Professional Documents
Culture Documents
Savoir Comment Éviter Les Pertes Dans Le Processus
Savoir Comment Éviter Les Pertes Dans Le Processus
Savoir Comment Éviter Les Pertes Dans Le Processus
cO r P O r aT E S T r aT EGY B Oa r d ®
Optimal Planning
Waste-Free Strategic Planning and Execution
INITIATIVES ASSUMPTIONS
1 SENTENCE
That…
Reconcile conflicting
assumptions and views.
That…
Are explicit and
communicated to the broader
That…
Captures the essence
of the strategy.
• Indeed, most companies have a strategy that is too vague, non-committal,
or unwieldy for each member of the executive team to fully understand it
METRICS DESCRIBING organization.
OUTCOMES DESCRIBING
the INITIAL STATE* Build strong Signals the aspiration. the TARGET STATE*
buy-in for the right Are concrete, with quantifiable
Trading Par tners Trading Par tners
projects. thresholds for monitoring Includes a limited
Net Promoter Score validity. number (less than Net Promoter Score � x
Market Share Market Share +x%
teams.
Operations Operations
Lack of consensus, Confusion or disagreement Any doubt as to what
Perfect Order Fulfillment Perfect Order Fulfillment � x%
support, focus, and on the cognitive basis for constitutes the strategy.
Human Capital resources for key the strategy. Human Capital
Turnover as a Percentage projects. Turnover as a Percentage
of Headcount of Headcount % � x
Percentage of Employees Percentage of Employees with
with Low Intent to Leave Low Intent to Leave < x%
© 2009 The Corporate Executive Board Company. All Rights Reserved. www.csb.executiveboard.com
CSB1B0V6R3
April 2009 1
THE Idea in Practice Why seven? Research has demonstrated that the average person can think
contemporaneously about as many as seven things but begins to have trouble
To deal with uncertainty in the when an eighth is added. Given that the set of metrics will be discussed with
pharmaceutical business, Eli Lilly vets and cascaded to hundreds or thousands of people, it is important that the set
and monitors the most critical, uncertain is tractable to the average employee.
assumptions underlying its strategy.
After identifying the metrics, estimate their value on day one of the
The assumptions are communicated
implementation period and the target outcomes for the last day of the period.
to the entire organization, which acts
The period may be as short as a quarter or as long as five years. Given the
as a testing mechanism for validity.
transaction costs of formulating and communicating strategy, the volatility
Performance reviews start with
of the current environment, and the need to give a strategy a chance to work,
assumptions first—not execution issues.
we recommend a period of one or two years and that progress be tracked at
least quarterly.
Charles Schwab emerged as a winner as
the first wave of online trading disrupters Second, identify the seven key initiatives required to move from the initial
reshaped the brokerage business. to the end state. Yes…again with the seven, for the same reasons cited above.
Schwab’s bold strategy centered Note that you do not need to include initiatives intended to run the business,
on a gut-wrenching decision to cut such as, “keep serving our customers” or “maintain employee engagement.”
prices dramatically. Executives used a These initiatives strive to perpetuate the current state or trajectory. In
dashboard of weekly and monthly proxy contrast, the seven key initiatives represent the change-the-business agenda,
metrics that instilled confidence in the and seek to create value beyond the inertial trajectory. Strive to achieve a
strategy logic, even as the stock price level of granularity among your chosen seven by grouping smaller projects as
took a severe, initial hit. necessary.
Note that the key initiatives may impact important run-the-business metrics
other than those identified for this short list. If you cannot be confident that
any given critical metric will stay within an allowable range, you need to
add it to the metrics list outlined above or address it with your list of critical
assumptions, outlined below.
After specifying the initiatives, set criteria and dates for key milestones and
completion. Expect those responsible for implementing the initiatives to
want more time and budget to complete them. Expect yourself to want more
slack related to the assumption thresholds described below. Expect CEOs
and CFOs to want tighter delivery timelines and assumption thresholds and
higher target values for metrics.
Next, craft a concise statement that captures the essence of the strategy.
The essence or core elements of the strategy will address the target end-
state and required initiatives. Strive for a single, aspirational sentence, but
sacrifice concision for clarity. Focus more on getting the essential elements
right (seven or less, of course) than on finding the perfect turns of phrase.
When you find yourself caught in endless debate over wordsmithing, you
have likely gone too far.
This activity should flow directly from steps one and two. Indeed, clarity
and simplicity—in this case, of the target outcomes and supporting
initiatives—are powerful motivators. In practice, they do more to guide than
inspire. A compelling statement that passes the same tests of clarity and
simplicity nicely complements an optimal plan. You may also find value in a
similar statement simply describing the current state. This is optional.
