NAEDA Equipment Dealer, March 2012
By David Spader and John Spader
The traditional approach to strategic planning doesn’t work for many of today’s implement dealer. The industry is significantly different than it was five or 10 years ago, and it demands a different approach. In this sense, the industry is not alone. Recent research indicates that more than 70% of all strategies fail to achieve expected results across all types of organizations.
The first reason many traditional strategies don’t work is that “Strategic Planning” is often viewed as an annual event. The last few years have proven that the business environment changes, and it can change quickly. In a rapidly-changing environment, if “a plan” is the goal, it is often outdated before the ink is dry.
The second reason traditional strategic planning doesn’t work today is that many dealers are using outdated tools and processes to understand their business. A straightforward SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) often doesn’t cut it anymore. While the SWOT Analysis is still a good tool, it should be only one of many tools in the toolbox. With this in mind let’s explore the 3D Strategic Development Process developed by internationally-known thought leader Michael O’Connor.
The 3D process consists of three distinct phases:
3D PHASE 1: DISCOVERY
The first phase is Discovery. In this phase we analyze the internal and external environments of the company. Begin by assessing your dealership’s internal “readiness” to enter into strategic activities. We have found that many dealers don’t have the foundation to execute the complex strategies they create. A readiness assessment can help avoid this problem.
Here are a few questions to help determine whether your dealership is ready to begin the strategy development process, or whether you might need some additional guidance:
1. Does our dealership have a consistent track record of successfully executing our strategies?
2. Does our dealership have a management team that demonstrates highly collaborative, open and exploratory thinking?
3. Does our dealership have a structured, proven way to analyze its internal and external environments to ensure we don’t miss critical strategic information?
4. Does our dealership have a strong track record of choosing successful strategies from among the possibilities?
If you can’t answer yes to at least three of the questions above, it would be a good idea to seek a qualified resource to lead your team through the entire process initially.
3D PHASE 2: DECIDING
The second phase of an effective strategy development process is Deciding. Once you have successfully analyzed the environment, it is time to choose from the many possible strategies and actions. In How the Mighty Fall, Jim Collins cites Packard’s Law saying, “a great company is more likely to die of indigestion from too much opportunity than from too little.” This holds true for strategies as well. A good rule of thumb is to be working on no more than one or two significant strategies in unfavorable economic conditions… and no more than three or four in positive economic times.
At this phase, one of the most common mistakes is neglecting to complete scenario/contingency planning based on the range of possible conditions the business may face. One practical action your dealership can take is to look at the possible strategies under three different scenarios:
1. best case,
2. worst cast, and
3. most likely case.
Then create “triggers” that initiate plans of action as the scenario changes .
Trigger Example: If we aren’t within 10% of our revenue targets by the end of March we won’t order any additional inventory until…
This type of contingency planning creates a pre-planned actions for changing scenarios so that you (and others in your business) can act quickly instead of sitting on a decision until the end of April or May - when it might be too late.
3D PHASE 3: DOING
The last phase is Doing. The single most common reason strategies fail is in their execution. Detailed action plans identifying “who” is to do “what” and “by when” are critical but often neglected. This phase should include regularly checking to make sure the assumptions you made in the Discovery and Deciding phases were correct and checking to see if anything has changed since then that would require you to change your approach. It is not a difficult step to complete, but most dealerships find it hard to execute. Don’t start the process unless you commit to detailed action plans.
Remember, effective strategic development is ongoing. It’s important to have “a plan” of action. However, single-minded attention on execution of a plan can unintentionally focus all of your energy to the activities inside your business. The purpose of strategy is to make sure your business is responding to external marketplace dynamics. Obviously, these are two sides of the same coin but if you are only looking at only one side it could be catastrophic. Review your strategy quarterly in good times and monthly in tougher times, and then adjust as necessary.