Businesses typically run on a fiscal year cycle. In many ways it is a rinse and repeat process where certain managerial activities occur on a routine basis, which is often referred to as the corporate operating system. Creating the annual plan typically takes place in the fourth quarter of the year, and is one of the most interesting and engaging processes of the corporate operating system.
For more mature companies, it is primarily a budgeting process. For others, it is more of a strategic planning process. It typically requires a balance of aspirational thinking and practicality. In a growth environment, aspirational goals can be inspiring, or they can open a chasm between what the rank and file believes is possible and what leadership ‘hopes’ to achieve. The backdrop for all plans is the goal to preserve and increase shareholder value.
I heard a group of CEOs speaking about their annual planning process, and one CEO described a guiding principle they adopted early in the company’s history that caught my attention. Each year, as a part of their planning process, they decide on three things that they have to be the best in the world at doing, and three things they have to be great at doing, but not necessarily the best in the world. Everything else gets a much lower priority. By identifying the focus areas and differentiating ‘best’ and ‘great,’ the entire company understands what is important, and what they should prioritize. It sharpens their competitive message and positioning, and it focuses their product direction and engineering. I have heard variations on this theme, including narrowing the analysis all the way down to just one thing for which we want to be the best in the world. However, I like the idea of picking two or three elements to be best-in-the-world and two or three elements to be on par with the top competitors.
In a complex, multi-faceted market, it is impossible to be the best at everything. We speak about competitive differentiators, or unique value propositions as ways to position the business in the competitive landscape without trying to be all things to all buyers. However, it is easy to get caught up in trying to cover all of the competitors’ salient points. Chasing the competitors is like striving to be average, instead of trying to stand out. Choosing to be the world’s best at something requires creativity and boldness. It demands a deep understanding of the market, and the ability to step back and create something truly unique, not just a one-up approach to the way a competitor achieves the same outcome.
The second part of the process is to select three things for which you do not need to be the best, but you still need to be great. It forces you to recognize what you need just to remain in the top echelon of your market. I think of it as the ‘cover’ component of the plan. It is basically the three things you need to do to neutralize the competitors. If your competitor has selected some feature or offering to be the best in the world, how can you neutralize them by being great at a similar offering while not pouring all of your resources into being better than them. You want to take the wind out of their sails in the most economically efficient manner. To apply an electric vehicle analogy, suppose one manufacturer decides they want to be the best in the world at battery life and distance on a charge. Your company decides to make the most luxurious interior and design in the world. In order to remain competitive, your luxury offering still has to get great mileage, but it does not have to deliver the longest distance to stay in the game. Best in the world at luxury features + good mileage becomes your plan.
When thinking about the 3:3 items, keep in mind that they may not be features or external offerings. In my last company, when I shared this planning model, one member of our team focused on being the best at internal processes, specifically cross-team communication. He suggested that If we become really exceptional at communicating both internally and externally, it would have a dramatic impact on satisfaction and loyalty for customers and teammates, and significantly increase our efficiency. Some companies focus on being the best in the world at logistics (Walmart) or procurement (also Walmart), or supply chain (Dell). These are all internal ‘bests’ rather than external products or features or services.
Whatever you decide to be the 'best in the world,’ versus ‘just great,’ the exercise will focus the organization and create alignment on priorities. It will spur a healthy discussion and debate, and will bring clarity to the entire planning process.