Strategy Linked Planning

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Strategy Linked Planning is a solution that integrates the Strategic Plan with the Business Plan to measure the effectiveness of the overall strategy and the performance of the supporting initiatives. This requires alignment of information such as the data model, timeline, KPI’s, and business processes. Once aligned, the strategy and business planning processes become a seamless exer­cise that can be performed iteratively throughout the fiscal year.

Company strategy

A clear business strategy answers the questions “Who do we want to be,” “Where do we want to go,” and “How do we get there?”

Market strategy
In this first step, an examination of the macro trends that are shaping the industry, the customer trends and insights, and the competitive environment must take place.

Product strategy
One of the most important aspects of the strategy setting process is assessing and aligning capabilities to market, which helps to define where the company has “the right to win” (what products and services).

Organizational strategy
Translating strategy into tangible strategic initiatives begins with a gap assessment – where the organiza­tion is are versus where the organization wants to be and what the potential strategic initiatives are to get to the target state, then key initiatives are defined.

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Initiatives

Translating strategy into tangible strategic initiatives begins with a gap assessment – where the organization is are versus where the organization wants to be and what the potential strategic initiatives are to get to the target state.

Invest
Identify and understand the key areas (e.g. regions, product lines, business units) where capital should be invested.

Perform a competitive process to secure the initiatives that are approved for investment.

Acquire/Merge/Divest
Determine acquisition targets in the market based on available capital and ROI.

Identify opportunities for mergers in the industry to drive synergy within the organization.

Target underperforming or non-strategic areas of the organization to be divested.

Reinvest
Identify the key areas within the organization where investment will drive greater strategic value or ROI.

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Planning

The purpose of the integrated plan is to bring together the output from the bottom-up financial planning and the top down strategic planning. The bottom up financial planning is used to create the baseline plan that covers all the elements present in the current state.  The strategic planning output with its financial impact calculated at an initiative level provides a layering of additional elements that will be part of the future performance.

Sales
Aligning the key drivers from the sales planning process with the overall operating plan will drive linkage through the delivery of product and/or services.

Key drivers (e.g. customer, product line, regional breakdown) will be drawn from the sales plan to seed the operations plan.

Operations
Aligning the operations plan with the financial statement planning will provide a quantitative beginning point.

Further adjustments to the operations plan can be made to account for seasonality and other nuances of the company’s operating cadence.

Financial Statement Plan
Aligning the income statement with the overall operations plan will allow for key drivers (e.g. # of units, products, margin mix) to be leveraged to drive the financials.

Additional adjustments will be made as the financial plan flows up the organization.

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Financial Performance

Actual results are compared with the Plan using key reports to measure financial progress in different areas as such as profitability, working capital, and free cash flow.

Profit & Loss
Measuring financial performance with the P&L provides profitability metrics such as gross profit margin and operating profit margin that delivers insight and allows for effective comparisons across years.

Balance Sheet
Plan to strengthen the balance sheet through working capital improvement to measure the organization’s operational efficiency and short-term financial health, and better cash management to ensure financial stability and solvency.

Business Intelligence
Alignment throughout the planning process / cycle will drive greater business intelligence as more quantitative elements are leveraged and tracked.

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KPI’s

It is essential to set a baseline with specific key performance indicators (KPI’s) at the beginning of an initiative to track self-performance that will be consistently measured over time.

Dashboards
Dashboards are a central reporting function that maintain all KPI’s and the progress in a single location in a visual format for quick hits of information. Dashboards make sure all stakeholders are aware of progress and help leadership make critical decisions.

Scorecards
Scorecards are an alternate view of KPI’s that provide a grade, or score, against the ultimate target numbers across a variety of metrics. Like dashboards, scorecards help stakeholders understand how the KPI’s are trending and identify what areas of the business might require a strategy review.

Competitor stats
Competitor statistics create a benchmark across a variety of business functions that can be used to consider current state compared to relevant peers and potential areas of improvement.

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Why do companies fail to link their strategy to their business plan?

What are the expected business outcomes of Strategy Linked Planning?

Increased insight
Strategy Linked Planning will drive additional insight into the organization. A greater percentage of resources time will be spent analyzing the past, understanding the impacts, and predicting the future.

Improved efficiency
Strategy Linked Planning will allow the organization to operate in a far more efficient manner. Aligning the business processes, technology solutions and organizational structures will reduce the overall time and effort to complete the cycle.

Enhanced control
Strategy Linked Planning will increase transparency and overall control. Improving the underlying business processes and supporting technology solutions will allow for passive validation and an increased confidence in the information.

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Muhammad Hassan

US and Global Enterprise Performance Management, PwC US

Blake Cooper

Enterprise Performance Management Partner, PwC US

Colby Conner

Enterprise Performance Management Partner, PwC US