How to use StrategyTrees for Effective Strategic Planning

Why StrategyTree?

12Faces has developed the concept of StrategyTrees.
It is our approach to solving the problems of creating and implementing a strategy.

StrategyTrees refers to our planning framework and, in our minds, it resembles the shape of a tree.

The principal goal of the business is the tree’s root ball.
The mainstream strategy is the trunk of the tree.
Various branches carry the sub goals and directions of the Strategic Plan.
Twigs and individual leaves are the detailed layers in the Strategic Plan.

The tree analogy gives a strong mental impression when you develop your strategy according to these principles.

Setting the Destination or Goal

Step 1 in any Strategic Plan:
Decide on the purpose of the plan; the goals or the destinations that it is to achieve.

These goals can vary depending on the nature of the Strategic Plan and the nature of your business.

Example:

The particular Strategic Plan you are working on may be a subset of a much larger Strategic Plan.

A division of a larger business or a Public Service department:

• The divisional Strategic Plans need to interface with the Strategic Plan of the parent entity.

A Strategic Plan might be for a short period, like 12 months, or a much longer period of say 10 years.

A for-profit organisation:

• Will have a Strategic Plan goal that mentions their profit goals and/or growth goals.

A not-for-profit (NFP) enterprise:

• Will have a revenue-raising goal to fund its activities.
• They will aim to break-even on profit to maximise their community activities.

The setting of the goal, or the destination, that we are aiming for, is an important first step. All the rest of the strategic planning exercise falls out under that.

When setting goals, keep in mind the SMART attributes of a worthwhile set of goals.
Further reading on this topic at the article: How to do Goal Setting for Business
or
Go to the Leaders Briefing sign on: LB3 Quick Goal Setting for the Time Poor

There are no right and wrong goals.

There are only whatever goals suit your organisation at a point in time. The goals will relate to the particular element of strategy that your business is trying to develop.

Critical Success Factors (CSF)

If Goals are the Root Ball of your business, it then follows that the Critical Success Factors are the Major Branches off the trunk of the “Tree”.

Critical Success Factors (CSF) are the things that must be done, or at least considered, to give you a decent probability of achieving your chosen goals.

The CSF can be anything that seems to be “Mission Critical” to achieve those goals. They will vary from strategy to strategy.

Ask yourself, what are the “Mission Critical” things to achieve your goals?  What do you have to cover in your Strategic Planning process to achieve your goals?
These are your CSF.
Another way to look at them is, if any of them fail, the strategic plan fails; or is partially crippled.

Examples:

Any Strategic Plan that has budgetary implications will typically have, at least, the following 3 CSF:

• Revenue:
  The raising of sufficient funds to execute whatever the Strategy is.

• Cost of Goods Sold (COGS):
  The costs directly related to achieving the necessary Revenue.
  These costs go up and down with the amount of Revenue raised.
  Also known as Variable Costs.
  An efficient operation aims to minimise these costs.

• Overhead Expenses (OE):
  Those expenses that are necessary for the operation to function.
  These costs don’t move very much with the amount of Revenue generated.
  If they do, they move in fairly large blocks at a time.
  OE include permanent staff, rent of premises, costs of utilities (electricity and water), other stable costs.
  They are also known as Fixed Costs.

Other CSF’s that may be relevant include;

• Investment:
  The funds available to support, grow or restructure.
  A determinant of the Return on Investment (ROI), a metric used to measure the efficiency of a for-profit enterprise.

• Target population:
  Who is the target client and what is the promise you are making to them.
  Example:
  A NFP homeless shelter will be targeting the homeless.
  The promise might be “always a hot meal available”.

• Support services:
  These are, what might be called, ‘enablers”.
  They don’t move towards the Goals themselves but facilitate other CSFs.
  The goals are more likely to be reached.
  Typical examples are HR and IT.

Keep in mind that they might not all be equally important.

• A public sector enterprise is likely given a budget so their need to raise revenue is low.
• A for-profit enterprise sinks or swims according to its ability to raise revenue.
• Both enterprises need revenue
• The relative importance of revenue differs in each of their strategic planning process.

More CSF’s can be added at any time as your understanding improves.

At any time, Critical Success Factors (CSF) are the things that must be addressed.
They are “Mission Critical” to the strategy.

Necessary Conditions (NC)

For each of the CSF’s, there will be one or more “Necessary Conditions” (NC). These are the things that are necessary for the CSF’s to be achieved.

Example:

If you are a for-profit business:
Under the Revenue CSF, you might think that it is necessary to have the following NC’s:

• A sales funnel to raise the necessary funds
• A product range which we sell to raise the Revenue
• A cashflow system to ensure that the money from Sales is realised. This would include things like Accounts Receivable and Accounts Payable.
• A pricing mechanism designed to position you in the minds of the consumers at the price point you want

Each and every one of these Necessary Conditions (and quite possibly others) have to get their necessary share of the enterprise’s attention.
This will ensure that the CSF of Revenue is fully addressed.
In this example, for the Revenue CSF of the set of Critical Success Factors (CSF) to be successful, you must achieve your Necessary Conditions (NC).

The Strategic Planning team will give your Necessary Conditions greater or lesser importance. This will depend on the nature of your enterprise.

Example:

• A public hospital doesn’t focus too much on a Sales Funnel, their clientele is well assured.
• A for-profit business would.

There is no limitation to the number of Necessary Conditions that you have in the system.

Successful CSF’s rely upon you listing all Necessary Conditions (NC). Leaving any of the NC’s out at this stage invites you to overlook their role (no matter how significant) in the pursuit of the enterprise’s goal.

Key Success Factors (KSF)

For each of the ‘Necessary Conditions’ (NC’s), there will be one or more activities that will be important in making sure that the NC’s are met.

Example in a for-profit organisation:

• The Sales Funnel NC is necessary for the Revenue CSF.
• It will have several KSF’s that follow the normal sequence of a Sales Funnel.

These are:

• Lead Generation:
  A system to get people to express some form of interest in what your enterprise has to sell.
  Example:
  Use press or other media advertising as a way of getting people to become aware of your business. The hope is this will lead them to begin to buy from your business.
• Lead Qualification:
  Of the ‘Leads Generated’, a percentage will pursue the possibility of buying product from your business.
  Many of these will need some method of encouraging them.
  For example, when they give you their email address on a website to get some type of free product.
  You then repeat market to their email address encouraging them to buy your product

• Sales Conversion:
  Once people have ‘Qualified’ above, the more active sales process begins.
  The aim of the active sales process is to convert the customer into making a decision to buy.

• Retention:
  Once you have a ‘Sales Conversion’ continue to promote to these customers.
  Having purchased once, encourage the customer to make additional purchases in the future.

• Advocacy:
  If you can make customers very happy, encourage them to tell their friends and colleagues.
  These referrals are invaluable in any business context.

You can see that a successful Sales Funnel has five stages, or Key Success Factors (KSFs).

In turn, you need the Sales Funnel as a Necessary Condition (NC) to generate Revenue. Otherwise you will not have a sales process.

Finally, the generation of Revenue NC is a Critical Success Factor (CSF) in achieving your goal of increasing growth.

This shows you how the branches, and some of the sub-branches and twigs, are put together.

Projects

The Projects layer in the StrategyTree is still strategic.

Projects are necessary in order for the Key Success Factor’s to feed the Necessary Conditions to achieve the Critical Success Factors and ultimately the business goals.

We call these Projects because there will be quite a few of them and many of them will not have a very long life. Projects are a way of fleshing out the various activities that will need to be undertaken. They are completed as one small stage of a larger process.

The Strategic Plan itself may have a life of several years, but the Projects may have a much shorter life serving their immediate KSF parents.

Example:

Continue with the Revenue/Sales Funnel/Lead Generation KSF branch example above.
You decide to have some Projects associated with building an effective website to generate leads.

This might include individual Projects aimed at:

• Designing an attractive website.
• Taking out Adwords to promote the website in Google searches.
• Paying strict attention to the Search Engine Optimisation (SEO) of the website.
• Adding various participation and involvement tools to the website. Encourage people to provide their email address in return for a “freebie”.

In their own right, each of these Projects may not take very much time.

It is easy to see how Projects are, in fact:

• ‘Mission Critical’ to their parent KSF’s.
• Which are in turn ‘Mission Critical’ to their parent NC’s.
• Which in turn are ‘Mission Critical’ to their parent CSF’s.

AND

• Ultimately to the goals of the organisation.

Tasks

For each Project, there will be some specific Tasks to be undertaken.

Example:

For the “designing our website” Project for the KSF of Lead Generation, we have the following tasks:

• Design the menu structure of the proposed website.
• Block out text to fall under each of the menus in that structure.
• Consider the “look and feel” of the site, including such things as colour scheme, font, speed etc.
• Consider Search Engine Optimisation (SEO) by careful use of key phrases in headings and on pages. Search Engines will develop an understanding of what is to be done on a page. Also consider meta tags.

Further reading on this topic at the article: Website Tuneup

Because of their very short lifespan, you may decide not to include Tasks in your StrategyTree system.  They are not particularly “strategic” but rather “tactical” in nature.

Alternatively, Tasks can be managed by either ‘Kanban’ or ‘Agile’ systems which are much better tools for managing of “tactical” tasks.

Further reading on Kanban systems at the article: Kanban: Workflow Tool

Further reading on Agile systems at the article: Take Advantage of Agile/Scrum/Kanban to Increase Productivity

Strategy v Tactics v Skirmishes

The comment above on including / not including “Tasks” raises the question of “how far down the Strategic planning path does a StrategyTree go?”

Let’s consider what gets put into the StrategyTree out of all the steps to design and implement a strategy.

Divide the stages into:

• Strategy.
• Tactics.
• Skirmishes.

Example:

Consider the WW2 D Day Landings.

Strategy.

Cast your mind to the D Day Landings in World War II when the allies invaded France.

There was a great deal of strategic planning prior to the D Day Landings. The CSF’s and NC’s that were necessary for the invasion to take place were blocked out.

The CSF’s would include things like having:

• The troops available.
• Ships available to transport them.
• A beach that could be assaulted without excessive loss of life.
  And so on…

Each of the CSF’s had NC’s, KSF’s and Projects under them.

These are the components of the strategy that would have been addressed to commence the D Day invasion.

Tactics

The Strategy is blocked out. Now, lower ranking officers in the system would have taken responsibility for working out the actual Tactics.

Example:

The Strategy:
They may have decided to allocate a particular Army group to the task.

The Tactics:
Would be for the Army group Commanders to work out which troops would take the lead and which troops would come up in the rear by way of support.

These are shorter time span, once only, types of activities. They are necessary to support the Strategy.

Skirmishes

There is a well-known axiom – no matter how well you plan an invasion, all those plans turn to dust the moment the first shot is fired.

Using this analogy, there comes a point where Strategy and Tactics give way to localized Skirmishes.  These are among small groups of troops trying to push forward to the goal of occupying Berlin.

This happened in reality in the D Day Landing.  Individual small bodies of troops got caught up in the hedgerow country of France.  This is something the Strategic Planners had not anticipated.

Therefore, it was a matter of very local decisions by local Commanders.  They had to work out the best way forward over very short periods of time.

Why Distinguish Between These Three Levels in a Strategic Plan

Your focus is to have a Strategic Plan that looks at how you will achieve your objectives at a high level.
This is the reason we distinguish between these layers in a Strategic Plan.

The tools we speak of, in our StrategyTree process, are not very well suited to the very short term nature of Tactics and Skirmishes.

As you move into Tactics, there are other organisational systems that you can use. They are much more adept at handling short term, high volatility, events.

As mentioned above, these include such things as Agile and Kanban.

Further reading on Kanban systems at the article: Kanban: Workflow Tool

Further reading on Agile systems at the article: Take Advantage of Agile/Scrum/Kanban to Increase Productivity

A well known software package for implementing Kanbans is: Trello

The Shape of the StrategyTree

So far, we have discussed the general shape of our “Tree”.

To recap your Strategic Plan:

Begin with the Root Ball of the Tree – the goals, objectives or destination.  These need to be carefully thought through and expressed using the SMART formula. This will ensure that they are effective goals.

Further reading on this topic at the article: How to do Goal Setting for Business
or
Go to the Leaders Briefing sign on: LB3 Quick Goal Setting for the Time Poor

Working down a StrategyTree, we have the flow:

• Critical Success Factors (CSF) – block out the major items that are necessary to contribute to a successful Strategic Plan.  The plan is unlikely to succeed without them being addressed.
• In turn, each CSF has some Necessary Conditions (NC).  The NC’s have to be attended to in order for the CSF to be achieved.  NC’s overlooked in this planning process may cause a reduction in the performance of the CSF’s.  Imagine if we left the Sales Funnel out of Revenue generation altogether. Revenue generation is unlikely to be very successful without a sales function.
• The NC’s are parents to Key Success Factors (KSF). KSF’s are things that are necessary to support the NC’s.
• Each of these KSF’s has one or more Projects that have comparatively short life spans.
• Finally, we have the Tasks necessary to meet the Projects.  Tasks are things that are done quickly and are quite fluid in how they are done.

Expressing that again in the opposite direction moving up the StrategyTree we have:

• Projects are things that are done to achieve the Key Success Factors (KSF’s)
• KSF’s are in turn necessary to support the Necessary Conditions (NC’s)
• NC’s must be done to allow the Critical Success Factors (CSF’s) to have the best chance of succeeding.
• and finally, the CSF’s must all be appropriately serviced by the strategic plan if the Goal is to be achieved

Efficiently Achieving the Strategic Goals

Having developed a StrategyTree, we can turn our minds to implementing the strategy as quickly and effectively as possible.

We are firm believers in the effectiveness of an 80/20 mindset and of the Theory of Constraints.

80/20 Principle

The 80/20 Rule, or Pareto’s Principle as it is more scientifically known, says:

• Only 20% of the available activities make a significant contribution to moving forward in the required direction.  The remaining 80% are decorative and/or time wasting.

Example:

• It may be better to put your website together as quickly as possible (the 20%) rather than have endless meetings on colour schemes, wording etc (the 80%).  Such details delay having a website to begin to execute your Strategic Plan
• you also often don’t know what will work so better to get started quickly and keep testing to find the best path forward
  Go to the article: How to Improve Performance with A/B Testing
• You no doubt have experience with meetings that could have finished in a few minutes (20% of the time taken). It got drawn out for a much longer period when attendees got bogged down debating trivia (80% of the time taken).

When executing a Strategic Plan:
The planners need to continually consider which of the few items (the 20%) of the possible things they could do are going to have the greatest impact.

Example:

• There is not much value in investing in a Sales Funnel if the product range has not been determined.
• You may have an excellent Sales Funnel on paper but it can’t do anything until it knows what it is selling.
• Focus on the mission critical 20% of getting the Product Range identified before spending time on refining the Sales Funnel.
• Both Product range and Sales Funnel are NC’s for the CSF of Revenue raising.
• Product Range has to come before the Sales Funnel in actual timing.

Further reading about the Skills Module on 80/20 at: SM2.0: 80/20 Sales Growth; Double Sales, Triple Profits

Therefore, the Strategic Planning execution team needs to continually prioritise the elements of the Strategic Plan that they are working on.  They need to get the timing right.  This will ensure that any projects that have to be done, before something else, will happen.

