business planning concept
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Business Planning
Hossam Weiss, PE, PMP, PgMP
Hossam WeissOver 20 years of progressive experience in project management,
program management, portfolio management, general management and business planning.
Experience working with several companies including Siemens Corning - Siecor, Automated Prescription Systems, Nestle Purina, Kraft Foods, Cargill Foods, Katakit, MGC, Russell Stover Candies, and Zodiac Aerospace.
Education and Qualifications MBA - University of Texas at Arlington. Expected 2016 Bachelor of Science Degree, Mechanical Engineering – University of Texas
at Arlington. 1991 Licensed Professional Engineer – State of Texas board of professional
engineers, USA (#96339) Project Management Professional PMP (#474047) – PMI, Pennsylvania,
USA Program Management Professional PgMP (#1259842) – PMI,
Pennsylvania, USA First place winner of "JCI Best Business Plan" competition in 2008. JCI –
Syria Completed a mini MBA and attended a large number of management and
soft skills training events (List Available) Instructed project management and business related courses in several
occasions
Objectives
Give the attendants all necessary basics to perform business planning activities within Zodiac.
Explain how business planning can help the organization and the key points to ensure success.
An introduction to the basics of business planning process including analyzing, deciding, planning, implementing, and monitoring and control.
Outline Introduction and terminology Mission Vision and Values Performing situational analysis
SWOT PEST Porter’s Five
Strategy formulation / global goals / objectives / budget Measurements / KPIs / Balanced Scorecard Roles and responsibilities Conclusion
Introduction and terminology
Business Planning
A process which enables your organization to act in unison to achieve company-wide goals in all areas of the business.
Unison = Unity or Harmony
Key planning questions
Where are we now? How did we get here ? Where would we like to be? How do we get there? Are we on course to achieve our targets?
Business Planning
The real value of doing a business plan is not having the finished product, but the process of research and thinking about the company’s business in a systematic way.
Business Planning
The act of planning helps the company to think things through thoroughly, study and research when the company is not sure of the facts, and look at ideas critically.
Strategic Planning
CoreValues
Vision
Strategy
.
.
Mission
Project Portfolio planning and management
Management of Authorized programs
and projects
Management of on-going operations
High level operations planning and management
Sequence of Strategic
PlanningAnalyse
Decide
Plan
Implement
Monitor & learn
Strategic Plan
The strategies converted into business plans - responsibilities, actions, resource requirements, measurable deliverables - shown as KPIs.
Synergy
In general, synergy (pronounced SIN-ur-jee , from Greek sunergia , meaning "cooperation," and also sunergos , meaning "working together") is the combined working together of two or more parts of a system so that the combined effect is greater than the sum of the efforts of the parts.
Synergy In business the term describes a hoped-for ,or real,
effect resulting from different individuals, departments, or companies working together and stimulating new ideas that result in greater productivity. Synergy in terms of management and in relation to team working, refers to the combined effort of individuals as participants of the team.
Positive or negative synergy can exist. An easy way to interpret and understand both positive and negative synergy (Antagonism) is: Positive: 2 + 2 = 5, Negative: 2 + 2 = 3
What is the business plan for?
A business plan will help the company clarify its goals and focus on defining every detail of the company’s business opportunity.
Have a clear focus as what we need to do in the next annual plan.
It helps the company avoids costly mistakes later.
What is the business plan for? Help raise money to implement the plan. Help get needed human resource to
implement the plan. Determine future projects within the
organization. Determine all other needs throughout the
company in order to have a balanced plan. It will be revised every year. The plan should be organized, complete and
factual.
Planning process
1. Understand the business2. Pre-planning analysis3. Global goals setting4. Aligning and lower level strategy formulation5. Tactical plans and objectives setting and
budget6. Build in procedures for monitoring and
controlling including risk management
Understanding The Business“Mission Vision and Values”
Mission
Why do you exist? A concise statement of the purpose of the
organization.
Vision What will success look like? What we want to be? A concise statement that
defines the ambitions of the organization.
Often in somewhat “visionary” and usually in non-measurable terms.
Values
What do you stand for? What is important to us? What values should guide our behavior?
