Strategy In Action

Oliver Wight Strategy In Action Oliver Wight Strategy In Action

Give a man a fish and you

Contents
feed him for a day.

Teach a man to fish and you

feed him for a lifetime...

Perfect Vision page 3 Market Making page6

Lloyd Snowden shows how to make strategy work in practice Stewart Kelly argues the case for an integrated marketing strategy

Oliver Wight
Oliver Wight are leading business improvement specialists who educate, coach and
mentor people to lead and sustain change on the journey to business excellence
and outstanding business performance. The largest worldwide consultancy of our
type, we have offices throughout Europe, North and South America and the Asia Decisions Decisions page 9 Driving the Action page12
Pacific region. Stewart Kelly looks at putting strategic plans into action Andrew Purton examines the process of Integrated
Business Planning
Sustainable Business Improvement through Knowledge Transfer
Sustainable business improvement can only be delivered by your own people.
And we can help – by transferring our knowledge to your organisation;
knowledge that comes from many years of working with some of the world’s
best-known companies.
Strategy In Action
Establishing a strategic direction and then deploying it, is fundamental for
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Strategy In Action any company; easier said than done? In these four articles, experts from
email@oliverwight-eame.com Oliver Wight explain that there is a logical sequence to follow, which involves
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setting a vision for the business, a set of robust management processes and,
Oliver Wight EAME LLP crucially, the engagement of people throughout the organisation.
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Oliver Wight Strategy In Action
Perfect Vision
W
ere you involved in your company’s last strategic
planning meeting? No prizes then for guessing
the answer to the question “Did the earth move
for you?” Strategic planning should be an exciting way of
pointing the whole organisation towards a practical way
forward. Sadly, the reality for many companies is that it
is an academic exercise carried out behind closed doors
and it is completed to satisfy a corporate HQ deadline.
It is quite detached from the budget, the business plan,
and from day-to-day events and management. It is
rarely owned and has little relevance for line managers
throughout the business. No one expects the strategic
plan to actually happen.
Excellent companies take this fundamental business
process seriously, seeing it as the vital link between the
common business processes (managing new products
and services, managing demand, and managing supply).
They see it as the link which ensures that the short-term
actions and improvement plans you make, are selected
and directed to take you on to a better future, acting as
the bridge between boardroom aspiration and the reality
of daily work throughout the business.
Consider what will happen if you leave Birmingham on
the way to Edinburgh without knowing that Edinburgh
3 4
is your desired destination; without knowing in which
direction it lies; without knowing the different ways of
getting there (with costs and timescales); without having
enough money for the journey and without knowing
where the pit-stops are (yes, I hired a delivery company
like this too). Add to this scene: no knowledge of why
you were going there; what you were to do when you
arrive, and what was in the whole exercise for you.
This is laughable, of course, but it is even more so if
we fail to ask and answer similar questions for our
business. Are you clear where you want your company
to be in five years time? In reality, in that timescale it
can be anything you want it to be, provided you want it
badly enough. The biggest barrier to our future is in our
minds and behaviours today. It is our reluctance to come
out of the box of our current business and practices.
Think of giants today who did not exist five years ago.
Would they have succeeded without a vision and plan?
Also, think of the giants of five years ago who do not
have an independent existence today. How realistic and
ambitious was their game plan? We have to face the
simple fact that if you don’t know what you want to be,
you are very unlikely to be it. It is no coincidence that
the longest-running self-assessment tool for business
excellence (the Oliver Wight Class A Checklist – now in
its sixth edition) has Strategic Planning as its opening
chapter and quickly gets into the adequacy of the
company vision as the catalyst for thought at all levels
of the organisation. Without a clear vision for the future
to aim for, the strategic plan and all that follows, has no
direction and becomes relatively meaningless.
By ‘vision’ we do not mean the poster in every room
which boldly states that the company seeks to be number
one in its market, having excellence in all processes, with
happy customers and employees. Vision means that we
have a picture painted in words – a strap line that every
employee can readily recall, which succinctly describes
the business we want to become – and reminding them of
our ‘mission’ – embracing markets, customers, geography,
products, services, scale, performance, people, behaviours,
cultures etc.
It is the simple and clear statement that can be
understood from top to bottom of the organisation,
which will prompt a team leader anywhere in the
organisation to think about his or her contribution
to making it happen. It is the statement that can
spread belief and excitement through the organisation
for an achievable future, yet with sufficient ‘stretch
Strategic Planning
Lloyd Snowden Partner Oliver Wight EAME
Strategic planning? Lloyd Snowden
asks, how do you expect to get
anywhere, if you don’t know where
you’re going?
goals’ to cause behaviour and cultural change. But “Think of the
there is a huge difference between a vision and a
giants of five
dream. We must ensure that our plan has sufficient
reality for people to believe it really is possible.
years ago who
The company’s strategic plan is the plan of how we get do not have an
from where we are today to the vision embracing every part independent
of the company – individually and as a co-ordinated whole – existence today.
within an achievable timeframe. The Class A Checklist gives
How realistic and
us more clues on how we might go about defining the plan
and setting excellence criteria for this process. It expects
ambitious was their
to see activity; to understand the current business and how game plan?”
well it performs; to analyse the external environment and
our own capabilities; to develop a clear case for change;
to set clear plans in every part of the business to get
from where you are to where you want to be; and to have
clear milestones and goals. More importantly, it insists the
strategy is driving and integrating the business plan and
budget as part of the top-down message, and of course
that the company ensures everyone in the organisation
understands and feels a part of the ongoing change and
adventure. If this all sounds like common sense to you,
that’s because it is. Let’s take the criteria one by one and
see how well they stand up individually, and how much
more when they are taken together.
Oliver Wight Strategy In Action Strategic Planning Oliver Wight Strategy In Action Marketing Strategy

