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Case Study 2: Strategic Planning

Large and small business a like must have a system of performance in place in order to insure the business is remaining viable and on course with and/or leading the future of the market. Staying in touch with new customer demands and new product and process developments is critical in keeping the company profitable and growing. Strategic planning is the tool that a business owner uses for these purposes. There are four perspectives in strategic planing: Customer Perspective, Learning Perspective, Business Operations Perspective, and Financial Perspective. At the end of each year in business these four areas are covered to look back at the previous years performance and then to look forward to the coming years new objectives. By observing the previous year’s performance the business owner can see how well last year’s objectives performed. Were the projected outcomes achieved? Did the implementation of objectives and tasks have a positive impact? And, based on those outcomes what should the objectives and goals be for the new-year? The measures for answering those vitally important questions must be accurate and they must be dynamic. With all it’s information and importance, the measures must not overload the owner. There is a balance to running the business and there must also be balance to measuring systems and reporting.

Examples of the Four Perspectives

Customer Perspective (How Do Customers See/Judge Your Business):
A typical business mission statement reads, “To be number one in delivering value to our customers.” While this uplifting slogan sounds rosy and is certainly a worthwhile mission it is difficult to put into a meaningful measurement. Customer service, customer satisfaction, and perceived value all must have some way of being judged. Certainly your customers have measured your business this way, and so should you. When you buy from a company you have in mind what is important to you when doing business and paying out your money. Usually those “values” are: time, quality, performance/service, and cost. A business can measure lead-time to judge the amount of time it takes to provide the customer with their product. Lead-time is the total amount of time that passes from the time the customer places the order until the customer has the product in their hands. New products lead-time would consist of the amount of time from concept to first offering to the customer. Quality can be measured in terms of defects returned by the customer, missed delivery times, rejected products during production. All of these are good measures of how value (time, quality, performance/service, cost) is provided to and seen by the customer.

Learning Perspective (Can the Business Continue to Improve and Create Value):
This area of strategic planing must focus on those areas where the business must be competitive. The target measures in this area are ever changing. As the companies we compete with find different ways to add value to customers the playing field is in flux. There is never any one area that will make your competitive advantage, but you don’t always need to follow – you can lead the changes. Your business ability to innovate, improve, and learn are measured by your ability to launch new products, create more value to the customer, improve operating efficiencies, penetrate new markets and do it better and faster than anyone else. How many new products were offered this year? What improvements to lead-time were accomplished? How many new markets did you enter and gain revenue from (keywords and search engines)? What percent of sales came from new products and/or new websites? How much did you reduce prices on older products? How many new websites and /or pages, and how many new keywords did you add to the business?

Business Operations Perspective (What Must The Business Excel At):
Value added to the customer is a direct result of internal business processes, decisions, and actions that occur throughout your entire web presence. The measures must look at what has the greatest impact on potential customers. How fast do your pages load? How reliable are your servers? How easy is it for the customer to make a purchase (how many different ways can they buy)? How many errors exist on your web sites? How easily are data collected for measuring and reporting, and how often is the data charted and observed? How many corrective actions and changes result from reviewing business measures? How far behind are the measurable data to real time operations? These are all critical areas that determine if your business can excel in the right areas.

Financial Perspective (How Is Your Portfolio of Net Worth Looking):
The financial performance of the company is the one last measure which determines if all aspects of the business are contributing to bottom line increases. Typical measures in this perspective can include profitability, market growth per quarter, cash flow, and sales by product line. More precise measures include operating costs to revenue, return on investments of capital goods (computers, CD burners, etc), and future value analysis are the more forward looking and decision making measures of financial perspective.

Enter the Four Targets

I developed the four targets to provide feedback on the four perspectives of strategic planning in 1997. During a strategic planning process for my wife’s digital photography business we were frustrated by trying to correlate certain data and finding ourselves making judgement decisions without facts. Even though we had a great source of data collection and reporting system, the basics were missing. We wanted and needed a quick overview that could tell us at a glance how the business was doing. Call it the pulse of the operation if you will. We need to determine as quickly as possible if the business is a live and what are the vital signs? The Four Targets relates that information precisely and in real time, if you have the need.

The measures include:
1) Gross Revenue,
2) Number of New Customer Orders
3) Number of Repeat Customer Orders
4) Total Unique Visitors

Gross Revenue is an important measure because everything we do should be growing our income. If we get good new customer numbers and repeat numbers and unique visitor numbers we can look at revenue to determine the impact of the results. If the revenue isn’t going up than we are obviously doing a lot of changes and all of them are wrong. Measures should provide not just answers, but they should provide you with direction.

Number of New Customer Orders is tracked as an indicator of our online and offline marketing techniques. When we run ad campaigns such as Google adwords and offline such as radio station spots we would expect to see an increase in new customer orders.

Number of Repeat Customer Orders is an indicator that tells us how good our customer service, product and service quality, and follow up contact are. If we are really good at these things we should see our repeat customers grow parallel to New Customers.

Total Unique Visitors helps us to track our efforts to gain traffic through SEO efforts. If we add a new feeder domain then we can track such impact to the Target Domain total Unique Visitor counts. It also helps us determine the quality of traffic coming to the site. If Total Unique Visitors is increasing but Income is the same or declining we know that the quality of our traffic is poor. This measure can also tell you when it is time to upgrade your target domain or services and products.

Reading the Charts Click Here to See A Sample of the Four Targets

Each chart features two key regions. On the left is the year to year measure and on the right is the current year -- month-to-month measure. This format helps us to see the effect of our efforts and special events in the short term and overall efforts from year to year. More importantly we can use these measures to identify problems and spur investigation in the right area of the business. For instance if we start to see new customers dropping off we can focus investigation and corrective actions in that one area. As opposed to managing without measures, which is pretty much seat of the pants and often chaos. At the beginning of the week you can set your goals and tasks for the week a head. Those goals and tasks are always in line with accomplishing the objectives set forth during your strategic planning session. With the exception of something showing up a miss on your Four Targets chart. The best of plans from strategic planning can be put on hold if a crisis arises, and if you are putting changes in place as a result of objectives from strategic planning it is possible that the signal from the Four Targets is a result of your activities.

With the Four Targets measure in place at my wife’s company she has an easier time of knowing how the business is doing, making decisions, and driving performance to customer value. We also found these measures made strategic planning sessions quicker and better decision making as a result of the information found on the charts.

I realize that all of this sounds a bit overwhelming and at the same time it sounds like a great resource for you. Please remember that you can put me to work for you on these types of objectives; strategic planning and/or the Four Targets. As your analyst it is my job to make sure you have these powerful tools in place to help guide your business to make more sales and greater profits. Don't get bogged down in all the details, let me provide you with the analysis so that you can focus on making informed decissions.

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