DEVELOPING A STRATEGIC PLAN (Pt 3)

Information Needs

The most important consideration in developing an effective approach to forecasting and planning is the development of your information system. In the world of personal computers, you may equate information systems with microchips and programming, but the concept as used here is much broader, referring to the way you gather, screen, analyze and use information that may affect your business. This publication is part of your information system. You are using it to inform yourself of modern approaches to managing, improving and possibly enlarging your business.

Too many businesses still have information systems that might be described as shoebox systems. Information about the business and its environment are collected in various documents that are stored in shoeboxes, or it is picked up through contacts between the owner and customers. The owner analyzes this information and the results are used to make further decisions.

The problems with this system are obvious. First, no effort has been made to determine what critical elements -- internal or external to the business -- should be assessed. Second, assessment is based entirely on what strikes the owner as memorable or important. Unfortunately, what is remembered is not necessarily what is important. Memory is influenced by preconceptions and perceptions, and by how busy, tired or distracted the owner was at the time an event occurred. An additional problem with this informal approach is that, should the owner want to verify his or her impressions of some series of events, it would be time consuming -- if not impossible -- to locate the records that would allow a full analysis. While seat- of-the-pants decision making based on this type of information system sometimes works remarkably well, much is left to chance.

Setting up an effective information system is integrally related to your mission and goals and to the specific environmental factors defined in your strategic purpose. Collect enough information, but don't collect too much this leads to information overload, where decision makers are so swamped they become incapable of making sense of the information, or of using it to make good decisions.

Developing a good system is a dynamic process. It is easy to determine what information you need to collect and how to obtain it. However, as the environment and your situation change, the information you need also changes. Items that were once important now are not. Other considerations, impossible to anticipate at the time you developed your system, have become critical.

Employees should be involved in determining what information is needed and where to obtain it. They are often the first line for data collection. They can provide insights and perspectives that you may not have considered. Together, you will be able to develop a reasonably thorough list of concerns that the information system should address.

In any information system, a variety of sources should always be used. You already collect much information in the documents you use to conduct everyday business. Other sources may include periodicals (particularly those published specifically for your industry), newspapers (or clipping services), books and experts in areas of concern.

Once you have collected the data, you will need to condense and analyze it. This is the information reporting system. You already produce reports for various government agencies and banks, which are nothing more than a presentation of the data you collect in a way that is useful to the particular agency. A good information system will provide information to employees in your business in a form that they need to make effective decisions and carry out their jobs. It will provide enough information, but not more than is necessary and useful. As the type of data collected changes over time, so will the reports needed. As a result, report requirements must be periodically reassessed so time is not spent producing useless reports.

Finally, information should be stored for easy retrieval to accommodate new situations that may require different analyses. In data processing, this system of storage is referred to as the company's data base. Whether you rely on an electronic or a manual system, storing information so it is easily retrievable requires considerable forethought. Much of the business software available today focuses on storing data in ways that allow it to be retrieved in many different forms and later combined for analyses that were not originally anticipated or necessary.

Internal Business Analysis

Once you've begun to collect the necessary information about your external environment, you will be able to consider how to best fit your business into the situations that surface. To do this you must clearly understand the strengths and weaknesses of your firm. For a long time, people assumed that small businesses were always at a disadvantage because they were small. Today, there are few commercial areas that don't have room for smaller competitors if they are focused and efficient.

The primary task in the business analysis phase is to identify those factors that may give you a competitive advantage. If you hold a patent or an exclusive license on a particular product or service, you may enjoy a competitive advantage. Flexibility is a major advantage that small businesses often enjoy over larger rivals. You may be able to respond more quickly and with less cost to mood swings or taste changes in the market. Also, small businesses can often move into new product or service lines more quickly than larger firms.

The nature of the technology used to make your product may often yield competitive advantages. If you employ individuals skilled in areas unique to your business, their skills will often yield cost advantages that may offset disadvantages in other areas. For example, your competitor may be further ahead in using computer-aided scheduling, but you are able to rely on specialists in your own firm and can market your product as a unique value while you move to minimize the technological differential.

Once you are clear about the areas in which you are ahead, assess your weaknesses. Having done this, you can develop a strategy that has the best chance of succeeding. Instead of simply trying to compete for customers on a single dimension, such as price, or to catch up in one area of technology, you are now able to consider alternatives derived from a combination of factors. You may, for example, see that a traditional competitor has an apparently insurmountable cost advantage from adopting a technology that yielded unforeseen benefits. An effort to compete strictly on the basis of price while attempting to catch up technologically is probably doomed to failure. On the other hand, a move into other product lines that take advantage of the skills used by your firm may give you a better chance for survival. Eventually, this strategy may give you the time needed to acquire the technology to compete in your original product area.

Finalizing a Plan

When you have a clear grasp of the competitors, customers, suppliers and situations you face, and you combine this with a realistic understanding of your own strengths and weaknesses, you can develop a strategic plan with a strong chance of success. You may decide that you have the strengths to compete with other businesses head-to-head in their best markets. You may choose to target a market that has not been touched by your competitors.You may see opportunities to influence local or state legislation in a way favorable to your needs. Or you may realize that you are constrained by a combination of circumstances that severely restrict your opportunities and leave you only limited chances for success. You should, however, under any of these scenarios, be able to make better choices.

Before you develop a detailed plan to implement, attempt to identify several possible alternative approaches. Frequently, when an individual or organization faces a problem or opportunity, solutions will appear to pop up. You've faced similar situations before, you have a gut feeling that the way to solve the problem is to. . . . While your first idea may, in fact, work, the odds are it won't be as effective as other possibilities. The reason that this obvious choice may not be the best option is that it is usually based on experiences that, while appearing similar, are actually very different. You may struggle a bit to identify other possible approaches. No alternative will be perfect. But once you have considered several and listed the advantages, disadvantages and overall chances of success for each alternative, you will be in a better position to settle on a plan with greater potential.