“We have to face Do we really understand our business and how it
perceived in the market place? It is so easy to believe our
the simple fact that
own propaganda and PR. How well do we understand our
if you don’t know competitors and how different they might appear to our
what you want to customers? How well do our capabilities and competencies
be, you are very compare with our competitors?
unlikely to be it.” Do we really have a grip on the world around us? How
do local and national issues impact us? Increasingly, how
does Europe impact you and what will the euro do for
you? Have you a plan for exploiting the impact of the
technology revolution? How will our markets change
in size, requirement and in pricing, and how are we
structured to take advantage of change?
The case for change is a fundamental need. How sad
that in an age where people respond more than ever to
excitement and challenge, so many case studies and so
much perceived wisdom promotes that you must have a
burning platform to manage rapid and effective change.
A marketing strategy
isn’t just a nice idea. It
should be an integral
element in business
development – assuming
everyone knows what
‘marketing’ is.
which are the foundation and framework for the next
actions and gains.
We have to be sure that our actions and steps do add
up and take us forward. But while we work on taking
the big picture forward, we must perform and make
good money today. There must be a demonstrable link
between our strategic plan and activity and our day-
to-day plan and control. Sales and Operations Planning
(S&OP) is the process that the best companies use to
manage every month, so that everyday business is under
control. It is the one management process that ensures we
have one set of figures in all parts of the company, with
one clear set of priorities across its processes and functions
in new product introduction, demand management, and
management of all supply.
Where is the value of any of this if our people are
not informed, educated, and fully engaged in the plan?
Our business gains will come from changing our people’s

How long-lasting can any change programme be if it is
born and justified through fear? How can you sustain this
when the fire is visibly put out and how can we promote
any long-term thinking when from the top down we are
joining in the fire-fighting? Without a clear and well-
communicated vision you may need the burning platform.
But the better companies with the fastest and most
consistent pace of change create real excitement. Start
planning early enough and your competitors will have the
Market Making
behaviour through improving their understanding of what
is possible. We happily spend a fortune on new systems
and re-engineering, yet so little on educating our people
to ensure that they truly do understand what we want to
happen, and how they can contribute.
Later in this publication, we will look more closely
at three vital parts of strategic planning: firstly, the
marketing strategy – which determines the products and
services we wish to sell and the customers to whom we

