Defining the direction

- When you set direction for your organization as part of the strategic planning process, there are four elements to doing so: Articulating your mission, your vision, your guiding principles, and your goals. A mission is: Why does your organization exist? What is its purpose in the world? The vision is then saying: If we're fulfilling that purpose, at some point in time, where are we going to be? What do we want to achieve? What do want the organization to look like at some future point? Your guiding principles are the rules you want your team to live by. How do you want people in the organization behaving, especially when the boss isn't around? What are the lenses you're going to look through as you try to evaluate decisions? 

And lastly, your goals. Try to quantify these. It may be X number of customers by a certain date, or dollars of revenue, dollars of profit, a margin percentage, being able to put out hard numbers by a certain point in time to orient the organization and say, "Here's what we're shooting for." Some of the pitfalls that I've seen during this step of defining where you're going. First, many vision statements and mission statements are way too long. I've seen some that have spanned multiple pages. To the extent possible, make them short, clear, and free of buzzwords. 

Next, your guiding principles need to be clear enough that everyone in the organization understands them and can apply them, even to the smallest actions. And last, your goals need to be aggressive, but pragmatic. If they're not aggressive, the organization isn't going to push itself. They're not going to innovate to try and fill that gap between where they are and where the goal says they should be. If the goals are too aggressive and you're not pragmatic, people will look at the goal and say, "There's no way we can achieve that," and they just give up. So as you define it for your organization and set out that mission, vision, guiding principles, and goals, you'll be providing clarity for where you want the organization to be in the future.

Creating a mission statement

- When you go to set direction for your organization, you need to clearly articulate your mission. Your mission is why the organization exists. It should be a cultural reflection of your values, your beliefs and the philosophy of the organization. Try to make sure your mission statement is clear, brief and understandable to everyone. Employees and people outside the company. Your mission should clearly specify what business your organization is in and where you compete. 

And you should word it in a manner such that it can serve as a rallying point for the organization. People should be excited about living that mission. Let me share a few examples that you may be familiar with the companies, but not necessarily their mission statements. eBay's mission, "To provide a global trading platform "where practically anyone can trade practically anything." Johnson and Johnson. "Be the world's largest and most comprehensive manufacturer "of health care products serving the consumer, "pharmaceutical and professional markets." 

All of these are simple sentences. They clearly articulate what business the organization is in and where they compete. It helps everyone in the organization and outside of it know what this organization stands for and what its total purpose is.

Defining the organizational vision

- Another element of setting direction for your organization is articulating a vision. A vision should provide a clear picture of where you want to be as an organization in three to five years. Why three to five years? Anything less than three ends up being too tactical and people don't focus on generating big ideas. Anything further out than five years, there's too much ambiguity in the market. It's hard to see that far into the future because the world can change so much. 

So, defining what your organization is going to look like three to five years from now can provide a very clear target for people to shoot for. When you build your vision statement, first, articulate what value your organization creates. Let people know here's why we exist and here's how our customers benefit. Your vision should be ambitious but realistic. 

Ambitious because it'll push the organization to innovate and be aggressive and push hard. However, you need to make sure it's realistic so they don't look at it from day one and just give up. That vision needs to be something worth doing, to win people's commitment. You want your team excited about delivering on that, on getting to that destination. 

When you articulate the vision, try to figure out how you're differentiated from your competitors. And lastly, make sure that vision statement is concise, a few critical words. All of these are big ideas, but they clearly scope here's what we do, here's the market we do it in, and here's how we're different from our competitors. And the entire organization knows what they're working toward. So, when you articulate your vision, think three to five years out and put something aggressive out there that people can be excited about.

Refining the mission and vision

- While generating a vision and a mission statement might seem like an intimidating exercise, there's a pretty simply way to do it. First, get the right people in the room. Bring in the head of the organization, people from multiple functions, and look to involve people from multiple levels of the organization. Essentially, what you're going to create is a brainstorming session. Carve out two or three hours to do each of the vision and mission statements. 

Next, pass out to everyone what exists today. Let them see the current vision, the current mission. Have them identify things that they really like about it and things that they don't. Pass out the SWOT analysis and Porter's five forces to understand what the risks and opportunities are in the marketplace. And then it gets fun. Pick a scribe, preferably somebody who's been a scribe before for brainstorming sessions, and ask people to throw out phrases that describe a vision and a mission for the organization. The scribe shouldn't judge anything. Write down everything everybody in the room says, and you'll know when to stop, when there's a lull. People will generally run out of ideas. Once you hit that lull, go ahead and send everybody out on a break. 

You, as the scribe, then need to identify the most common phrases, or groupings of phrases, and assemble them into a statement. When you assemble that statement, refine it. Clarify any buzzwords, things like leverage or best in class. Those can be throwaway terms. To the extent that you can put precision to them, you'll have a crisper and more compelling vision and mission statement. And ultimately, you're trying to get down to something that's one or two sentences long, that you can share with the broader team, get their feedback and refine. The way this process might work is you get the team generating those ideas and they start throwing out things that may identify markets or products that you're going to pursue. 

