Laying a Foundation for Future Growth,
Strategic Planning Part I
By Jim Doucette, Managing Director

Now is the time of year when many companies are creating their strategic business plan. The bold executives among us will plot a course for dramatically accelerated growth. That is the certainly the intent of the 'strat plan.' Too often, however, strategic planning becomes a derivative exercise. The last strategic plan is dusted off and developing the new plan essentially becomes a process of making incremental changes to the prior one.

The results of strategic planning processes are certainly not adequate. Fewer than 50% of senior executives are satisfied with their current strategic planning processes and fewer than 25% think they yield actionable plans.* At the heart of this dissatisfaction:

• The approach to investment prioritization is not systematic
• Growth targets are not driven by consumer or category realities
• Growth strategies are overly reliant on white space, acquisition, etc. vs. "controllables"
• Growth options are not systematically quantified, making comparisons across franchises and operating groups difficult, if not impossible, to make
• The financial plan is often disconnected from the strategic plan, leaving the most carefully crafted strategies starved for implementation resources

It is easy to see the path that leads to such dissatisfying strategic plans. A good strategic planning process should be a dynamic, creative discussion about discovering the possibilities to take your Brand to new heights. However, when you are embroiled in a business, it is hard to get "out-of-the-business" and challenge conventional thinking. How can you make sure not to fall into this trap? The two fundamental steps for creating a successful strategic plan are understanding consumer behavior and then building the plan upon a behaviorally-based foundation.

A comprehensive understanding of consumer behavior starts with an in-depth analysis of consumer usage patterns and consumer purchase patterns. There are two very powerful analyses that allow marketers to empirically understand, validate, and leverage these behaviors: One, a usage domain that analyzes the largest viable set of competitive/substitutable products and Two, a purchase structure that defines the specific drivers of purchase behavior in close-in, specific product categories.

Each one provides distinct and vital insight into how consumers behave. The combination of usage and purchase behavior gives you the foundation to develop much clearer strategic decisions to make your Brand the one that best meets consumers' needs. When integrated with targeting, need state, product performance, Brand benefit and Brand equity information, you have the insights to develop a powerful and effective strategic Brand positioning that creates a differentiated position vs. your competitors.

Where should your Brand compete to establish a competitive advantage? Your Brand's strategic positioning should answer that key question. For example, does the Brand compete in soup or simple meals; OTC medicines or pain management; isotonics or refreshment beverages? Furthermore, do you have a strategic Brand positioning that is clearly articulated and precisely defined? Is it understood and embraced by the entire business unit and your business partners? Does the positioning enable your Brand to stand apart from your competition in a highly relevant way?

Answering those critical questions with a consumer behavior-based approach is the key starting point for strategic planning. In addition to providing clear direction for each Brand, defining the strategic Brand positioning ultimately allows you to define the roles for each Brand in your portfolio. Against the newly defined competitive frame, you will be able to evaluate each Brand's ability to grow revenue and deliver on margin requirements by assessing the Brand's competitive effectiveness and the attractiveness of its core categories. You are then able to calculate the expected future value of each Brand. The results are role definitions for each Brand in your portfolio in a way that is rigorous, quantitative and rooted in consumer's actual behavior.

Once the foundation is set, the second key is to balance strategies and activities between the core business, new innovation and acquisitions/divestitures across the portfolio. We will explore this area in part II.

* Source: "How to Improve Strategic Planning," McKinsey Quarterly, August 2007