burning platform as they try to catch up with you.
This all sounds great but how do you make a long-term
plan work? How do you sustain people enthusiasm and
energy through a five or 10 year plan? The answer is of
course, that the strategic plan must identify and prioritise
the bite-size chunks of activity that each pay their way
and give rapid gains, but which together carry you to a
new horizon. Think of it as the jigsaw puzzle where your
vision is the picture on the box and the improvements
and projects in every part of the business are the puzzle
pieces. Where in your business are your corner and edge
pieces, which are easy to see, go quickly in place, and
provide a much-needed structure for everything else to
follow? And as in a jigsaw, do not be blinded by clever
technical words and science. Leave the sky until later
when it will be much clearer and more obvious why you
need it and where it fits in. Success breeds success. Make
sure that your plan gives early gains from early actions,
wish to sell them; in which markets and countries. It
starts by understanding the market and its direction, and
where in it we want to be placed.
After that, we will consider operating strategy, which sets
out how we will operate to meet the marketing plan most
effectively; where we will meet the customer, our people and
investment strategies; the role and focus and maturity of
our plants; and of course the design of our supply chain.
Lastly we will examine the role of S&OP (or Integrated
Business Planning as it is known these days) in integrating
the business, as the bridge between our long-term plans
and our day-to-day activity, and its value in keeping the
business under control as we drive it forward.
So, do you know where you are going? If not, I think I
know where you will end up. Do you know how and when
you will get there? If not, I suspect someone else will get
there first. Do you know how you will win in that new
competitive world? If not, you will probably lose.
I
n one of the world-famous ‘Dilbert’ strip cartoons,
the bespectacled hero is sent to the marketing
department on an assignment called ‘job rotation’. He
has no idea what the marketing department does: all he
knows about it is that they wear flash clothes, drive snazzy
cars and have something called an ‘expense account’. True
to his mental image, when he arrives he is greeted by an
attractive female wearing a toga and is advised that there
is a ‘two-drink minimum’ in the department.
Dilbert’s is a ridiculous picture, of course – but, if you
ask most people what their understanding of marketing
is, then the answer is going to be much closer to a
definition of the sales function than it is of the broad
and complex reality. It’s not unknown for salespeople
to disappear from the office for a while and then, on
their breathless return, announce that they’ve secured
a fantastic deal that will keep the presses at the factory
turning and the employees in work. Rather than being
hailed as a saviour, the salesperson will quickly learn
that’s where the problems start. Is this a new market?
If so, has it been thoroughly researched? What are
the special requirements – legislation, transport, local
content, if it’s somewhere else in the world? When is
delivery and what is the expected lead time? How does
it fit into existing schedules? Is the supply chain geared
up for the additional demand? The poor salesperson may
feel unloved after that little lot but he or she will be in
no doubt about one thing: marketing is more than a good
ad campaign.
On the other side of the desk, the production
and operations people may well feel they’re too busy
chasing their tails and getting orders out to spend
time answering questions about capacity, inventory,
lead time and stocks. If they think anything about it,
they’ll be wondering why the pretty boys in marketing
department want to know.

