implementation. A prioritized strategy implementation roadmap had been developed during the work on Levels 1 and 2, so there was a clear plan in place that everyone could support. The leadership team was aligned and in agreement with providing the implementation teams with the financial resources and human capital that were required and implementation was begun by the three strategic planning groups: Market Facing, Technology and Value Add.
Findings and results
The development of the company’s strategic plan and completion of Level 1 occurred over a 6-week period. During this effort, there were some key findings, that once addressed, significantly enhanced the foundation of the business and the strategic plan:
- The Value Proposition was enhanced.
- Leadership traits were developed and made actionable.
- Organizational diversity was created as a strategic imperative.
Strategies and tactics were developed to address various operating gaps and strategic gaps as follows:
- Additional channels of distribution were created to address customer concentration.
- A new supply chain strategy was created to reduce supplier concentration and make the supply chain more resilient.
- Leadership recognized that the company wasn’t leveraging their current investment in IT, so they made this a strategic focus.
- The primary operating gap was in product development. Further investigation was needed to close this gap.
- New resources and organizational capabilities were needed to close gaps and operate the future state of the company.
Part of the implementation roadmap was to close the product development and implementation gap, because it was obvious to everyone that the current approach was struggling to support the existing channels of distribution and adding new ones would only make the situation worse. Group50® Consultants led a Value Stream Mapping project: quote to cash. We found that the majority of the process was done manually across the supply chain. Working closely with the strategy teams, a project was defined to implement a PLM (Product Lifecycle Management) system and to make other upgrades to their technology backbone on their existing systems and adding new low code solutions to help automate repeated tasks.
These changes in strategies and programs were all driven by a focus on the company’s Most Important Goal which made change management much easier. There was no ambiguity in the organization on what every business activity needed to be driven by. Building a strong foundation and properly addressing Level 2 as the bridge between strategy and results led to an implementation plan that was more easily done and communicated. Following the change management framework of the Business Hierarchy of Needs® provided the clarity needed to successfully develop and implement their strategic plan which will ultimately lead to an increase of enterprise value of over $105M.
To talk to a strategic planning expert at Group50®, call (909) 949-9083, drop us a line at email@example.com or request more information here.
About the Author: Jim Gitney is the CEO and Founder of Group50® Consulting, and the author of “Strategy Realized – The Business Hierarchy of Needs®” which summarizes a framework for creating a business that leverages topics in this article. (You can find out more about the book and acquire a copy by clicking on the image to the right).
Founded in 2004, Group50®consulting is focused on working with middle market companies to significantly improve their productivity by leveraging people, process and technology as part of a company’s strategic plan. Group50® consists of consultants who have spent their careers in corporate America learning how to optimize businesses. We specialize in working with senior leaders to develop and implement strategies that accelerate top line and bottom-line performance.
Strategy Realized – The Business Hierarchy of Needs
- Podcast: Jim Gitney with Host David Bookbinder on “Behind the Numbers”
- Making Continuous Improvement a Reality
- Building Effective Procurement and Supply Chains Using Data Analysis -Live Webinar with Jim Gitney –
- Stopping Short of Excellence – Overcoming “Good Enough”
- Group50® Consulting in Manufacturing and Distribution
- Group50® Supply Chain Consultants: Empowering Businesses through Expertise
- Strategic Planning Consultants: Your Complete Guide
- 10 Elements of an Effective Supply Chain
- Optimizing Operations: The Role and Benefits of Supply Chain Consulting
- Managing the Productivity Cycle