External Systems that Impact Internal Systems

From the Ask Tom mailbag –

Question:
When I look at our strategic plan, it is mostly a mathematical increase in revenues over last year and some projects to cure some of our operational problems. If that is all it is, why is there such a focus on strategic planning?

Response:
Unfortunately, for most companies, your observation is correct. Most strategic plans are not strategic, they are tactical. Tactical planning is important, but it is rarely strategic.

Your question is why plan. If we were successful in identifying our competitive advantage and effective efforts to operationalize that advantage, why pow wow to come up with a new plan?

We have to periodically pow wow because of this one factor, change. Change requires us to reexamine our assumptions, understand our marketplace, revise our thinking, adapt our internal systems and track our progress in the face of that change.

Most planning is an attempt to resolve operational issues with our internal systems, that is still a noble goal. Strategic planning is an examination of those external systems that have an impact on the way we organize and operationalize our internal systems. Here are five important external systems you might consider –

Market (external system). This external system includes your best customer, different customer segments, your best competitor, second tier competitors, vendors and suppliers.
Regulatory (external system). This could be financial regulation, like taxes, environmental regulation, tariff regulation, permit regulation.
Finance (external system). As companies grow beyond the resources of stockholder investment, reliance on external sources of capital becomes more important. This includes simple revolving lines of credit, institutional term debt, private equity. All come with strings that have an impact on the way you internal organize. Banks call these covenants. Access to capital markets is seeing an extraordinary shift with increased interest rates depending on market risk.
Labor (external system). We used to look at unionization and unemployment statistics to get a handle on our access to labor. Now we have to include governmental intervention, student loan forgiveness, cultural impact on employment conditions (unlimited vacation, virtual roles) and accountability in those conditions. It’s all part of your business model.
Technology (external system). Technology has changed the way that we work. Meaning, technology has changed the way we make decisions and solve problems. Every business model is shifting to incorporate technology and make it effective with a constant eye to the next technology which will bring the next change to the way we organize.

It is these external systems that will have the most impact on your change in strategy. This is where I always start. What’s changed?

Casual Opinion

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From the Ask Tom mailbag –

Question:
You appear somewhat down on SWOT analysis as a planning tool?

Response:
It’s not the analysis part, it’s the opinion part. Most SWOT exercises are not analysis, but rather opinions, not tested by reality. Chuck Bamford, in his book Strategy Mindset tells the story. He was able to teach his eight year old son the SWOT methodology and asked him to conduct an “analysis” of his third grade class in school. Shockingly, his son declared the strengths of recess and lunch.

In our companies, we make million dollar bets on strategy. That strategy has to have some relationship to reality and requires a much harder examination than casual opinion.

List or Analysis?

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“Of course, we are doing strategic planning this year,” Allison smiled. “Each year, we go off-site, the central exercise is our SWOT analysis.”

“But, you said you were disappointed over the past few years with your planning efforts?” I asked.

Allison nodded her head. “You are right. Sometimes it seems our planning is a rote exercise to build some SWOT lists and call it a day. The effectiveness of the exercise, though completed and compiled in our single page business plan, isn’t very helpful when the firefighting of the day kicks in. Sure, we pull the plan out every quarter and walk through its initiatives, but at the end of the year, we are still firefighting in spite of the plan’s guidance. Becoming the premier provider of goods and services to our targets markets seems like more bluster than planning. I mean, we wanted increases in revenue, gross and net profit, but it appears to be more intention that a methodology.”

“But, SWOT is a tried and true exercise,” I observed. “Why do you describe it as lackluster?”

Allison was quiet. “SWOT is supposed to be an analysis. Seems like more of a list than analysis. We are comfortable making the list, not so much on the analysis. And what we are really comfortable with, is the firefighting of the day.”

We Improvise

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“Not one plan, but four plans?” I wanted confirmation from Roberto.

He nodded. “I was in the Marines. We had a saying, ‘We don’t plan. We improvise.’ But, improvisation only works if you are prepared with a plan. What’s the first part of every plan?”

“Purpose,” I replied. “We all have intentions, mostly unspoken. A plan is created when intentions become a documented purpose.”

“Improvisation only works when there is a commonly agreed-to purpose,” Roberto continued. “Without a purpose, improvisation becomes chaos. The chaos may be interesting, but it accomplishes little. Purpose drives the next step.”

“Visualization,” I replied.

“Everyone on the team must agree to the purpose and hold a similar vision of what that future state looks like,” Roberto explained.

“How do we know the picture each holds is close to the same picture of their elbowed teammate?”

“Simple,” Roberto grinned. “They talk to each other. It’s a discussion. It is the necessary work of improvisation. When all hell breaks loose, we have to be prepared to make the micro-decisions of the moment, in concert. Serendipity doesn’t happen by random chance. Serendipity is all about our intentions.”

“And?”

“And only then can we create the mile markers to chart our progress, the goals, objectives of our micro-decisions. What looks like serendipity only occurs when we create the context of a plan in which to operate. It may appear we are winging it, but our actions require preparation to be effective toward our purpose.”