Why Do we Need Mission & Vision?Executive - It drives the strategy
Middle management - It focuses decision making
Operating staff - It guides action in all areas of the business
Visions - Good and Bad
Covers the breadth of the business for Shareholders, Customers & Staff
Stretching & inspirational yet achievable
Meaningful to Staff, Customers & Shareholders
Specific to your business Competitive Sets clear expectations for
detailed Strategies, Plans & Actions
Sets out some key standards of performance
Capable of being measured
Wishful statements / Unrealistic
Generic in thought and word Could be anybody’s Mere words on paper For the outside world, but
not the people who work in it
Complacent (Self satisfied) Cannot translate into Plans
& Actions Is “Nice” but harmless (to
the competition)!!
A Good Vision... A Poor Vision...
Missions & Visions simple check-points
If:
Majority of employees do not understand the organization ambition
Majority of employees do not believe in it
Then:
Something is missing
Management are not giving effective leadership
Values simple check-points
Do you live all your values? Management live it. Decisions made based on it. Employees believe in it.
Organizational culture
Organizational culture describes the psychology, attitudes, experiences, beliefs and values (personal and cultural values) of an organization.
It has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization."[
Planning process
1. Understand the business2. Pre-planning analysis3. Global goals setting4. Aligning and lower level strategy formulation5. Tactical plans and objectives setting and
budget6. Build in procedures for monitoring and
controlling including risk management
Performing Situational Analysis
Situational Analysis
The classic approach at longer-term "strategic" planning starts with an analysis of the current and expected future situation - both the external situation ( over which the organization has no effective control ) and the internal situation ( over which the organization SHOULD have effective control ...).
Levels of depth of analysis
1. Good judgement – instinctive
2. Careful and deliberate analysis
Situational Analysis
Understanding the organisation, the market, and the competition.
Where we are now?
What factors will condition our future options?
Requiring :
Honest – Remember Tsun Zu (Know your self and the enemy)
Real (not modest).
Careful thought
Willingness to use in planning decisions
Internal Analysis Tools
1. SWOT2. Trend analysis3. Vision / Mission / Values / Culture4. Lessons learned
External Analysis Tools
1. SWOT
2. PEST
3. Porter’s 5
4. Other
Appraisal of the competitor
Who are your competitors?
Why are they competitors?
What do you know about them?
What do you need to know about them?
Appraisal of the competitor
How he thinks?
What are his strengths?
What are his weaknesses?
Where he can be attacked?
Where the risk of his attack is greatest?
Sources of Competitor Information
Published report & accounts
Internet
Product / service advertising
Benchmarking
Staff movement
Others ...
SWOT
Strengths, Weaknesses, Opportunities,Threats:
A recognized international standard methodology for analyzing current and future business prospects.
A management tool for "strategic analysis & thinking“
Strength What advantages do you have? What do you do well? What relevant resources do you have access to? What do other people see as your strengths?
If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths! In looking at your strengths, think about them in relation to your competitors - for example, if all your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.
Weakness
What could you improve? What do you do badly? What should you avoid?
Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you do not see? Are your competitors doing any better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.
Opportunities
Where are the good opportunities facing you? What are the interesting trends you are aware of?
Useful opportunities can come from such things as: Changes in technology and markets on both a broad
and narrow scale Changes in government policy related to your field Changes in social patterns, population profiles,
lifestyle changes, etc.
Threats What obstacles do you face? What is your competition doing? Are the required specifications for your job,
products or services changing? Is changing technology threatening your
position? Do you have bad debt or cash-flow problems? Could any of your weaknesses seriously
threaten your business?
PEST
Stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business.
Identifying PEST influences is a useful way of summarizing the external environment in which a business operates.
Porter's Five Forces
1. The threat of substitute products2. The threat of the entry of new competitors 3. The intensity of competitive rivalry4. The bargaining power of customers5. The bargaining power of suppliers
The threat of substitute products
The existence of substitute products outside of the realm of the common product competitors which increases the propensity of customers to switch to alternatives
Buyer propensity to substitute Relative price performance of substitutes Buyer switching costs Perceived level of product differentiation
The threat of the entry of new competitors Profitable markets that yield high returns will draw firms. This
results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level.
