Welcome to our newsletter for FEBRUARY-APRIL 08, Edition 40

In this edition, we focus on how to enhance the strategic planning process within your organisation and the latest trends in podcasting.

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Dianne Davis
Principal and Managing Director

www.davismarketing.com.au

Every year, organisations embark on an annual strategic planning process; copious amounts of financial & operational data are collected, detailed forecasts produced, and presentations made to Boards and senior management about the organisation's future direction.

But research shows that managers are often disappointed by the lack of impact that the strategic planning process has on their own actions and the broader direction of their organisation.

In a recent McKinsey Quarterly survey of nearly 800 executives:

• Just 45% of respondents said they were satisfied with their organisation's strategic-planning process
• And only 23% indicated that major strategic decisions were made as a result of the planning process.
So what can organisations do to enhance their strategic planning?

Five key approaches are suggested:

1. Identify and discuss the strategic issues that will most impact future business performance.

   Upfront, identify the key strategic issues that will impact future business performance; this ensures management don't waste time and energy on minor issues / topics.

   There are a variety of ways in which organisations can inject fresh strategic perspectives.

   The CEO of a large health care company, for instance, asks his Business Unit Leaders to envisage how a set of specific economic, social & business trends will impact their businesses, as well as ways to maximise opportunities - or counter threats - that such trends pose. Only after such analysis and discussion, do the Business Unit Leaders focus on more standard planning exercises such as financial forecasting and identifying strategic initiatives.

2. Involve the right people

   Don't leave strategic planning just up to the corporate strategists and senior executives. Key strategy discussions must involve corporate decision-makers at various levels, business unit leaders and people with the specialist expertise essential to the discussion at hand.

   Importantly, the McKinsey study found that survey respondents satisfied with the strategic planning process, rated it highly on the following key dimensions:
   Includes the most knowledgeable and influential participants, stimulates and challenges participants' thinking, and involves honest, open discussions about difficult issues.

3. Adapt planning cycles to the needs of each business

   Liberate business units from the annual planning process.

   With the exception of highly volatile industries, major strategic re-alignments are generally not necessary every year. In fact, requiring businesses to undertake this exercise annually can be distracting - even counter-productive. Managers often need to focus on implementing the last plan's major initiatives, which can typically take between 18 months-3 years to implement in full.

   Another option is to alternate the business units that undergo the strategic planning process. A media company, for example, requires individual business units to undertake strategic planning only every 2-3 years. This phased approach enables senior management to dedicate meaningful time and energy to the business units "in process".

   Other companies use "triggers" to decide which business units will undergo the strategic planning exercise in any given year. One industrial company, for instance, assigns each business unit a colour code (green, yellow or red), based on the unit's success in implementing the existing strategic plan. "Code red" identifying a business unit ready for strategic review.

4. Implement a strategic performance management system

   Many organisations simply fail to implement their strategic plan.

   • More than 25% of McKinsey survey respondents said their organisation had strategic plans but no implementation path
   • And 45%, reported that their planning processes failed to adequately track the implementation of strategic initiatives.

   Establishing a system to measure and evaluate a plan's progress substantially enhances the credibility and impact of the overall planning process.

   Many organisations, however, believe existing control systems and performance management processes (i.e. budgets, operational reviews) are the best way to monitor progress on strategy. But this often means that managers translate decisions made during the planning process into straight budget targets or other financial goals. While this practice is necessary, it is not, in itself, sufficient.

   A significant number of strategic decisions can't be tracked exclusively through financial targets. For example, innovation initiatives need to measure a blend of qualitative metrics (e.g. quality of available talent, range of ideas / projects in development) and quantitative metrics (revenue from new product and service ideas, cost savings).

   When well-designed, strategic performance management systems provide early warnings of problems / difficulties with strategic initiatives; by contrast, financial targets tend to operate as lagging indicators.

   An effective management system enables executives to intervene and correct, re-align, or even abandon an initiative that is failing to perform as anticipated.

5. Integrate HR systems into the strategic plan

   Just monitoring the implementation of strategic initiatives is not enough: effective implementation also hinges on how managers and employees are evaluated and rewarded:

   Yet only 36% of executives (McKinsey survey) said their organisation's strategic planning processes were integrated with HR processes.

   Strategy development is a longer-term activity, but organisations still tend to focus on shorter-term, financial metrics to evaluate manager / employee performance. And while this approach is changing (with many organisations now including longer and shorter-term performance targets), in many cases they don't directly address the need to link evaluation and compensation to specific strategic initiatives.

   One way of doing so is to develop a mix of performance targets that reflect a company's strategy.

   For example, a services business in the US that launched strategic initiatives to improve customer retention and increase sales, also adjusted the evaluation and compensation targets for its managers. Rather than measuring senior managers only by revenue and margins, it tied 20% of their compensation to achieving retention and cross-selling goals.

   In this way, the company actively motivated managers to make the strategy succeed.

   A clear benefit of such an approach is that it encourages managers to identify problems early in the implementation of strategic initiatives, so that the organisation can address / refine them.

   Otherwise, (as noted by McKinsey) managers tend to "sweep the debris of a failing strategy under the operating rug until the spring-cleaning ritual of next year's annual planning process".

Since podcasting was introduced, the key question has been does this channel have a sustainable audience?

Online marketing website, eMarketer, estimates that in the US market, the total podcast audience reached 18.5 million during 2007

Furthermore, this audience is projected to grow by 251% to 65 million in 2012; and of those, listeners, 25 million will be "active" users who listen at least once a week.

And along with a growing audience comes increases in podcast-related advertising spending.

Driven by audience growth, US spending on podcast-based advertising (including sponsorships) will increase to $435 million in 2012 (from $165 million in 2007).

Several factors are driving growth in the podcast audience:

• Ease of consumption for podcast content
• Increased awareness of podcasting
• Traditional radio's use & promotion of podcasting
• Increased penetration of portable players
• Evolution of smart phones
• Growth in affordable mobile data plans.

Interestingly though, the majority of podcasts are still experienced on PCs, rather than portable devices. This may change over time, but for now podcasts are mainly a desktop phenomenon rather than a mobile or portable one.