For my firm, we're a training firm, and when we sat down and laid out our vision and mission, we went through the same exercise. When we looked at the mission of the organization, I asked for ideas and people threw things out like best in class, premium, top end, distinctive. They also threw out training, marketing, getting into new markets, identifying different training opportunities, different classes. People said leadership, decision making, strategy, Excel, PowerPoint, and there were all different words that were coming out, and I captured all of them on a screen. And then we stepped back and we said, "what are the common ones?" 

And all of a sudden, there were some pretty clear groupings. There were words that all represented the top end of the market versus commodity type of training that was very common in the marketplace. There was a clear type of class that we were going to pursue and other ones that we weren't. And there were clear participants that we wanted in our classroom. 

When I saw groupings of directors, vice presidents, CEOs, managers, those were much more common types of phrases than call center associate or front line associate. And when we stepped back and looked at all those different groupings, we were able to assemble a mission statement that said we sell leadership training to management and executives, to large corporations throughout the world. But we had to go through that exercise to figure out what the organization stood for. So when you go through this exercise, just capture all the ideas, good, bad and ugly, then step back, look for the synthesis, look for the common themes, and hammer it out into a clear, crisp, compelling vision and mission statement.

Guiding principles and goals

- The last two elements of setting direction for your organization are articulating your guiding principles and your goals. Guiding principles dictate how you want the organization to behave, especially when your leaders aren't around. You're setting out a principle that an associate can use when they're confronted with a situation where they don't know what to do. 

What lenses do you want them looking through as they're evaluating those decisions? Because if you have clear guiding principles, the actions they're going to take will be consistent with the direction of the organization, which ultimately helps you achieve that vision and mission. In terms of your goals, you're going to set out those metrics, those things that after a year, two years, five years, you'll look back and say, we achieved those goals. 

Try to make them as measurable as possible. It can be a dollar, how much revenue, how much profit. It can be a number of new customers that you add. Those guiding principles and goals need to be clear enough that they guide behavior, help people behave in a manner that's consistent with the organization's mission, and those goals should be driving you to achieving your vision over time. They need to be aggressive and pragmatic so you get that balance of I know I can achieve this, but I'm not really quite sure how I can get there so I need to innovate and push to be able to do so. Let me share some ideas around what guiding principles can be. I've worked with many organizations around the world to define what they want in terms of behavior from their associates. Some guiding principles I've heard that are great are things like, "Would I give this to my family?" 

The organization was in the consumer packaged goods industry and when people were trying to figure out whether they make an ingredient change to a product or a packaging change to the product, they asked their people to step back and say, if you made that change, would you be comfortable giving that product to your family? If the answer was yes, go ahead and make the change. If the answer's no, stop immediately.

 Other guiding principles I've heard. "Be net exporters of talent." This is how we want our managers in the organization to behave. Being a net exporter of talent means bringing people in, helping them develop, helping them grow, challenging them, and building their skills and then, once they've reached that next level, push them off to the next team. Send them to the next great opportunity in front of them. And then, bring in more people behind them, and the net effect of that is you're generating more talent for the organization than you're bringing in. Now, think of the behaviors that this can lead managers to take. They won't hoard talent anymore. The notion that I've build somebody and they're a high performer, but you know what, I'm going to discourage them from going to the great new role, would run counter to this guiding principle. 

So, by putting this principle in place, that organization is going to achieve that goal of having a more talented organization. So, think about what you want your organization to look like in the future, how do you want your associates to behave, and then be able to put in place a principle that they can understand when they're faced with a decision. 

Now, in terms of goals, laying those out very clearly and then sharing them across the organization, but letting the organization figure out how to get there. I've been in organizations where we had revenue targets or retention targets. My organization today, I lay out a goal for myself. Every year, I want this many more client logos on our website, so I want to force us to get out of the comfort zone of serving clients that we currently serve, which is great and we love doing, but we need to continue to grow so I want new logos on the website. When we land a new client, we add a logo to the website, and that's a metric that I track because it helps me achieve my vision.

Core competencies: Starbucks example

- One large aspect of strategic planning is deciding where you will or will not compete. A way I encourage organizations to think about that is to look at their core competencies. A core competency is something your organization is great at. I know your organization is probably good at a lot of things, but what are the two things you would hold up and say, we're better than anyone else at these two competencies.  

Allow me to offer a few examples. Core competencies could be things like the quality of your product, your ability to innovate, the efficiency of your supply chain, the strength of your brands, your technology infrastructure. There are a lot of things that you could be good at, so take a step back and say, how do we compete in the marketplace? Allow me to offer a couple of examples. Starbucks, I would argue that their two core competencies are the quality of their product and their service. Proctor and Gamble. Their core competencies would be marketing and product development, and their primary competencies are the ones they're going to play to first. So once you've identified your two primary core competencies, it's helpful to plot them against one another on a grid, and looking at competency one and competency two, and understanding will the market or the product or the initiative you're pursuing rely upon that core competency and how much from low to high and low to high for each of those two core competencies. 