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Oliver Wight Strategy In Action
In some ways, marketing is a victim of its own failure
to communicate what it is actually about to other parts of
the organisation. Marketing strategy covers (or, at least,
impacts on) all aspects of the business. At the delivery
end, it deals with creating demand among customers for
a product; maintaining existing customer loyalty; timing
release of new products in such a way that it doesn’t reduce
current sales and leave stocks sitting on the shelves.
Understanding and developing technical and production
resources are essential to the delivery end. Financial and
management accounts are vital tools, in order that the
products selected for production are those that meet the
corporate financial and development strategy. On the
supply side, marketing needs to know what lead times
and prices are, and the terms that suppliers are on.
The cheapest isn’t always the best, nor is the quickest
delivery. What about product lifecycle? When should the
7 8
upgrade or replacement be introduced? And what about
packaging? Does it attract customers or bore them to
tears? Does it meet environmental standards?
Getting all the ducks in a row is what marketing is
about – and that’s why it has to be an integral part of
business strategy. Product lifecycles are getting shorter
and shorter; lead times are being squeezed. Getting to
market sooner than everyone else gives an advantage – if
the launch campaign is right, the timing is right and the
style is right selling new season swimsuits in the middle
of winter will certainly give a lead against the rest of
the market but you could go bust before the first one is
bought. For example, offering something so novel that
the market is wary can equally spell disaster.
Although maybe not widely appreciated, these aspects
are pretty well widespread already but the last few years
have brought new challenges. In order to deal with them,
the marketing role has to be integrated with business
processes. While the auto industry’s attempts at multi-
OEM trading platforms may have effectively collapsed, the
Internet is still in the process of dramatically changing
the way business is done. Consumers can (and do) switch
between brands at a moment’s notice. Consider banking:
20 years ago – or even 10 – changing bank accounts was
something not undertaken lightly. Whoever could capture
a customer as a student was likely to have them for life.
Today, banks compete aggressively for customers, who can
change their provider at midnight, on-line. Purchasing
departments can use the Internet to find a dozen or more
suppliers of commodity products – and that’s just using
the search engines. Set up an on-line trading method
and the number and choice will be higher – and they’ll
all be pre-qualified. For the company in the supply
chain, understanding the customer, the marketplace and
meeting special requirements as a matter of routine are
all pre-requisites. But the good news is that the very tool
that raises the stakes – the Internet – can make doing so
a lot easier.
It’s a bit of a paradox but the fickleness of the
marketplace has tended to place a higher emphasis on
brands. When choice is so great it becomes confusing, the
customer wants to find something they know. Brands give
comfort in an alien environment. They may be a symptom
of ‘Coca-colonisation’ – the erosion of the very cultural
differences that make other countries interesting – but
the tourist will be comforted by seeing a recognisable
name in a foreign country, whether it’s McDonald’s,
Marks&Spencer or Dell Computer. Suppliers, too, can
strengthen their position in the supply chain by making
their name synonymous with particular attributes.
The question then becomes: what values does the
company wish to be identified with its brand name?
What is your company’s niche and what does it do
better than anyone else? Why do your customers value
your services? Micheal Treacy and Fred Wirsema, in
their book ‘The Discipline of Market Leaders’ propose
that successful companies excel at delivering one type
of value to their chosen customers. In so doing, they
become identified with it. The challenge is to identify
that specific value. It may be operational excellence
– in which case, the product range needs to be narrow;
it should be presented in a uniform package and should
be delivered efficiently. That’s likely to be the focus
of a company that’s involved in a price-competitive
market, one that behaves in a commoditised way. It
will typically source from the Far East and will have
an outstanding supply chain. If the focus is customer
intimacy, then the marketing emphasis will be on
service and collaboration. The value proposition will be
based on an extensive product range, innovation and
flexibility. The supply chain will be able to respond
rapidly – which means that low-cost sourcing is unlikely
to be the answer. In the case of product leadership, the
Marketing Strategy
priority will, clearly, be about rapid adoption of new
technology, seeking first-mover advantage and aiming
the sales effort at early adopters.
That is not to say that any one area should be pursued
and all others dropped. It’s a question of prioritising
within a balanced scorecard. Price competition is a major
factor in the auto industry, and a car is, in the end, a
means of getting from A to B – so it’s a commodity. But
the market doesn’t always behave like that. Since it was
taken over by VW Group, Skoda has improved its brand
perception no end. The new range may be just as good as Stewart Kelly
– or even better than – offerings from BMW. But BMW Partner
Oliver Wight EAME
has brand value among consumers and customers are
prepared to pay more for its products. In the fickle and
“Getting the brand
fashion-conscious mobile phone market, consumers will
buy a product from Nokia, Sony Ericsson and Motorola
into the customer’s
before they’ll risk something from a new name, especially consciousness costs
when new technology – like G3 – is involved. They do so money, in advertising
because they trust them. and sales effort
Brand awareness and perceived value binds customers – those who rely on
to the provider, which means more stability and even – in word of mouth to
some areas – the opportunity to charge premium prices. spread the message
But it isn’t enough on its own. The company has to be of product excellence
