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Strategic Planning

The CEO should always leave time to manage the corporate strategy. Given you should build plans for success (its surprising how many people build plans that mostly account for failure), the CEO should continually extend the strategy so it always looks 3-5 years into the future (beyond 5 is too supernatural for most).

Strategic planning is often a formal activity organized once or twice a year. It involves at least the senior leadership team and often other strong talent from within the team (as well as external advisors) to maximize the outcome. Some companies are poor at managing the lifecycle of the strategy so effectively reinvent it each time they meet. Others think they never need to revisit the strategy and find over time (too late) the company has drifted from the market it was pursuing.

The strategy should be written down, available to every team member and drive the top level objectives of everyone on the team. Strategic planning is a CEO-led activity, although other team members can take a lead role in helping to shape (and validate it). This section explores the key elements of a strategic plan, a variety of ways to approach strategic planning events and how the strategic plan ties into overall company activity.

Strategic Objectives for Year One

The first year generally centers on validating the value proposition of the core product offering. Essentially proving to yourself and any investors that the business was worth starting in the first place. If this can be achieved in the first 12 months, you have accomplished the hardest part of getting a business off the ground -- the subsequent years are largely about scaling the team, the product and the base of revenue to pay for it all. To some degree, the cycle starts again with each new product, but that's not the focus of this section.

A common set of strategic objectives for the first year of operation might be:

  1. Complete the first major version of the core product

    The business of selling can't really start (nor should it), until you have a product to sell. You may not have all the major features in place, but enough so that someone would be willing to spend money on aspects of the value proposition you are looking to offer. If your product is a long way off from being complete (or stable), it is likely sales are premature for the first year so you should adjust objectives and expectations appropriately. Many young companies make the mistake of trying to sell a product before it is ready for use and end up harming their reputation in ways that makes market positioning when things are ready more challenging than it needs to be.

  2. Successfully sell N customers the primary product or solution of the company

    N should be at least 5 and perhaps as high as 100 or more depending on the target market, the expected average size of sale and the overall market opportunity being pursued. Your goal is to set N such that you comfortably can state with confidence that you have passed any relevant luck factors with your first few sales -- if they all come from personal friends, favors, past contacts, etc, you have not really earned the right to scale up the business and take on more expense attempting to sell to the market at large.

  3. Complete any remaining key hires

    The initial management team and any other key hires should be in place as early as your budget can allow it. As long as their are gaps, you will likely be spending your time with too many hats on to make any one objective successful. In an ideal situation, you would complete all the first year key hires in the first few months of the year so that the remainder of the year can be spent almost entirely on the other objectives.

You may have other important goals for the first year like raising money, finding an office space to settle into, signing a few business partners, attracting an independent Board member, etc. If you are unsure about whether any of these are strategic, perhaps consider whether or not they occupy most of your time as CEO (or should) or impact the success of the business for a few years ahead. If either is true, you could consider them strategic in nature.

Keep in mind that the most important objective tends to be how quickly you can get to the point of earning the right to start scaling the business. You should use the first year as a good time to find out what is working and not working from your original business plan and make sure any problems are corrected as you head into your second year and beyond. For example, you might find the definition of the target market needs to change, the way you express your value proposition resonates poorly with early adopters, product quality is not where it should be, the go-to-market plan is weak or out of sync with the opportunity (e.g. channels versus direct). All of these assumptions (and more) are best to be validated and refined early in the first year when there is time to make changes. The bigger the business gets, the harder it is to re-vector down a different path.

The last point is to make sure everyone is clear, crystal clear, on what the strategic objectives are. They should fully understand how their roles and their individual objectives contribute towards achieving the strategic objectives. Lastly, if you have investors and/or a Board of Directors, make sure these objectives are agreed upon by all participants. It's easy to drift as the year unfolds which creates unnecessary stress between all the stakeholders.

Strategic Planning Events

Planning events should be handled differently than day-to-day business meetings. These are participation events, don't invite people who will not participate. They are 'events', which means something spectacular should occur to make them memorable for the Company. Often it's the new ideas that come out which rally the team towards the next goals. You want people to walk away saying 'this was the meeting where we came up with the idea to ...'.

Regardless of the number of people involved, it is common to go off-site, away from business interruptions and the visual reminders of what today's tactical issues are. If you stay in and around the office, you often find people distracted by their normal work responsibilities, which takes away from their ability to participate at a strategic level (their often mentally stuck on the problems of the day). You can schedule time for everyone to be on-line, respond to Blackberry requests, return phone calls, etc -- but never during a planning session meeting (nowadays you need to be ruthless about this one). Always have proper refreshments on hand so that everyone can perform to their maximum level (this means more than hot coffee -- good meals, healthy and unhealthy snacks, beverage variety, etc).

Planning events, like all well-run meetings, require tight facilitation, well-defined agendas and prepared participants. In all my planning sessions, I like to include early on a summary of what the current strategy is and my personal assessment of how I think the Company is doing compared to the strategy. I find this gives participants a chance to orient themselves towards the topics at hand as well as prepare for participation. I also like to send out the challenges at hand in advance of the meeting to give participants a chance to consider their contributions.The best meetings occur when you can go deep on an issue and decide with certainty if it should become part of your plan. This is hard to do without some advance preparation. I don't like to hope coming up with some net new ideas in the meeting itself as its only benefit.

Formalized planning in young companies is challenging due to the lack of critical mass of the team itself. Do you go offsite with two people to talk about Company strategy? Do you get everyone involved? Yes to both if needed, although you do not need a crowd to benefit from some focus on long term issues. In fact, even if you are the only 'senior' person in the Company, you may want to take a day off to consider how to handle the long term issues. It's a chance to clear your head of the day to day challenges and come back with refreshed points of view to present to the whole team.

If the group is large enough, you can organize into subgroups throughout the meeting to tackle specific topics. A common approach is to divide the group into enough sub-teams so that one topic has one sub-team covering it. You give each sub-team a fixed amount of time to review the issue they are responsible for. At the end of the time period, each sub-team presents their findings to everyone and a broader debate can ensue, but now with deeper perspectives to consider.

Running your own strategic planning session is not ideal for everyone. It may require an outsider to properly facilitate. This can bring a sense of 'neutrality' to the meeting where your voice as CEO is more 'equal' with others (which often promotes broader participation from everyone). This does not mean you loose your ability to influence the results -- you are still CEO after all, but it does often result in perspectives that would not have otherwise surfaced. Pick someone with relevant credibility and ideally someone who can drive depth into the discussions.

Common practice would say that you hold a strategic planning event at least once a year, typically in advance of the operational planning cycle. It's also useful to hold mini-planning meetings that focus on medium to long term issues a few other times during the year -- perhaps only a few hours in length versus an all-day off-site meeting.

Follow up and Produce some Output

Smaller companies (maybe companies of most any size) are famous for holding strategic planning sessions that produce little to no output. We had some great conversation, we generated a lot of ideas, we even drafted a bunch of flip chart materials, but one week later it's all sitting on a desk or in a box somewhere with little output or follow-up. The assumption tends to be that everyone attending heard what was decided so they would go about implementing or absorbing it without need for any reinforcement. Wrong, wrong, wrong.

Communication is often at the core of reaching excellence. Effective communication of all forms from all areas of the Company is critical to building a venture that can sustain a successful path. If you hold a strategic planning session, you should tell everyone the outcome -- even if it was decided not to change anything the Company has plotted out as part of its future. Focus on the following to help communicate your strategy: