business planning concept

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




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




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




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




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

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Sequence of Strategic

PlanningAnalyse

Decide

Plan

Implement

Monitor & learn

Thank you

business planning concept

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