able to deliver, so supply chain excellence is necessary,
will soon find that
too. First mover advantage won’t last long and price
the advantages
becomes an issue quite quickly. Getting the brand into
the customer’s consciousness costs money, in advertising
of this method of
and sales effort – those who rely on word of mouth to communication
spread the message of product excellence will soon find are greatly
that the advantages of this method of communication are overestimated.”
greatly overestimated.
The function of marketing has to blend sales,
manufacturing, planning, logistics and marketing itself
into a form that will work with customers and suppliers
to deliver products so as to maximise business benefits
to the customer and ensure a strong marketplace brand
presence. That’s the strategy. Its delivery depends on
accurate forecasts, which will be based on a realistic and
robust analysis of the company’s position in the market.
That will identify value and volume, which will, in turn,
identify the gaps to be exploited with new products or
expanded sales of existing products, whether achieved
through price competition or additional promotion.
The reality of shorter product lifecycles means that new
products have to be developed quickly – and that raises
the pressure to eliminate waste from the process.
A successful marketing strategy needs to focus on
brand development to strengthen customer loyalty – but
it’s not just about advertising. The structures behind the
public face – supply chain, packaging, operations and
logistics – all have to be aligned to deliver. That being
the case, there is no reason to argue for traditional
demarcation lines between business functions. All
are crucial, all need to understand each other and the
common ground is that single word with a huge breadth
of meaning – marketing.
Oliver Wight Strategy In Action
Decisions Decisions
Stewart Kelly looks at the decisions that need to be
made to put the strategic plan into action
T
he rapid and alarming spread of foot and mouth
disease showed us all the incredible distances our
livestock travels around the country and around
Europe on its way from field to frying pan. In industry
we know better of course. We understand the cost of
travel, in money and time. We know how to design
effective supply chains, how to seek gains through
process acceleration in all business processes, and how
to get the right structures of facilities to service the
market we seek...
Or do we? I regularly read of major companies
making decisions on the future of plants by gambling on
currency. And how was your last motorway journey? How
many lanes were filled with large trucks delivering what
to where, with ever increasing amounts of urgent and
emergency trips? Perhaps we are not so good after all.
If you had a blank sheet of paper would you have the
operating structures that you have now with the same
facilities doing the same work in the same place?
In the first two articles in this publication, we have
discussed the need for a business vision. A picture
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painted in words of the business you want to be and
how you would like it to perform. Then we looked at a
market strategy and plan, to be clear what products and
services we wanted to supply to meet the business plan
and the customers and markets to which we wanted to
supply them. In this article, we move from designing the
supply chain to the structure and role of facilities, from
investment strategy to make/buy policies, and to the use
of maturity mapping to decide which few improvement
projects will come first as we pursue our operational
strategy for the best service, quality and, of course, to
make a good return.
These pictures of our future business and its place in
the market are fundamental inputs to a strategic operating
plan, which must precede our practical improvement
plans if we are to be sure that every initiative is another
step towards our vision. As we set out and implement
our operational strategy we will make some huge and
unforgiving decisions and so our first lesson is to ensure
that the inputs to the plan are good enough to support
the decisions we will make.
In each product or customer group, we must be clear
that we have an agreed corporate view of the size of
business we aim to be it. The growth of groups of products
and services (especially where new technology may need
significant investment); the customers and geographies
we will serve; and the service levels we must sustain to
be a long term winner. All of these will have an impact
on the design of the best supply chain and will drive our
structural and investment decisions strategically, rather
than from currency fluctuations.
So how many product groups do you have? Too
many will ensure micro management, while too few
will encourage decisions based on a one size fits all
approach to investment, to processes systems and tools,
and to supply chain design. This latter is the world of
compromise where our structures and ways of working are
so unfocused that we end up as jack of all trades but not
quite good enough at anything to consistently win.
The matrix in Figure 1, first used by Hayes and Wheelwright,
causes us to think about operating structure. Whether you
are at group, regional or local level of your business, plotting
your current activities on the matrix and how they will move
over five or 10 years leads to some profound questions about
the future shape of your business:
• The focus and role of facilities etc
• Where we might choose to meet the customer
• How we maximise value-add and service for the
customer to become increasingly indispensable
• Our approach and ownership of distribution
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Figure 1 Business Styles
To use the grid we work in natural product or customer
families, for each of which we will design, plan and manage
an extended supply chain. Such families will reflect sales
value or volume, as well as service and logistics requirements.
They will also highlight loss-makers and breakeven products
for decision.
For each family we design the extended supply chain to
give the required service levels at minimum cost and stock.
We lay out the total process (Figure 2) from raw material
Operating Strategy
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Figure 2 Steps in the Supply Chain
