The 4 Pillars of Successful Businesses - #1: Strategy

How do organisations handle the increasing pressure of today’s business world – increasing regulatory environment, heightened risk awareness, customers demanding increased flexibility and responsiveness, environmental footprint concerns, workforce pressures and rising costs.

In our view, there are 4 key pillars that are common to successful businesses.  All successful businesses…

  1. Have a clearly defined strategy
  2. Are customer centric
  3. Innovate to stay ahead
  4. Focus on productivity

These 4 pillars are held in place by the organisation’s processes and systems, and the success is then cemented by the people and culture that exists within the organisation.

 

four-pillars

So how do we adopt these 4 pillars into our ways of working?  This is the 1st of four articles that discuss bringing these 4 pillars to life in a pragmatic manner, not just across the supply chain but also across the wider business environment.

The 1st Pillar – Strategy

An organisation’s governing body (usually the Owners or Directors) are responsible for setting the strategic direction of the organisation.  In practical terms, the strategy is usually developed by the Executive and endorsed by the Board.  Whilst this sounds fine in theory, the reality is that the organisational strategy needs to be understood and embraced throughout the organisation if it is to be fully effective.  Often the further down into the organisation one looks, the less that the employees understand how their work contributes to the strategic direction of the organisation.

The A3 Planning Process

The use of the A3 format in the development of Business and Action Plans is a useful way of bringing focus throughout the organisation.  A3 Plans are ‘one pagers’ – they limit the amount of information that can be imparted on 1 page – and this is why they’re so effective.  When developed properly, they bring out the 5 – 6 key ‘game changers’ or ‘must do’s’ for the organisation.  Typically we’ll develop 3-year A3 Business Plans, and these will then be supported by A3 Action Plans for each of the key initiatives.

A3 Plans can be likened to a business roadmap – just like satellite navigation in a car.  Without satellite navigation, drivers can easily deviate from their journey, requiring them to back-track and lose time.  In a worst case scenario, they can end up in the wrong place.  Satellite navigation enables drivers to plan the most efficient route to their destinations; it prevents unplanned deviations, reduces time and saves running costs.  The A3 Plan is an organisation’s ‘satellite navigation’.

a3-plans

The A3 Business Plan

The A3 Business Plan has 5 sections:

Background – it explains “Why are we here?” and summarises the organisational intent and some of it’s history, ie it provides context to the Business Plan

Current State – it answers the question “Where are we now?” and lists the 5 – 6 ‘game changers’ that the organisation must adopt. And this where the employees can have significant input.   We use a structured idea generation workshop (called Reflective Thinking) with a range of employees to detail their views on the Current State.  And we also use the participants to identify the key priorities.

Future State – it answers the question ”Where do we want to be in 3 years?”. Again we use the Reflective Thinking process to generate a list of employees’ ideas on the desired future state.  Why 3 years?  Organisational change or capital may be required to achieve the 3-year Future State and any shorter time-frame may not allow these investments to be fully implemented.  And conversely anything beyond 3 years is increasingly more difficult to visualise.  In effect, 3 years is a good compromise.

Key Performance Indicators – KPIs answer the question “How do we know when we get there?”. It’s not necessary to detail a full balanced scorecard on the A3 Plan – we find that the top 3 – 4 KPIs are sufficient.

Key Actions – The Key Action Table will answer the question “How will we get there?”. It will list the key high-level actions, who is responsible, the timeframe to complete the actions (some actions may be concurrent, others may be staggered over the 3 years depending on interdependencies and available resources).  The actions are colour coded according to their state eg

  1. Blue – not yet started
  2. Green – on track
  3. Orange – facing difficulties and requires additional support to bring back into line
  4. Red – Unlikely to meet the objective and requires senior support to remove bottlenecks.

And the colour-coded Action Table is an easy way to see if the A3 Plan is on track and where any stakeholder discussions may need to be focused.

A3-business-plan

In order to ensure alignment with the organisational strategy we incorporate the organisational strategies into the outputs of the Reflective Thinking workshops.  This results in:

The A3 Action Plan

An A3 Action Plan is then created for each of the 5 – 6 gamechangers that were identified in the A3 Business Plan.  The A3 Action Plan has 6 sections – it contains the above 5 sections but also includes a 6th section on Risk and Mitigations.  The Risk and Mitigation section asks the question ‘What might slow us down or stop us reaching our Future State?”.  The risks and mitigations should be completed separately using a risk heat map, and a summary of risk severities and weightings before & after mitigation are then included in the A3 Action Plan.  An example of a risk heat map follows:

3a-action-plan

A word of caution:  There are a number of ways you can structure the A3 Business Plans across an organisation. For example, they can be set up by function, eg Manufacturing, Sales and Marketing, Procurement, Supply Chain, etc.  If established this way, the challenge will be to ensure that each Business Plan does not have competing priorities with the Plans from other functions within the organisation.  Another option is to structure the Business Plans by organisational business theme, eg Customer, People, Quality, Sustainability, Productivity and Safety.  Then each department can have an Action Plan for each of the themes.  The advantage of this structure is that it:

Key to the success use of the A3 Plans is their continual review and update.  They are dynamic documents that need to be kept current.  Sponsorship is key – use the organisation’s Executives as sponsors for each A3 Business Plan, and assign an aspiring key talent within each department as the Worklead for each plan.  It’s great as part of their own personal development.  And include the Plans in individuals’ annual objectives.

Summary

The use of A3 Business and Action Plans, combining the organisational strategies with the employees’ ideas on the current and desired states (using structured idea generation workshops) is a useful way of getting organisational alignment and commitment to the strategies.  The A3 Plans create a ‘line if sight’ between the strategies and the operational targets.  The 5 – 6 ‘game changers’ are identified as part of the A3 3-year Business Plan, and an A3 Action Plan is developed for each of these priorities. Progress against the Plan is monitored using KPIs and the status is highlighted using colour codes (traffic light principle).

Value Chain Connections Ltd can help with developing A3 Business and Action Plans.  For more information, visit our website www.valuechainconnections.com or contact Alistair (alane@vccnz.com, mob +64 21 610 918) or Natasha (natasha@vccnz.com, mob +64 21 432 681).

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