The Five Key Elements of Strategic Planning

1. The Five Key Elements of Strategic Planning The CEO TuneUp II Jim Alampi September 1, 2014 Delivered For: Vistage 9017 Date: July 19, 2007 Presented by: Jim Alampi Alampi & Associates, LLC

2. Great Companies The 11 Great companies had a5 times multiple in profit performance and a 10 times multiple in valuation compared to the Good companies. Good to Great, Jim Collins

3. Our Agenda Today • The 5 Key Elements of Strategic Planning • Core Values • Purpose • Mission • BHAG • Hedgehog • The One Page Translatorä – getting your strategic plan onto one page so you can execute it • Execution and Results

4. High-performing Companies Companies don’t fail for lack of vision. They fail because they cannot translate their vision into execution. Vision without execution is hallucination.

5. High-performing Companies “Great performance is about 1% vision and 99% alignment” Jim Collins Built to Last

6. One Page Translator™ How does a company translate its vision into execution and results? It all starts with a vision (core ideology) and then a specific plan and process to execute that vision

7. One Page Translator™

8. One Page Translator™

9. Core Values • Not as important what they are but that an organization has them • Small set of essential and enduring tenets • Already exist and need to be discovered • Do not change in response to market conditions • Should be evident to all “We would hold onto our Core Values even if they became a competitive disadvantage”

10. The Value of Core Values • Daily reinforcement of behavior • “Moments of Truth” * • Hiring process – interviewing • Performance management process * Moments of Truth, Jan Carlzon, 1987

11. The Hiring Matrix Values Alignment H L H Experience & Skills

12. The Values Model Aspirational Permission To Play Core Values Accidental

13. Discovering Core Values Jim Collins Martian exercise and model • Identify candidates who Martians should observe • Capture two or three key attributes from each • Look for similarities and consolidate into five to six • Sort into Core, PTP, Accidental & Aspirational values • Divide up, write one sentence descriptions and agree • Snicker-test all • Reconvene, review and modify as required • Rollout carefully and without splash

14. Purpose • An organization’s reason for being - Answers the question “Why do we exist?” • Lasts the life of the leader / founder(s) • A star on the horizon (forever pursued, never reached) • Internal use To get at purpose, ask “Why” five times

15. Why does your company exist? “We provide automotive intelligence” Why? “Because the OEM’s need it” Why? “To select the best potential dealers” Why? “It increases the new dealer success rate” Why? “It improves their decision-making”

16. R.L. Polk Purpose: We help people make better decisions.

17. Purpose Examples • 3M: To solve unsolved problems innovatively • Cargill: To improve the standard of living around the world • Mary Kay: To give unlimited opportunity to women • Merck: To preserve and improve human life • Wal-Mart: To give ordinary folk the chance to buy the same things as rich people • Disney: To make people happy

18. Mission • Should answer the questions: • What Business are we in? • What do we do every day to achieve our Purpose? • Long-term time horizon • Can drive a tag line or an “elevator pitch” • External use

19. “Elevator Statement” We provide (product or service) For (target customers) Who (statement of need or opportunity) The (product/service name or category) That (statement of key benefit) Unlike (primary competitive alternative)

20. Jim Collins’ Hedgehog? “The fox knows many things, but the hedgehog knows one big thing” Isaiah Berlin

21. Hedgehog • What kind of work, customers, business are we really passionate about? • What can we be best in the world at (and what is our world)? • What drives our economic engine (profit / X)?

22. Hedgehog “Hedgehog is a great filter to test new opportunities against to assure a company remains focused on key areas” CAN BE BEST IN WORLD PASSIONATE ECONOMIC ENGINE

23. Hedgehog Examples • Walgreens • The best, most convenient drugstores with high profit per customer visit. • Wells Fargo • Run a bank like a business with a focus on the Western United States. • Abbott • The best company in the world at creating products that make health care more cost effective.

24. Hedgehogs Simplify complex issues Focus on a single idea, concept or vision Unify multiple visions and guide actions Anything that does not relate to the Hedgehog idea holds little relevance Foxes Pursue many ends at the same time See the world in all its complexity Are scattered and diffused, moving on numerous levels Never integrate thinking into a single overall concept or unified vision Hedgehog or Fox?

25. BHAG • At least 10 years out (10-30 years) • Has to reinforce core values, purpose and business fundamentals • Need a clear finish line • A catalyst that can drive emotions • Gulp factor; audacious but not braggadocios • The center or “sweet spot” of your Hedgehog

26. Four Types of BHAG’s • Target BHAG – qualitative or quantitative • Common enemy BHAG • Role model BHAG • Internal transformation BHAG

27. BHAG Examples • Become a $125 billion company by the year 2000 (Wal-Mart, 1990) • Become the dominant player in commercial aircraft and bring the world into the jet age (Boeing, 1950) • Become the Harvard of the West (Stanford, 1940’s) • Crush Adidas (Nike, 1960’s)

28. BHAG 10 – 15 Years Hedgehog 3 – 10 Years Thrusts 3 Years Initiatives 1 Year Rocks 90 Days Vision Core Values Purpose Mission SWOT Strategic Thinking Map

29. Leadership Habits Drive Execution

30. Leadership Habits Drive Execution • The Rockefeller Habits • Priorities - Top 5 and #1 of 5 • Rhythm – Executive team meetings • Data Driven - Metrics Titan, Ron Chernow Biography of John D. Rockefeller Mastering the Rockefeller Habits, Verne Harnish

31. The Rockefeller Habits • Priorities - Top 5 and #1 of 5 • Rhythm – Executive team meetings • Data Driven - Metrics Titan, Ron Chernow Biography of John D. Rockefeller Mastering the Rockefeller Habits, Verne Harnish

32. Habit #1 - Priorities • Ivy Lee • Top 5 focus areas (maximum) • Issues where executive team focus will have greatest impact for the company • Know the Top #1 • For the Current Year and Quarter • For Company / Department / Individual levels

33. The 3 Rockefeller Habits • Priorities - Top 5 and #1 of 5 • Rhythm – Executive team meetings • Data Driven - Metrics Titan, Ron Chernow Biography of John D. Rockefeller Mastering the Rockefeller Habits, Verne Harnish

34. Activity Time Activity Time Rhythm is all about Frequency Increase the frequency and you will naturally increase the results

35. Habit #2 - Rhythm • Annual executive team off-site – 2 days • Quarterly executive team off-site – 1 day • Monthly management meeting - ½ day • Weekly executive team meeting/call – 60 - 90 min. • Daily huddle or call – 15 minutes maximum “This structured format utilizes less than 10% of an executive team’s total time”

36. The 3 Rockefeller Habits • Priorities - Top 5 and #1 of 5 • Rhythm – Executive team meetings • Data Driven - Metrics Titan, Ron Chernow Biography of John D. Rockefeller Mastering the Rockefeller Habits, Verne Harnish

37. Habit #3 – Data Driven • Standard Corporate Numbers • Financial and operational numbers / ratios • Rear-view look • Smart Numbers • Typically 3 in any organization • Leading indicators around Business Drivers • Critical Number • 1 or 2 Numbers targeted to a Critical Weakness • Targeted for a specific period of time (e.g., Quarter)

38. The Right Measurements • Graph it (actual against plan, etc.) • Visual - get it up and around the organization • Frequent - 6 data points to spot a trend • Measure what’s important, not what’s easy • Absolute numbers vs. %’s - choose which is appropriate for the measurement

39. Summary • The 5 Key Elements of Strategic Planning • Core Values • Purpose • Mission • BHAG • Hedgehog • The One Page Translatorä – getting your strategic plan onto one page so you can execute it • Execution and Results