Turning Plan Into Profit: The Innovators

Do we really need to discuss planning? After all, everyone has a plan, right? Most likely, the answer is "Yes." But the questions for consideration are this: How's that plan working? Is it helping you achieve your goals?

Now is the time to evaluate your plan and set a course for 2010. Once your plan is locked down the biggest challenge is the ability to execute and stay focused on achieving results. Regardless! Salesforce.com (CRM Quote) is an excellent example of a company that executes well in spite of a tough economy. Apple(AAPL Quote) and Goldman Sachs (GS Quote) are two others that continue to delight investors.

One of my favorite quotes from the book "Kiss Theory Good Bye" is "At the beginning of the day, it's all about possibilities. At the end of the day, it's all about results." In fact, the true measure of the success of a business is its ability to understand this mantra and continuously meet or exceed its profitability objectives.

Unfortunately, a failure to plan and execute effectively creates a recipe for disaster as your company gets swept up in a reactive, rather than proactive, cycle. The key is to bridge the gap between planning and results. Here are the essential elements of an effective plan.

• 1: Choose your direction. Does your plan provide clear direction that's easily understood by employees, shareholders, and customers alike? Have you tested and analyzed it against customer needs, market conditions and profitability objectives? When you plan, begin with your existing strategy. If it doesn't produce sufficient profits, like at a company such as Blockbuster(BBI Quote), you must either reduce your cost structure or develop a more profitable strategy. Either way, take action!
• 2: Determine whether your competitive advantage is sustainable. Just because you have a great idea, doesn't mean it's sustainable. Look at General Motors and AT&T(T Quote). At one time they were both king of the hill, yet both failed to maintain their substantial competitive advantage. Whenever there is profit, competition will enter. So take proactive measures to determine what gives you a sustainable advantage and then do it. One of the best advantages short of patents and high barriers to entry is your ability to out execute the competition.
• 3. Assess your objectives. Are they attainable? Don't focus solely on revenue and market share growth as indicators of success. This will eventually compromise your business. Only grow as fast as you can grow profitably. Set growth objectives in three areas -- financial, customers and employees. Then have each team member identify a maximum of three things he needs to accomplish each objective. Your job is to give the team members what they need to succeed. Their job is to deliver.
• 4: Evaluate your team. Have you hired the right people? The "people component" of any business is critical. You must have the right people (meaning people who are smarter than you in their respective areas) in the right positions. When evaluating your team ask yourself these two questions. Do my direct reports frequently tell me something about the business that I did not know was possible, and given the choice would I hire them again for the same position? If you answered no, you still have work to do. Your job is to establish a culture that is accountable, collaborative, and when necessary, argumentative. Having the right people is foundational to your success. Never compromise.
• 5: Debate your assumptions. List every assumption in your plan. For example, how fast you think the market will grow, how much market share you think you can get, future economic conditions, customer attrition, productivity, etc. Base those assumptions on data and vigorously debate them with your profit and loss owners to determine validity. This is important for a buy-in to your plan.
• 6: Analyze the risk. While risk is inherent in business and can't be totally eliminated, it's important to understand and quantify risk. Take time to identify potential problems and determine solutions should they materialize. Have an early-warning system in place to minimize surprises and rapidly respond to change. AIG(AIG Quote) is an excellent example of a company that either didn't understand risk or chose to ignore it, which led to its ultimate demise.

Now that you have your plan and strategies in place, primary objectives quantified and the right leadership on board, it is time to develop detailed operating plans and budgets that lay out specific programs, timelines, metrics and resources required to achieve the company's overall objectives. Couple this with an effective measurement and reward system and you have a powerful process for establishing accountability and driving results.