Sorting Out the Decision Process by John Stiernberg

July 15, 2012 by John Stiernberg

In this series, I’ve emphasized the importance of planning many times. We’ve talked about strategic plans, marketing plans, sales plans, financial plans—the list goes on; and they are all important. The primary value of any plan is decision support.

A good plan provides a platform for making those critically important business decisions that have an impact on your money, your time, and your brand. Where does the strategic plan end and the operating plan kick in? Do I really need both? Can they be included in the same document? How do they work together? This article addresses these issues and recommends three action tips for success.

No, strategic plans aren’t just for big companies in traditional industries. They are relevant to any business, including mobile entertainment. A strategy is a decision that you make now that affects what you do in the future. A tactic is an activity that flows from a decision, and is geared to achieving a specific measurable result.

Some companies have great long-term strategy but lack the tactical or operational details that are necessary to implement their visions. Others have the reverse: a decent budget and operational structure but no strategic framework or vision beyond the current year.

So what’s the difference between a strategic plan and an operating plan? Here is a quick summary.

Strategic Plan
• Describes your company three to five years in the future
• Answers the question “What are you going to do and why?”
• Includes market trends and competitive analysis in addition to core company strategy.
• Includes foundation information (mission, vision, values, brand positioning statement) and financials
• Relatively brief
• Updated annually
Operating Plan
• Describes your company one to two years out (this year and next year) in detail
• Answers the question “How are you going to achieve planned financial and non-financial objectives?”
• Includes current budgets and tactical projects for all departments
• Longer than the strategic plan—more detailed in describing how things work
• Progress review monthly

Both the strategic and the operating plans can and should be combined into a single system of documents. The documentation package includes text (like Microsoft Word) files with the narrative and spreadsheets (like Microsoft Excel) with the numbers.

Once you’ve created the first version of your plan package, you can easily review, modify, and update it as needed. How often? I recommend that you review actual results compared to budget at least once every three months (monthly is better). Key point: A review of results does not necessarily mean a change to the strategic plan.

Update the operating plan once every six months. This includes adjustments to details on sales, marketing, product development, competition, and special projects. There are multiple sections to the operating plan that go into much more detail than the strategic plan does (e.g. promotion plan, hiring schedule, or other key initiatives).

How do I make a decision like when to hire more people? When should I buy a new truck? Should I open an office in another city? How do I promote my current business just to get enough gigs to survive? Your plan is the foundation for addressing these and other key decisions. Here are three suggestions for how to successfully approach the decision process.

Action Tip 1. Review the decision you are working on in the context of your mission, vision, values, and brand positioning statements. These are the foundation elements of your strategic plan. If the issue at hand is consistent with these principles, then proceed. If not, shut it down or rework it.

Action Tip 2. Run the numbers. Estimate costs and benefits relative to revenue potential. Is it affordable? Do I have enough time and money to do a quality job? Does the project or initiative help build sales and profits? What other projects are prerequisites for success? These questions represent the transition from strategic (long-term goals) to tactical (implementation geared to achievement of near-term objectives) decision-making.

Action Tip 3. Practice on lower-risk decisions. If you have a hard time deciding what to order for dinner, be careful when you are faced with business decisions like buying a building for your office or merging with another company. Practice on those decisions that are important but less scary. Examples include replacing your lighting rig, leasing a new van, or upgrading your website. They are important tactically, but won’t put the company at risk if you stumble a bit.

Whether the project is strategic or tactical, big or small, your integrated strategic operating plan is an essential tool and the foundation for decision making. If you don’t have a plan, every decision is difficult. With a plan, you streamline and inform the decision process and are more likely to do the right thing.

Be sure to implement the Action Tips in sequence: 1) use your strategic plan as a foundation, 2) quantify the financial impact, and 3) practice decision-making on projects with lower risk.

Next time we’ll talk more about key elements of the operating plan and how to prevent “analysis paralysis” pitfalls when you do budgeting. In the meantime, best wishes for success in mobile entertainment in 2012!

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John Stiernberg John Stiernberg (16 Posts)

John Stiernberg is the founder of Stiernberg Consulting (www.stiernberg.com), the premier business development consultancy serving the entertainment technology and music products industry. With over 25 years experience in these fields, he currently works with audio and music companies on strategic planning and market development. His book Succeeding In Music: Business Chops for Performers and Songwriters is published by Hal Leonard Books. Contact John via e-mail at john@stiernberg.com, find him on LinkedIn and Facebook, and follow him at http://twitter.com/JohnStiernberg.


Filed Under: Business, Issue #143, Personal Development