Business growth consultant Steve Haarstad has some advice for business leaders who avoid formal strategic planning because they don’t have time, think it is unnecessarily complicated, or see their company doing just fine without a plan.
First, he urges leaders to take a little time — maybe just the few minutes it takes to read this article, or the length of one of his manufacturing workshops on strategy — to understand what strategic planning involves and its typical benefits. More information will reveal that its value easily outstrips costs.
Haarstad emphasizes that strategic planning can be scaled down. Many business owners and leaders think formal strategy only makes sense for large companies, but it’s equally valuable for smaller manufacturers, and it can be much simpler and less time-consuming. “You can get away with a more streamlined version of planning that takes less time and covers less topics yet still clearly defines where you are going and how you plan to get there,” he says.
He also notes that even successful companies find value in strategic planning. It gives leaders a clear direction for the company and provides more criteria to evaluate the short-term decisions that fuel long-term objectives.
The advantages of strategic planning ultimately flow to all employees, Haarstad says. “When employees know that a plan exists, even if they don’t know all the details, it gives a sense of security,” he says. “It also provides rationale to understand the decisions that are being made by company leaders.”
Haarstad says strategic planning is a sure recipe for engaging leaders and employees. “The most common, concrete outcome is a stronger, more unified team that’s in better alignment with the company’s direction,” he says.
Establishing a framework
For companies just starting strategic planning, those trying to boost their efforts, or those in the middle of executing a formal plan, it’s useful to consider Haarstad’s four pillars — the four Ps — of good strategy. Purpose, position, process, and people form the foundation of a solid strategy, and clarifying them can help guide manufacturers at any stage of planning.
Defining purpose requires the company to clarify and communicate its mission: why it exists, what it’s trying to accomplish, and its vision of the future. “Have you ever been frustrated when a leader above you made some kind of decision and you had no idea why they made it?” Haarstad asks.
That disconnect, he says, means either that person was being purposeful, and you didn’t understand, or their actions didn’t actually reflect the understood purpose. Company leaders can avoid miscommunications and rogue decisions when they work together to define and clarify purpose in the context of a strategic plan.
Position describes what sets the manufacturers apart from others. A company’s market advantage doesn’t necessarily come from doing a better job at something, it comes from doing something different than everyone else. When considering strategy, it’s critical to recognize that unique position and build goals around it.
Process outlines how things are done internally and ensures the systems and operations are in place to support the company’s goals. Without good processes even a company with an outstanding mission and a unique market position fails to thrive. Citing Atomic Habits author James Clear, Haarstad says, “We do not rise to the level of our goals. We fall to the level of our systems.”
The people aspect of strategic planning forces a company to define who you are as an organization through your core values and to consider and communicate the specifics of the entire team. “You’re putting words on paper that describe and define the culture of your organization,” Haarstad says. It’s also about having the right people doing the right jobs and taking time to plan for succession in your organization.
Often the first time a company goes through formal strategic planning can be time intensive. “We’ll cover all these areas, have discussion and debate, and give definition to the purpose and position. We’ll look at the long-range vision and short-range objectives and figure out the process and the people,” he says. “Those conversations take place over many hours and sometimes over several days.”
Combining a solid foundation based on these four “Ps” with four tips — detailed below — that Haarstad has developed through years of working with manufacturers gives leaders the tools they need to maximize the impact of strategic planning.
Tip #1: Keep the endgame in mind
Companies without a plan are easily distracted by urgent daily tasks or unforeseen diversions. Haarstad recommends leaders look far into the future and determine where they want the company to go.
How far? The endgame can be defined by a “big hairy audacious goal,” a term coined by strategy expert Jim Collins years ago that involves setting a target of 10-plus years. It can also be a three-to-five-year plan. Or it can be an exit strategy, maybe positioning the company to sell by a certain date or preparing for a transition to the next generation of leaders.
“Defining an endgame means painting the picture of the future with clarity,” Haarstad says. “That picture becomes a decision filter and a stabilizing anchor for our actions.”
It’s a decision filter because every situation can be considered in the context of the larger objective. Will taking an action move the company closer to or further away from that vision of the future?
To clarify this point, Haarstad asks leaders to imagine a compass. If the right direction for the business aligns to a 90-degree segment of the compass, then 270 degrees represents a wrong path. Just randomly picking something means you’re three times more likely to go in the wrong direction than the right way, he says.
Visualizing the endgame keeps leaders focused. Haarstad retells a key scene from the movie Castaway to illustrate the idea. When Tom Hanks’s stranded character decided to leave the island on a handmade raft, hoping he could find a boat or plane to rescue him, he took his most prized possession, his volleyball, Wilson. When the ball began floating away, Hanks grabbed a rope he’d attached to his raft, jumped in the water and paddled after Wilson. He got within feet of the ball but reached the end of the rope.
“That was his decision point: Let go of the rope or not? He would’ve made it to Wilson but might have lost the raft,” Haarstad says. “He stayed connected to his endgame, and that was a stabilizing anchor. It kept him from drifting off.”
Business leaders can face similar distractions. “We get our strategies and processes in place when some golden opportunity shows up,” Haarstad says. “But it’s going to take us over there and our endgame is over here. Having the decision filter keeps us moving in the right direction.”