The existence of barriers to entry (patents, rights, etc.) Economies of product differences Brand equity Switching costs or sunk costs Capital requirements Access to distribution Absolute cost advantages Learning curve advantages Expected retaliation by incumbents Government policies
The intensity of competitive rivalry
For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.
Number of competitors Rate of industry growth Intermittent industry overcapacity Exit barriers Diversity of competitors Informational complexity and asymmetry Fixed cost allocation per value added Level of advertising expense Economy of scale Sustainable competitive advantage through improvisation
The bargaining power of customers
Also described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes.
Buyer concentration to firm concentration ratio Degree of dependency upon existing channels of distribution Bargaining leverage, particularly in industries with high fixed costs Buyer volume Buyer switching costs relative to firm switching costs Buyer information availability Ability to backward integrate Availability of existing substitute products Buyer price sensitivity Differential advantage (uniqueness) of industry products RFM Analysis
The bargaining power of suppliers
Also described as market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources.
Supplier switching costs relative to firm switching costs Degree of differentiation of inputs Presence of substitute inputs Supplier concentration to firm concentration ratio Employee solidarity (e.g. labor unions)
Areas of competitor strengths and weaknesses … Porter Competitive Strategy
Products product range and reputationDealer / distribution channel coverage, relationships & ability to serveMarketing and selling market research, product development, salesOperations technology, scale, vertical integrationResearch and engineering patents, R&D capabilityOverall costs overall cost efficiencyFinancial strength cash-flow, development financing, profitabilityOrganisation alignment to strategy, focus on purposeGeneral managerial ability CEO, team co-ordination, depth, adaptabilityCorporate portfolio corporate strength v. individual business unitsCore capabilities competitors strengths & weaknessesAbility to grow capacity & capability, market share projectionsQuick response capability financial, R&D, operationalAbility to adapt and change fixed costs, exit barriers, major externalsStaying power financial, shareholders, management
Planning process
1. Understand the business2. Pre-planning analysis3. Global goals setting4. Aligning and lower level strategy formulation5. Tactical plans and objectives setting and
budget6. Build in procedures for monitoring and
controlling including risk management
Strategic Plan
The strategies converted into business plans - responsibilities, actions, resource requirements, measurable deliverables - shown as KPIs.
Choosing the Core Strategy
Maximize profit Growth Diversification Partnerships / alliances Consolidation Innovation
Global Goals
Goals set by top management in view of the strategic direction that the business must take.
Defined statement of what we want to achieve -measurable by amount and time.
“SMART“- Specific, Measurable, Attainable, Realistic or Relevant, Time related.
Sometimes called a "destination statement“.
Global Goals
Clear and consistent with Vision / Mission Measurable Realistic Understood by all who need to know
Global Goals
Decide what are the measurable ambitions of the organisationwithin the context of the Vision
“Validate” – whether the ambitions are mutually achievable and realistic
Strategies
The chosen route(s) to achieve the Goals.
This should involve choice, for example, competing on price, or product range, or quality, or availability etc.
Strategy versus tactics
Strategy: the broad approach to achievement of objectives over the long term
Tactics: detailed filling-in of measures designed to contribute to the strategy Designed to achieve short term goals
Cause & effect …Teamwork
Internal service
standards
Customerservice
standards
Customersatisfaction
Customer retention
PROFIT
Cross‐sell
Thinking process
Developing a “strategy map”
Two approaches: “Post-it” approach:
Brain storm all the critical factors
assemble as one map
Construct simplified map for each global goal or main
strategic theme then consolidate
Strategy Map
Financial
Customer
Process
Learning
Introducenew sources of
revenue
StrengthenCash flow
Maximizethe use of existing
assets
Createprofessional services
organization
Offer moreproducts forconsumersBuild
developernetwork
Reducetime tomarket
Moregranular marketsegmentation
Improvehardware
performance
Developleadership
skills
Develop neededworkforce skills and
competencies
Lower level strategies
Based on global goals: Developing Explicit / Aligned Strategies
Products Customer / market segments Distribution Financial management Etc.