to end consumer (forest to toilet) and ask ourselves key
questions about the way we will do business in the future.
“We will maximise
our return on
For instance:
• In the chain what do we own and who owns the rest? investment by
• What are the profit margins at each step? focusing our future
• Where is there large investment in stock and what is developments
our stocking policy?
• Which steps do we control and which would we like
towards our higher
to control. added-value
• Where might we target eliminating waste in the whole activities.”
chain or seek to add more value for our business?
The discussion here is to understand the opportunities
in the chain and our desired position. Look at the brewing
industry for examples of major companies repositioning
themselves from low margin brewing to much higher
value-added consumption.
If our families are right, each supply chain should be
relatively straightforward, although as with all families,
our supply chain may seem complex.
From our supply chain design, we plan where in, an
ideal world, we would best place facilities to balance
production costs, distribution costs, and service levels,
and also in a practical world, how close to that ideal we
can get in the next five years.
Well-focused facilities always outstrip non-focused
facilities in service quality and in cost performance.
But note carefully that the basis of focus we have been
building is of business style in Hayes and Wheelwright
terms, rather than the paradigm of process technology
much loved by production engineers and capital engineers
who dominate the thinking, planning and layout of our
facilities. Imagine the disruption costs of stopping a
car component line making parts for the Ford Focus to
produce a small batch for Rolls Royce. Could we possibly
charge enough for the Rolls Royce part to pay for the
disruption? Imagine the planning and support processes
needed when we fill a simple volume unit with small
batch work in spares or specialist work. Facility roles and
focus are vital to performance.
Oliver Wight Strategy In Action
This takes us to investment strategy. Over the next five
years how much money can you expect to be available for
capital equipment? For most of us, probably the same as
the last five years. But if you had a cheque for this full
amount today what could you achieve. Brainstorm and
quantify the ideas to create, meet and beat the vision, and
prioritise the list by the impact of each proposal on your
added-value performance. We will maximise our return on
investment by focusing our future developments towards
our higher added-value activities.
We must spend equal time on our investment strategy
for our people, determining the core competencies that
will add most value in the future. We must plan and
act as carefully in the investment in our people as we
do our facilities and equipment. Our competitors can
purchase the new processes and systems that we plan. It
is what we do with them that counts. Our people are the
ultimate differentiator and we ignore their education and
development at our peril.
If we cannot afford to invest in achieving ‘World Class’
in any part of the business in the next five years, we will
not be fit enough to win the race. Make/ buy decisions
naturally follow investment strategy. If we will not be
good enough we must seriously consider withdrawing
from this activity and buying from someone who will
invest and who can grow and develop with us. Make/
buy decisions are strategic, as is sourcing strategy and
ultimately supplier selection. In key commodities the
extra penny saved today will cost you pounds tomorrow
if your supplier cannot develop and grow with you.
Given our defined structure we must get each facility
we retain up to the highest level of performance. For most
companies to be the very best in their industry is a long
journey, which will need a long-term improvement plan
showing how we get from today to our vision, identifying
and prioritising individual projects for both payback and fit.
The maturity map (fig 3) helps us with this prioritisation.
First we must tackle those issues which cause us to spend
so much time fighting fires. The top four drivers of
reducing unplanned events are
• Sales and Operations Planning to ensure all parts of
the company have the same agenda
11
Operating Strategy
Stewart Kelly Partner Oliver Wight EAME
• ISO 9000 and ISO14000 to ensure we have consistent
processes for work
• Eliminating breakdowns in every business process
• Setting and maintaining standards, giving people
formal ownership of work.
With the foundations in place, we eliminate the
inherent failures in our processes using continuous
improvement to solve root causes of common failure,
stretching mean times between failure to new levels. More
sophisticated control is needed to achieve failure levels
low enough to automate safely. This logic applies to every
process in every part of the business. Doing first things
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Figure 3 Integrating the Business – Maturity
first represents the fastest route to improvement and the
most rapid payback for our efforts. So how mature are
you? How in control are you? How much of your working
life is spent fighting fires or reacting to events rather
than being in the driving seat?
But we still have to make it happen. We must perform
today and also build a new tomorrow. The following
article will tell you about the vital role of the Sales and
Operations Planning process in integrating the functions
and company processes, to ensure the integration between
the board and the shop floor, and for that vital daily
management and control which assures that we will meet
our short-term targets whilst building our way towards a
new future.
Oliver Wight Strategy In Action
Driving the Action
Andrew Purton examines the process of Integrated
Business Planning, which helps strategic planning
work in practice
��
�
�
I
� n this publication we have firstly described the role
� of vision and strategy; then the importance and
�
intent of the marketing strategy and its impact on
�
supply chain design; and finally, the operating strategy
�
� to define and deliver the optimal business structure,
� around which competitive supply chains will be built. In
this article we will describe the company management
process that ensures operational plans are managed from
