In my previous post, Structure for Strategic Planning, I outlined a concept called the Business Model Canvas, from a project compiled by Alexander Osterwalder. This process contains three steps.

1. Document the CURRENT Business Model (using the Business Model Canvas)
2. Identify and document external trends that will impact your Business Model
3. Create the FUTURE Business Model (using the Business Model Canvas) focusing on those elements you have to change in response to those external trends.

While there are nine elements in the Business Model Canvas, they can be grouped into four categories that are useful for Steps 2 and 3.

1 – Resources

• Key Partners
• Key Resources
• Key Activities

2 – Value Proposition

• Value Proposition (aka USP, Unique Selling Proposition)

3 – Customer

• Customer Segments
• Customer Relationships
• Customer Channels

4 – Financial

• Cost Structure
• Revenue Streams

These groupings are helpful specifically in identifying external trends that will have impact on your Business Model. Here are some questions –

Resources
What is the financial condition of your Key Partners?
What is the flexibility of your Key Partners?
What could disrupt your Value Chain?
What could impact internal teams?
What regulations could change the availability or the way we use our resources?

Value Proposition
What will change about our competitor’s Value Proposition?
How will technology impact our Value Proposition?
What new competitors will enter our market?
What will change about our customers expectations? Demands?

Customer
What could change the financial position of our customers?
What could change the way our customer uses our products or services?
What demographic trends will impact our market?

Finance
What will change about our cost structure? Higher prices? Deflation?
What will change related to personnel costs?
What will change in our regulatory environment?
What will change about our price points related to our cost structure?
What will change about the way our customer purchases our product or service?
Is there a different way to derive revenue from our Value Proposition?

There are a hundred other questions, but this will get you started on this second important step.

So, how do we talk about the long term future? Most long term (strategic) planning discussions falter. Managers seldom work through long term planning scenarios.

Long Term is a discussion outside the bounds of tangible concrete circumstances. It is a conceptual discussion.

For years, I have used a planning template and approach which I recently found compiled and published by Alexander Osterwalder in an open source project called Business Model Generation. The central piece of the project is a long term planning template called the Business Model Canvas.

In its one page form, it allows a group to deconstruct the elements of its business model into nine elements.

• Key Partners
• Key Resources
• Key Activities
• Cost Structure
• Value Proposition
• Customer Segments
• Customer Relationship
• Customer Channels
• Revenue Streams

This Business Model Canvas provides the structure for an orderly discussion, an orderly conceptual discussion about the way the business is put together. And that’s our Inventory, as of today.

The second step of this process is to examine external forces (trends, competitive pressure, economics, demographics, regulatory pressures) that will impact on each of the nine elements.

The third step is to redefine the nine elements in response to those external forces. This third step is the work product of the long term planning discussion.

A structured conceptual discussion, strategic planning.

“So, what’s the purpose of planning?” I asked again. “Specifically what’s the purpose of strategic planning. You talk about the uncertainty of the future?”

“You know, I am all for simplicity, but sometimes, the world is complex. There are all kinds of things that can affect our business. Looking ahead 30-60 days is easy. We know what projects we have, who the customers are, what materials we need and which team will do the work. But looking out three years, the conversation changes.”

“I will agree the conversation changes,” I nodded. “In what way?”

“When we look out three years, we don’t know what projects we will be working on, who our customers will be, what materials we will be using or even who will be on our team. All we can assume, is that we will still be in business, solving a customer’s problem.”

“So, what’s changed about the conversation?”

“Obviously, the Time Span. We are looking further out. But what has really changed is that we are no longer talking about concrete, tangible things. We are talking about uncertainty. It’s not easy to describe because it is a discussion about the future.”

“So, we are not talking about short term tactics, we are talking about long term concepts. And that’s why this conversation is unsettling. It is easy to talk about tangible, concrete things, but we are not used to talking conceptually.”

Now we were getting somewhere. “Something would change?” I repeated.

“Well, yes,” Walter started. “We could do the same thing over and over, and be successful, until something changed.”

“So, when we talk about planning, what would be valuable to talk about. Where is the real value in planning?”

Walter was still hoping he hadn’t painted himself into a corner. “You’re right. The real value in planning is talking about what will change. Maybe that is what is unsettling about the process. We talk about change, things that might happen or might not happen, things we don’t know about. Then we attach a revenue number to it, like we are the most accurate weather forecaster in the world. That is the unsettling part.”

“Are you trying to do two things at cross purpose?”

Walter nodded again, “Yes, we talk about the uncertainty of the future and then try to nail down a black and white number all in the same sentence.”

“So, what good is planning?” I repeated. “What would happen if we did NO planning?”

“You know, that’s a great question. I don’t know that anything would change. To know what to do, tomorrow, we just have to look at what we did yesterday.”

“So, just look at yesterday, do the same thing again and we can expect the same result?” I summarized.

Walter nodded his head and chuckled, “Pretty much. And at the end of the year, our revenue number would be about the same, hopefully a little better.”

“So, how long could you keep that up?” I prodded. “I mean, successfully doing the same thing over and over and over? Could you do that, forever?”

“Well, not forever,” Walter smiled. “At some point, something will change.”

“Something will change?” I asked.

“Then, what’s the purpose?” I prodded. “What is the purpose for planning? What is the value, spending two days jabbering?”

Walter was quietly making sure he hadn’t painted himself into a corner. “Okay, the planning process has virtue. But the process is unsettling. We call it strategic planning, but I don’t think we talk much about strategy. We try to create an annual revenue number and then talk about why the production line broke down last week. That’s not strategy.”

“So, talking about the production line is unsettling?” I asked.

“No. We can talk about the production line. It’s just that planning is a discussion about the future. We are supposed to create this vision of the future, but we talk about stuff that happened last week. And no matter how great we paint this picture of the future, the production line will always break down, or our customer’s project will be delayed, or a competitor will come in with a cheaper price. What good is planning?”

“Here we go, again,” Walter shook his head. “The obligatory offsite strategic planning meeting.”

“I can tell you are not excited about the planning process,” I responded.

“It’s just that we spend two days jabbering, write some goals on a flip chart and then forget about it. It’s not that I don’t like the process, it’s just, at the end of the day, I don’t see the value.”

“You don’t see the value in jabbering, writing goals or following up? Which is it?” I asked.

“I mean, we create a revenue goal. It’s a nice number. But whether we reach that goal, has little to do with the fact that we write the number on a flipchart every December.”