This is not a new concept and many would be familiar with the idea of Gantt Charts.

Over the years, we have learnt to be a bit wary of one limitation of Gantt Charts.  They very often lead to project delays.

We have become more interested in how effective the Critical Chain Project Management (CCPM) approach can be.

Further reading at the article: Critical Chain Project Management (CCPM)

The Theory of Constraints

The Theory of Constraints says:
That in any workflow there will be at least one, and usually only one, constraint or bottleneck  that you have to attend to before anything else can happen.

Further reading about the Skills Module at: SM5.0 Theory of Constraints (TOC) Find and Remove Bottleneck

A classic example of this thinking is the shape of an hourglass.
No matter what you do above and below the pinched waste of the hourglass, sand is not going to move through that pinched-waist-constraint any faster than the pinched waist will allow.

In your Strategic Planning, exactly the same issue of “constraints” will apply.  At any time, there will be usually only one thing that is retarding the speed at which the Strategic Plan can be executed.

It is a waste of time to spend any time focusing on parts of the Plan other than where the constraint is. No progress will happen until the constraint is “relaxed”.

There are 2 types of Constraint to for you to consider in a StrategyTree.

1. A “Global Constraint”.

In your Strategic Plan, there is probably just one thing, at any time, that is impeding its rapid progress.

Going back to our earlier example of a Sales Funnel and a Product range:

• It is a lack of a Product Range that is impeding Sales rather than the lack of a Sales Funnel.  The Sales Funnel, even if it was present, can’t do anything until the Product Range is operational.  It would have nothing to sell.
• The lack of knowledge on your Product Range is the single thing most impacting your rollover plan.
• It is the “Global Constraint”.

Many of the NC’s, and their KSF children, may have a “Local Constraint” of their own.

NC’s of the Sales Funnel can have a constraint.  This can be independent of whatever constraint there is in the NC of the Product Range.

Example:

• The local constraint in the Sales Funnel NC:
  Is no sales conversion process because you do not have sales people.

• The Local Constraint in the Product range NC:
  Is that you don’t have a product that is particularly attractive to customers.

The constraint in the Sales Funnel has no impact on the constraint in the Product Range NC.

Constraints that are present may not be a bad thing.  There will always be constraints in any workflow.
Some of them may be working as effectively as they possibly can. Therefore, although they are a constraint, they are not impeding progress by being under-optimised.

Constraints will move around to some extent; especially in the early days of a Strategic Plan.  Over time, they will tend to stabilise in the same places for the Strategic Plan as the “Global Constraint”.
They will stabilise as the “Local Constraint” in each NC and possibly even the KSF’s.

Software Systems

In a Strategic Plan of any size, monitoring and managing the CSF’s, NC’s, KSF’s, Projects and possibly Tasks can be a very substantial undertaking.

Add to this complexity the fact that:

• They are rapidly changing.
• There may be several teams of people working on various parts of the plan independently.
• It becomes a significant challenge to monitor progress and ensure that the vital 20% and the vital Constraints are the things that are focused upon.

12Faces uses the StrategyTree for its own productivity and has developed software to monitor this.  If there is reasonable demand for access to the software we may make it available to our user base.

Email reception@12faces.business if you are interested in using this software.

Mindmapping

Mindmapping is a visual way to plot out a StrategyTree – read more here at Wikipedia

We use a free online software package called Mindomo for this purpose.

If you choose to use this package, we can email you a copy of a template.

Wrap Up

This has been an overview of a comprehensive Strategic Planning methodology.

It breaks the goal of the Strategic Plan into the various layers and complexity that is necessary to address.  This is in order for the Plan to progress as rapidly as possible.

It draws your attention to the few 80/20 items and constraints where your focus is best applied. This will progress the Strategy as fast as possible.