Finally, document the seven most critical beliefs or assumptions on
which the strategy relies. Yes, up to seven. Your assumptions should
highlight cause-and-effect relationships between your business ecosystem
(initial and target), your key initiatives, and external driving forces. Some of
these relationships you’ll view as highly reliable “truths” about the business;
others will represent highly uncertain dynamics difficult to control or predict
© 2009 The Corporate Executive Board Company. All Rights Reserved. w w w . e x e cwww.csb.executiveboard.com
utiveboard.com
CSB1B0V6R3
April 2009 2
accurately. Your seven most important assumptions will likely include ones related to macro economy, customer
behavior, competitors, or technology—the central drivers of value for your company and industry. At best, your
assumptions will reflect why the core elements of the chosen strategy (the target end-state and required initiatives)
are better than their next best alternatives. This represents the cognitive foundation of the strategy you’ve selected.
Be sure to pick metrics that enable you to differentiate between strategy and execution gaps. While execution metrics
are straightforward—on-time completion of key initiative milestones—remember that strategy metrics (assumption
thresholds) must address two related but distinct aspects of strategy: the correctness of the target end-state and
the ability of selected initiatives to achieve it. This will help you avoid subjective debates over a strategy’s success
and understand the real root causes of underperformance. Not only will this ensure that course corrections fix the
right problems, it will yield invaluable organizational learning about your strategy, planning and implementation
capabilities.
After identifying your critical assumptions, set a threshold for each—or for a proxy variable that is more easily
measured. The threshold should be loose enough that you are at least 90% sure that it will not be breached. Bear
in mind that with independent assumptions, there is a 50% chance of at least one threshold being breached at 90%
confidence. Breaches are no trivial matter. If a threshold for one of your most important assumptions is breached, you
should trigger a course correction, with key stakeholders meeting to reformulate the strategy and execution plan as
needed. Consider a compressed, 2–3 day off-site to craft a meaningful new plan on a tight timeline.
The most important recommendation within this document: Monitor your assumptions as frequently as necessary to
provide at least one month’s advanced warning of an imminent breach. Planning for an effective course-correction off-
site takes at least one month.
FREQUENTLY-ASKED QUESTIONS
Q. “Honestly, we have no idea what Response: This lack of clarity is not entirely uncommon, and compounded
our target end-state is. It would be by the current environment of volatility and upheaval. Organizations truly
lost as to long-term strategy will need to work the process outlined above
foolish for us to try to define it by a essentially in reverse, starting with core beliefs and assumptions. Only by
set of metrics.” surfacing, debating and reshaping your foundational beliefs about your
business can you begin to visualize the alternative pathways and end-states
for creating value, along with their implied choices and requirements.
Q. “I work in a large, complex Response: Remember that 80% of the value of your strategy probably comes
organization. There is no way I can from 20% of your strategic initiatives. The best strategies are ones that make
tough choices and stake clear bets on the organization’s future. Even if you
simplify my strategy down to seven find it impossible to narrow your strategy to seven initiatives, at least make
metrics, initiatives, and assumptions.” sure that you and your executive team devote 80% of your strategic focus to
those top seven projects.
Q. “I’m not thinking about course- Response: Volatility can quickly make strategic assumptions—and the
corrections. We need to stay focused plans they support—outdated or invalid. Indeed, times like this are when
companies are twice as likely to gain or lose a quartile in industry rankings.
and keep moving forward with our Some of the best companies have been derailed by invalid assumptions even
strategy.” in good times. In this unprecedented macroeconomic environment, the
ability to sense and respond will separate the winners and the losers.
NEXT STEPS
Are you able to plot your company’s position, destination, and speed on the map? Would your company’s top
five executives almost identically describe the organization’s current state, target state, strategic initiatives, and
underlying assumptions? If they cannot, do you think that middle management can—or can appropriately make
difficult decisions in this extraordinarily dynamic economy?
Contact your CSB account manager, executive advisor, Seth or Paul to discuss supporting research, translation for
your organization, or on-site facilitation. A PowerPoint template for optimal planning may also be downloaded here.
© 2009 The Corporate Executive Board Company. All Rights Reserved. w w w . e x e cwww.csb.executiveboard.com
utiveboard.com
CSB1B0V6R3
April 2009 3
Optimal Planning
Waste-Free Strategic Planning and Implementation
© 2009 The Corporate Executive Board Company. All Rights Reserved. www.csb.executiveboard.com
CSB1B0V6R3
April 2009 4