For situations where an initiative or a market or a product plays very well to core competency one and very well to your second core competency, those are the types of opportunities that you should own. You should own that market. You should try to own that product category. For opportunities where neither core competency comes into play, and they're both irrelevant, those are the types of opportunities you should avoid. 

Because it's very difficult to be successful in a market where a product category where you don't have the required skills to compete there. Now there will be opportunities where your primary core competency does come into play. You should pursue those opportunities and they should be reasonably high priority. 

For other opportunities where your second core competency comes to play, but less so for your primary core competency, the one thing you're really great at, you should consider pursuing those opportunities. Because those opportunities might be attractive, they're just not as perfect of a fit as the ones where you own or your primary core competency is going to drive your success. So take a moment and step back from your organization and ask, what are we truly great at? What's first? What's second? And then that can form the types of opportunities that you're going to pursue.

Focusing with core competencies

- Once you've identified your core competencies, you should then look at the initiatives that you're thinking about pursuing to determine what your approach should be. This can mean markets you're thinking about entering, products or services you're thinking about launching, or new capabilities you're thinking about building. Let's look at an example. Let's imagine Starbucks was conducting this exercise. And as we define their core competencies, their primary core competency is the quality of their product from low to high in terms of the relevance of that competency in whatever initiative they're thinking about pursuing. 

The second competency that we looked at was their service delivery capability. Again, that competency being low to high in terms of its relevance for pursuing an opportunity. Let's evaluate some opportunities. Let's say they were considering launching a new holiday coffee drink. Well, as we look at the axis of product quality, this would be their product that they're launching, so it would be very high in terms of using that core competency. And that product would be sold by their baristas in their existing stores. 

So their ability to deliver service, that competency would come into play very much. So they should own that particular product category and pursue it vigorously. Now let's look at an opportunity where they have instant coffee that they're going to deliver to your home. So again, it's their product, so product quality, that competency, is very relevant, however, their service is irrelevant because they're not delivering it in their store. That's the type of opportunity that they should pursue, given the relevance of their quality of product. Another opportunity may be selling coffee mugs in their existing stores. 

And these are mugs that are created by another manufacturer. So, their quality competency doesn't really come into play. It's not their product. However, their ability to deliver service is very relevant since it's being sold in their stores by their baristas. So they should consider that opportunity. Last, if they're looking at launching a new product line, but that product line is going to be a low cost, commodity type of coffee product where the quality of the product is not very relevant, they're outsourcing the production of it, so it's low, and it's going to be delivered in discount retail stores that they don't own, entirely new retail chains. So their ability to deliver great service is completely irrelevant. 

That's the type of opportunity they should absolutely avoid. So as you look at your organization's core competencies and understand what you're great at, you can then use that to look at any opportunity you're thinking about pursuing, be it a new product, a new market, or a new initiative, and plotting on this grid to determine what your initial approach to that opportunity should be. And that will then help you prioritize the initiatives you think about pursuing, and the ones that you don't.

Understanding strategic filters

- Being able to evaluate the initiatives you're going to pursue as part of your strategic plan is at the core of the strategic planning process. You need to be able to identify what the high priority initiatives are and what the low priority initiatives are. And to do so, you need a common set of criteria that everyone across the organization is going to use to conduct those evaluations. I call them strategic filters. Those filters are going to be things that are important to your organization, things like this idea meets a customer need, or it helps us be differentiated versus our competition, or it has an acceptable level of complexity. 

Sometimes your filters aren't qualitative, they're quantitative. So what's the net present value of this initiative? What's the financial return? What's the return on investment? And by articulating this set of criteria, you're going to have a common lens to evaluate your initiatives through. Those filters are going to screen out initiatives that aren't consistent with the stated direction of the organization. And they're going to be customized based upon the needs of the organization. For example, if you need to grow internationally, you probably need a filter that says helps us be more global. And if the initiative does that and gets you into new countries and new geographies, then it would be high on the priority list. And if it doesn't and it keeps you domestic, that initiative would be low. 

Once you've generated your set of strategic filters, you need to understand how much risk they're going to have you take on, and there are five things to look at as you evaluate that risk. First, consider how relevant are your existing capabilities. Are the strengths you have today going to be relevant to the initiatives you pursue tomorrow? 

Second, look at your channels. Will we be distributing our products through the same channels, or will we be entering new channels? For example, if we sell through retail today and we're looking at selling online only tomorrow, you're going to be taking on more risk with a newer channel. 

Third, looking at your cost structure or the infrastructure. If the cost structure and infrastructure required to pursue an initiative is similar to what you do today, then it's lower risk, and if it's not, then it's higher risk. Customers. Will you be serving the same customers, or are you going after new customers? 

Obviously, new customers carrying higher risk. And lastly, will you be running against the same competitors, or are you going to compete with different ones? So once you've generated your filters, do this back-check against these five criteria to understand are your filters going to direct you in a riskier direction, or are you going to play it safe? And the right answer lies somewhere in the middle. You want to take on some risk