Strategies for Supporting Functions
Typical departmental or functional plan
1. Executive summary2. Functional SWOT analysis3. Other analysis if applicable4. Objectives and related projects5. HR plan6. Budget7. Assumptions8. Function related risks if any
Objectives
Set by each owner to best achieve the needs of the global goals.
Objectives represent the lower level strategies needed to meet the upper level strategies outlined in the global goals.
Objectives may require projects to be completed to achieve the objectives.
Management By Objective
Management by objective is about setting yourself objectives and then breaking these down into more specific key results.
(MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are in the organization.
MBO Principles
Cascading of organizational goals and objectives.
Specific objective for each member Participative decision making Explicit time periods Performance evaluation and feedback
Item Definition
Department / Section / UnitThe department that is the main owner for this objective
Global GoalThe global goal which this objective is related to.
Objective priority
Business priority:High=1Medium=2Low=3
Objective WeightHR prospective - The percentage that this objective weight comparing to all the other objectives. All the weights for each department objectives must equals 1. This must be completed in cooperation with HR.
Objective Primary OwnerThe objective owner that have the most percentage of owning this objective
Owner PercentageThe percentage that the owner owns this objective
Shared withThe objective owner that have less percentage of owning this objective
Shared with PercentageThe percentage that the shared with owns this objective
Objective The detailed objective which needs to be SMART
Performance IndicatorThe indicator(s) that can measure if this objective is performed as requested or not. The method of measurement.
Critical success factors (Assumptions)Any assumptions that must be considered to achieve the objective if applicable.
Objective DeadlineThe deadline to achieve the objective
Action StepsThe action steps that needs to be done to achieve the objective
By whomThe action step owner.
Action Steps DeadlineThe deadline to achieve each action step
Risk Plan
A plan that outlines risks associated with the business plan and that can affect the outcome of the plan.
Each risk is monitored, controlled, and specific response to it is planned during the year.
Building a project portfolio from strategy
Projects should be designed and implementedto meet objectives.
StrategicObjective
TargetMeasurement Project
Benefits of integration projects into overall plan
More relevant, actionable strategic plans Fewer failed projects Increased visibility for project management A stronger, smarter company
BudgetA detailed financial statement of the
projected financials for the next year.
Often shown with individual monthly or quarterly targets.
Must be aligned with the global goals and objectives.
Budget
Budget includes: Organization chart review. Expenses. Capital spending. External costs. Others.
Measurements
Planning process
1. Understand the business2. Pre-planning analysis3. Global goals setting4. Aligning and lower level strategy formulation5. Tactical plans and objectives setting and
budget6. Build in procedures for monitoring and
controlling including risk management
Monitor and control
1. Monitor performance of the annual business plan - Quarterly reviews
2. Risk register3. Key assumptions4. Control changes to plan
Monitor and control
The results of a business should be monitored to determine whether or not the plan is being implemented on schedule and within the budgeted resources allocated to it
If senior managers are to retain control (whilst delegating detailed implementation) there must be an efficient data collection system feeding back information on progress
Measurements
What gets measured – gets managed What can be counted does not always
count What counts cannot always be counted
Reporting
Examples:1. KPIs2. Dashboard3. Monthly management reports 4. Quarterly update report
Key Performance Indicators
Key Performance Indicators are quantifiablemeasurements, agreed to beforehand, that reflect the critical success factors of an organization .
KPIs Measure performance of the business plan They focus on the aspects or areas of our
organization's performance that are critical or vital for our ongoing and future success
They measure out success in key areas and processes that affect our customers, our employees and our shareholders or other stakeholders
KPIsThey can be developed for our: Total OrganizationDepartments or units / sections FunctionsProjects Teams (processes)
KPIs
KPIs need to be in line with overall company global goals.
KPIs can come from the vision of the company
The goals for a particular Key Performance Indicator may change as the organizations goals change, or as it get closer to achieving a goal.
How will we introduce KPIs?