Scenario Planning

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“You had a pretty good year, last year,” I said. “What was your secret?”

“It was a solid plan, flawlessly executed,” Roberto flatly stated with a smile.

“I know that’s not true,” I replied. “I mean, I know you had a plan, but, that’s not what happened.”

Roberto’s smile turned into a grin. “Your observation is correct. We didn’t have a plan. We had four plans. We took the two largest variables that would impact our business and played them out in four quadrants. We played each variable up and each variable down in combination. At the time, what we thought would happen was very far from what actually happened. If we had not had three alternate scenarios, we would have been sunk.”

“And this next year?” I asked.

“Same. We thought we were finally getting back to normal, then Ukraine, protests in China and Iran, now a looming rail strike. You have to plan for contingencies, not just what you think will happen.”

A tip of the hat to Gideon Malherbe.

The Two Strategic Questions

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When I was in journalism, I was taught to answer the 4 “W”s. Who, what, where and when?

This is planning season and companies across the globe are asking those questions. The multi-day retreat is called strategic planning, but in most cases, it is tactical planning. Here are the questions again, only two are strategic.

Who?
What?
Where?
When?
How? (I know it doesn’t start with “W”)
Which?
Why?

The responses to the list are mostly tactical.

Given two or more choices (and there are always at least two choices), which choice fits our strategy? Given two or more choices, why would we choose one over another? Those are the strategic questions.

Rolling Forward

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Seventeen year’s ago, (Nov 2004) we began this writing sojourn. I want to thank you for taking a precious minute out of your day to observe those events around you, reflect on your impact and think about the next move you make.

Management Blog will be back next Monday. Don’t eat too much turkey. -Tom

Discretion in the Quality of the Data

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“You describe the role as entry level. The output must conform to strict guidelines, which creates the quality standard. What are the decisions that must be made in connection with the work?”

Arlene was shaking her head from side to side. “We don’t allow a lot of latitude with this work. Sending prescription drugs by common carrier is serious business.”

“You think you don’t allow latitude. In fact, you tell your team members there isn’t a lot of latitude, when in fact there is. There are a ton of decisions that must be made.”

Arlene was quiet.

“Look, most of the prescribed duties involve collecting data from your customers to determine their qualifications. While it seems cut and dried, there are many decisions that must be made about the quality of their responses, the accuracy and completeness of the data.

Is the customer address we have on file their current mailing address?
Is the customer mailing address the same as the shipping address?
Is the telephone number we have on file a mobile number we can send a confirmation text message to?
Will the shipping priority we have on file assure the product reaches the customer on time?
If the customer does not answer the door, is it okay to leave the product on the front porch, or is there another more secure location?

“The difference between ok performance and outstanding performance is not in filling out the forms, but in the decisions related to the quality of the data that goes on the forms. The job may be completing the forms, but the work is the decisions that must be made.

“An important discussion between the manager and the team member is not about the forms, but about those decisions.”

Entry Level Work, Not Cut and Dried

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“I still don’t know what you are getting at,” Arlene shook her head. “It’s entry level work. You are right, it’s not that interesting.”

“Don’t be so swift,” I reprimanded. “Let’s talk about this entry-level work. First, what is work?”

Arlene was looking up, retrieving the answer planted in her mind some weeks ago. “I remember. Work is making decisions and solving problems.”

“Okay. And what decisions must be made in connection with this entry-level work?”

“It’s pretty cut and dried,” Arlene related. “Our work is highly regulated. Everything we do has to be within very specific guidelines.”

“And what if it’s not cut and dried,” I challenged. “You see, the guidelines you work under only set the quality standards for the output. Let’s ask the question again. What decisions must be made in connection with this work? And as we answer, I think you will find this work is quite a bit more than entry-level.”

Interest in the Work (Not the Job)

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“What’s missing in this young recruit’s career?” I asked.

“I don’t know,” Arlene replied. “All she seemed interested in was how many vacation days she is going to get.”

“Why do you think she is focused on her vacation days? What’s missing? What was missing in her work before she came to your company two months ago? And perhaps is still missing in her work?”

“I don’t know,” admitted Arlene. “It is pretty basic, entry level work. Perhaps there really isn’t that much to focus on, except how much vacation comes with the job.”

“You might be right be right about the job,” I agreed. “But what about the work?”

When guiding a young recruit, it’s important to help them see beyond the basic duties of their role and understand the bigger picture.

Often, employees new to the workforce can become fixated on the immediate rewards—like vacation days—without recognizing the deeper value of the work itself.

This is where solid mentorship comes into play. Instead of simply filling a position, the recruit should be encouraged to find meaning in the tasks, build a sense of purpose, and connect their efforts to the overall mission of the organization.

At Teresa Duke Consulting, we’ve found that employees thrive when they’re encouraged to engage in continuous learning and development.

Helping new hires understand how their role contributes to the company’s goals fosters a sense of ownership and responsibility.

This kind of guidance isn’t about offering perks or taking shortcuts. It’s about nurturing the mindset of growth, where the work itself becomes a pathway to both professional success and personal fulfillment.