an integrated business perspective, consistent with and
monitored against strategic direction, and optimised in
response to change and the latest business projections.
The common dilemma for companies who have invested
significant time in developing a meaningful strategic plan
is how to ensure it truly guides the business to a new
future rather than the once-per-year corporate exercise.
Half yearly or even quarterly reviews are largely ineffective
as they still pigeon-hole strategy as a periodic event,
which can be picked up or put down as events come and
go. Instead, to make strategy real, the business objectives,
focused programmes and short-to-medium term milestones
must be integrated within the data set generated to
support the monthly business review.
Strategy
A monthly cycle of business reviews is essential to
manage change occurring to our business, both external
and internal. Due to market place dynamics and fuelled by
technology, change is occurring at an ever-increasing rate.
This pace of change has driven recognition over the past
decade that the traditional management methodology of
monitoring actual performance against a pre-determined
budget, set many months prior, against assumptions that
may no longer be valid, is an inappropriate management
mechanism to optimise business performance. Whilst
businesses will still be held accountable by their investors
for delivering commitments on profitability and shareholder
value, it is fundamental that the business be managed
based on prevailing conditions and latest assumptions.
To continue the analogy in the first article, if we decide
to fly from Birmingham to Edinburgh, you can be sure
that the pilot will constantly monitor wind direction
and speeds and adjust accordingly. Hence the need for a
sales & operations planning (S&OP) process to ensure we
understand, and monitor against, our stated direction,
whilst recognising and adjusting for changes in economic,
market and business conditions.
12
Oliver Wight Strategy In Action
Readers must take care with the S&OP process label.
There are many thousands of companies who operate
“sales & operations planning” but who treat the process
merely as a middle management, demand versus supply,
quantity balancing exercise.Whilst preparing this article
I have, today, seen sales and operations planning described
as “aggregate/volume planning for the supply chain.” This
is a common view put forward by many consultancies.
However, it totally misses the power of this process to
provide the link back to business plan and strategy and
hence a fundamental management process... not just
for the supply chain. So you can see that S&OP, like
so many other management labels, is open to huge
variation in interpretation, and it is for this reason that
we decided to transition the terminology from S&OP to
Integrated Business Planning – a far more appropriate
description of this crucial management process and one
which increasingly recognises the growing ambition to
deploy it from a strategic perspective.
The diagram below shows the elements (sometimes
referred to as ‘the 5 steps’) that will usually be present in
the process; however, in more complex, typically matrix,
businesses this simple representation must be adapted to
reflect the unique characteristics, accountabilities and
structure of that type of organisation. Process design will
therefore be specific to the business but will be founded
on the fundamentals that follow.
Integrated Business Planning
Strategic context and business fundamentals are
defined in the central ’starburst’, around which the process
cycles each month. If the process is to be meaningful as
the business management process for the organisation,
the strategic and business fundamentals need to be clearly
13
articulated – vision, mission, value proposition, supporting
strategies, shareholder commitments, competitive
priorities, business scorecard etc. Often there is work to
be done here to ensure these things are clear and that
they provide guidance to the process design, as well as
the correct focus for each of the business reviews.
Product Management Review: So, we have a product
strategy but is it being deployed in a timely and
consistent manner with commitments made and other
actions or changes taking place across the business? Do
we have effective product/brand portfolio plans? Are
the development projects happening on time – whether
new product development/introduction (NPD/NPI),
product change, marketing promotional activity or product
discontinuation? How about SKU rationalisation to ensure
a balanced and profitable portfolio that is not draining the
business through ‘complexity’? Are there requests for change
and what is the impact of that change? Is there sufficient
resource to support all active projects? When will each project
be complete and hence available to the market place? This
can be a dynamic environment where uncertainty exists,
change is rife, demonstrated performance may be difficult
to determine, and resource is not well balanced. Hence it
is important that project progress, change, authorisation
for new projects and initiatives, resource management,
readiness for launch and delivery of the strategic plan
are all reviewed monthly; and that decisions are taken to
recover, rebalance or reprioritise, with issues arising.
Fundamentally that a valid, achievable, (revised) plan is
agreed and published (within the process) to ensure the
demand plan, supply chain plan and/or business plan
implications are communicated for resolution in later
steps in the process.
Demand Review: We may have a market and customer
strategy but demand data can be highly volatile. Demand
will change from period to period influenced by economic,
industry and market forces, including growth, inflation,
exchange rates, consumer confidence, competitive
pressures, changing promotional activity, market size,
market share and availability of new products, as well
as past performance of the supply chain generating
improved or reduced customer satisfaction. We need
a process to assess our forecasting capability and sales
planning performance and to use this information to
generate the latest view from marketing and the sales
force, underpinned by statistical projections, both in
volume and revenue terms. Assumptions must be
explicitly documented thereby providing visibility and
understanding, leading to an assessment of the most