Through consultation and involvement of our employees
Global critical success factors for the total organization will be reviewed by the management
Team KPIs will be developed by team members with assistance of a facilitator
KPIs will not used to:
Monitor individual performance Discipline employees
Example: HR DepartmentKPI: Workforce Turnover
Description:Turnover performance and cost impact upon the organization
Measures: % of total workforce terminating (70%) Total $ cost of turnover (30%)
Associated report:Workforce Turnover Report
Example: HR Department KPI: Workforce absenteeism
Description:Absenteeism performance and cost impact upon the organization
Measures: Total hours lost to due to absenteeism (% of total) Total $ cost of absenteeism
Associated report:Workforce Absenteeism Report
Example: PMOKPI: Program payback
Description:Tracked payback of all completed programs
Measures:Total actual payback of program compared to planned payback ($ and
%)
Associated report:EAC Report
Balanced Scorecard
Balanced Scorecard PerspectivesRESULTS
FOUNDATION
FinancialCash flow, ROI, sales growth, market share
Customer satisfactionLead times, quality, performance, service, costs
Internal ProcessCycle time, quality, productivity
Employee growth and learningCreate value, improve operating efficiencies
Scorecard – example ( 21 measures )
Finance
Profit ( EVA )Profit margin on sales
Overhead cost ratioCapacity / space utilisation
Customers
Volume of businessCustomer satisfaction
Customer repeat businessIncome from new services
Business in “pipeline”Market Share
Internal ProcessesQuality Index score
IT Systems performanceINT standards of performance
Internal communicationSupplier performance
HSE compliance
People & Learning
SkillsMotivation
Staff turnoverPolicy compliance
Empowerment / delegation
Sample measurements:Employee Learning and Growth Training investment per employee or customer Average years of service Turnover Number of applications for employment Productivity Ethics violations Leadership development
Sample measurements:Internal Business Processes Average cost per EC seat On-time delivery Average lead time Inventory turnover Ratio of new products to total offerings Defect and rework percentage Research and development Time to market
Sample measurements:Customer Satisfaction Customer attrition rates Market share Response time Customer acquisition rates Marketing cost as a percentage of sales Brand recognition Customers per employees
Sample measurements:Financial Total assets per employee Profits as a percent of total assets Return on assets Gross margin Profit per employee Revenue Cash flow Debt to equity
Roles and Responsibilities
What would business planning function be involved in?
1. Planning2. Reporting3. Monitoring and control
The Business side that is!
Key
A – Accountable for successful completion of task.
R – Responsible for completion of task. (Task can be delegated to this person.)
S – Supports task.C – Requires communication about the task.
AnalysisInternal –Businesslevel
External (Market and Customer)
Departmental or functional area –Internal & External
CEO A C C
Business Planning Function
R S S
Marketing and Sales VP
C A A
Other Department VPs
C C A
Managers /Others
C R R
Global goals setting
CEO A
Business Planning Function R
Other Department Heads S + C
Managers / Others S + C
Budget
CEO A
Business Planning Function S
CFO R
Other Department Heads S + R
Managers / Others S + R
Risk Management
CEO A
Internal audit department R
Business Planning Function R
Other Department Heads S + C
Managers / Others S + C
Strategy is everyone’s job
Conclusion
Planning process
1. Understand the business2. Pre-planning analysis3. Global goals setting4. Aligning and lower level strategy formulation5. Tactical plans and objectives setting and
budget6. Build in procedures for monitoring and
controlling including risk management
Re-enforce
Goal = Destination Strategy = route KPI = Measure how to reach destination
Other prospective
Planning for change. Managing change. Effective
implementation is key. Monitoring and controlling
Barriers to success
No incentive linked to success of plan Weak communication of plan and strategy No buy in / No alignment / No will Unrealistic plan No understanding of strategy Budget not linked to strategy Too much work outside of plan No monitoring
The six components of Success -
objectives
competencies actions resources incentives
actions
actions
actions
actions
resources
resources
resources
resources
incentives
incentives
incentives
incentives
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=
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confusion
fear
failure
frustration
littlechange
chaos
actions resources incentives+ + + + =plannedresults
information+
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+
information
information
information
information
+ information
objectives
objectives
objectives
objectives
objectives
competencies
competencies
competencies
competencies
competencies
Sequence of Strategic
PlanningAnalyse
Decide
Plan
Implement
Monitor & learn
Thank you
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