Tip #2: Stay in your core
Haarstad says businesses and their leaders diminish their effectiveness when they step away from core competencies. When developing, executing or adjusting a strategic plan, manufacturers must stay in their core, he says.
A core competency is defined by three things: it is difficult to imitate; it can be widely applied; and it adds value to your customers and to the things you offer to the market. To identify and get insight into your core competencies, Haarstad suggests asking yourself questions, asking others questions, and engaging in objective analysis.
Start by convening an internal brainstorming session, Haarstad says. What do our people think we do well? What do we pride ourselves in? What are we exceptionally good at? What makes us stand out?
These discussions will generate a wide range of responses, all of which could be valid. “It could be your market experience, your ability to provide support to your customer from a design perspective, your capacity to run large volumes of things super efficiently, or your outstanding customer service,” Haarstad says.
Internal discussions can kickstart the process, but those conversations alone may not identify your competencies. They can give you some initial insight, but you should test those ideas with additional input, Haarstad says.
Next, ask customers about your strengths, either through a formal survey or an informal conversation. “Customers are a rich source of information. Ask them why they choose to buy from you. Why do they like your product? What makes you different from competitors?” Haarstad says.
He also suggests looking into what your competitors are doing: poke around on their websites and see what they’re promoting and what their marketing messages are. Compare what they’re providing to what you’re providing. “It is a really great resource to learn a little bit more about what makes your company special,” Haarstad says.
Further evaluation, such as a SWOT (strengths, weaknesses, opportunities, and threats) analysis can provide deep insight into core competencies. Every item on the strengths list is a potential core competency. Haarstad also recommends reviewing financial statements and identifying areas that outperform others to uncover core competencies.
Clearly defined core competencies enable companies to align with their strengths and help create a menu of goals and actions. “Knowing your core strengths, you can leverage those and do better things for customers and the organization,” Haarstad says.
Tip #3: Stick to a rhythm
Rhythm is a foundational, critically important element of successful strategy, Haarstad says. He identifies two aspects of rhythm: deliberate daily routine and a consistent convening of leaders that gives them the tools to go back into the company and execute effectively. Companies that manage actions within a rhythm that is aligned to endgame goals are in a great position to build momentum and multiply their results, he says.
Haarstad urges leaders to develop a consistent routine. He recommends gathering the core team to report results, discuss and debate, align with goals, reset when necessary, and then send those leaders back out and execute. A consistent rhythm is a force multiplier, he says, suggesting a 90-day interval for those sessions.
He also encourages leaders to institute more frequent update meetings, ideally each week. For these he suggests using a fixed agenda, revisiting the same series of conversations at each meeting, and sticking to a consistent length of time and a set day and time each week. One person should facilitate the conversation, and one person should record key decisions.
A consistent rhythm includes having a predictable routine connecting frontline production employees to company objectives.
This could be a five- or 10-minute standup meeting: here’s the update from yesterday; here’s the focus for today; here’s a safety thing to watch out for.
If you’re starting from scratch, and you don’t really have any kind of consistent rhythm at any level, you want to start with your leadership team, Haarstad says. “This is where you learn the lessons and figure some things out and take ownership of these things. Once you’ve nailed that, you can start rolling things out to other parts of the organization.”
Haarstad emphasizes that starting this process can be a challenge. “Give yourself some grace. You’re putting something new in place. You’re not going to get it right the first time,” he says. “If you’re doing it consistently over the course of two 90-day periods, you’ll have it pretty well locked in and you’ll be feeling really good, and the rhythm will be working for you.”
Tip #4: Simplify
A good way to keep strategic planning on track, Haarstad says, is to simplify the process. Complexities often breed ambiguity and uncertainty, which lead to slowdown and decline.
“Think about when you are driving somewhere for the first time. When you’re not quite sure where to go next, you slow down. We don’t want our people to be confused and uncertain, which will lead them to slow down,” Haarstad says.
The fix, Haarstad says, is to break down objectives into specific tasks and clearly define milestones.
When tasks that take several weeks to complete are reported on in weekly meetings, it can kill momentum. “When they report out the next week, and then the week after that it’s not complete, it disrupts the rhythm because it feels like this thing is getting stuck. And it acts as a demotivator to the owner and the team,” Haarstad says.
He suggests breaking tasks into steps. For an action that will take two or three weeks to complete, break it down into weekly or even daily objectives. For a six-month or one-year goal, break it down to 90 days.
By defining specific milestones, leaders create a clearer picture of what needs to get done. It also prevents procrastination. “It’s clear that if we don’t get started right away on the 30-day milestone, we’ll never reach the 90-day target,” Haarstad says.
Simplifying boosts outcomes when implementing a strategic plan, and it helps everyone become more comfortable with the planning process when starting out, Haarstad says. At the beginning, if leaders can lay out a short list of steps to complete over a period and specify which series of conversations they’ll have, it all becomes much more digestible.
From young companies to well-established manufacturers, Haarstad has seen formal strategic planning pay huge dividends. “I’ve seen formal plans give more definition and create more pathways of growth. I’ve seen them give clarity in terms of what markets to pursue and why,” he says. “And I’ve seen how companies execute against their plans and become accountable to the outcomes that they were trying to achieve.”
Return to the Fall 2024 issue of Enterprise Minnesota® magazine.