likely view of demand and agreement of the ‘consensus,
unconstrained demand plan’. In a mature process this
will be qualified by vulnerabilities and opportunities to
provide upside and downside scenarios to review and all
within the context of strategic direction and medium-term
‘stretch goal’ setting. The review will approve and issue this
(updated) sales plan, identifying change and issues arising.
Supply Review: We may have an operational strategy but
is it clear and well-communicated? Are the actions planned
and reviewed? Is the capital being deployed? Is the supply
chain performing from supplier delivery, through conversion
(where appropriate) and master schedule performance, with
clarity on the demonstrated performance of our plants and
key suppliers? In essence, are we clear about the supply chain
‘capability and flexibility’, the underpinning assumptions
and the improvement plans, and will these deliver the
strategy? Following the previous two reviews, what is the
impact on the supply chain from changes in demand and the
scope and timing of product development plans? Are there
material constraints in supporting the new demand plan and is
there sufficient resource? What are the options and alternative
supply plans? What are the trade-offs between cost optimisation,
maximising supply (to meet the demand and product
management plan), supply chain confidence and credibility
(if constant change) and customer service capability?
Each of these business reviews must address a business
agenda and planning horizon sufficient to cost-effectively
manage resources and other business issues within the
framework of the strategic and business plan. It is for this
reason that we expect companies to operate with a horizon
in the range of 18-36 months (depending on circumstances).
Most businesses unfortunately focus on the short-term
where reactionary solutions carry a huge cost premium.
Integrated Reconciliation: Change would typically
have been identified in all of the preceding reviews –
product management, demand and supply. A reconciliation
process is required to address the issues arising both in
optimising the business and managing the gap versus
business strategy and expected business performance.
The integrated reconciliation needs to get beyond the
numbers to comprehend variability and the key business
levers and forces at work. Moreover, if this is truly a
management process then the financial impact of change
and the latest financial view must be clearly identified,
with implications understood, as a key input to decision
making. There is a further element to be reconciled and
that concerns the resource to support company-wide
Strategy
projects, to ensure sufficient visibility of these programmes
and to consider the impact, and trade-offs, on resource and
operational plans as we run through this monthly cycle of
business reviews. Integrated Reconciliation is a continuous
process; it works the issues arising from each of the business
reviews that have a broader business impact – and it seeks
resolution, not simply issue-identification. The outcome of
this process is a ‘Reconciliation Review’ where the principle
purpose is to understand the integrated picture and the real
management issues, so these can be filtered out, developed
and made the focus of the ‘Management Business Review’. Andrew Purton
Such management issue are presented to the senior team President
succinctly, with options and recommendations, and within Oliver Wight EAME
the context of the strategic framework and business
commitments, all defined within the ‘central starburst’. “Integrated
Management Business Review: Unlike many so-called Business Planning
S&OP meetings where a pack of spreadsheets are laid before is a monthly rolling
the management team who are then asked to play “hunt
the numbers”, this final step must be designed, as the name
management
suggests, as a management review containing management process that seeks
information. Such an agenda will review key performance to optimise the
indicators to show how the business is performing and business whilst
progressing towards the vision and strategy. It will show monitoring
business trends of operational and financial performance,
highlighting any gap versus business and strategic plans. It
deployment of the
will present issues arising, together with the underpinning strategy.”
understanding of assumptions, vulnerabilities and
opportunities, which have either been resolved at prior
steps or require a decision based on the recommendations
from Integrated Reconciliation. It will approve the plan
that will communicate clear visibility for the integrated
set of numbers driving the integrated business.
Hence, Integrated Business Planning is a monthly
rolling management process that seeks to optimise the
business whilst monitoring deployment of the strategy.
It provides a fully effective means of controlling the
business and managing in an integrated way, breaking
down silo mentality, aligning performance measures
and accountabilities, and driving a new management
style which will become the benchmark for team-based
working throughout the organisation. Integrated Business
Planning provides the forum for ensuring the strategic
plan is the driving mechanism for the business and hence
the bridge between strategy and operational decision-
making. So, do you know where your business is going?
If you do, Integrated Business Planning offers you the
most effective management process to get you there,
faster, to deliver real competitive advantage.
14
Give a man a fish and you
feed him for a day.

Teach a man to fish and you

feed him for a lifetime...
– Chinese proverb

Sustainable Business Improvement through Knowledge Transfer

Sustainable business improvement can only be delivered by your own people. But we can help
– by transferring our knowledge to your organisation; knowledge that comes from many years of
working with some of the world’s best-known companies. We will help you define your vision of the
future, and educate and inspire your people to drive change throughout your business.
It’s a proven, integrated approach which delivers results straight to the bottom line.

Setting the standard

The Oliver Wight ‘Class A’ Checklist is a comprehensive guide for your journey to business excellence.
Call Veronica Jones on 01452 397200. www.oliverwight-eame.com