Strategic Planning Fuels Growth, Profits

The strategic planning process that would guide Avista, Inc. through the next five years didn't begin in an executive conference room. It began on a warm summer day on the backwaters of the Mississippi River.

"One beautiful Friday afternoon we took some of our people out on a boat and threw out an anchor," recalls Avista president Jim Schneller. "We wanted to make a determination about the future of our company, where we wanted to be in five years."

The Platteville-based company, which manufactures aeronautical and medical engineering software, decided to pursue a major growth strategy. The question was how to get there. "

Most businesses today run with a fairly lean management team," Schneller said. "All your energy is focused on peddling the bicycle, but not necessarily steering it where you want to go."

Schneller asked the Wisconsin Manufacturing Extension Partnership (WMEP) to help the company develop a strategic plan. He said it was beneficial to have an experienced facilitator guide the company through the planning process, and now that it's complete, make sure they stay on track. "We needed someone who has been through this before, to keep us focused and ask the right questions," he said.

A strategic plan is an essential tool to chart a company's future growth and profitability. The process evaluates a company's strengths, weaknesses, market opportunities and current business climate. A plan establishes the mission, vision and values that guide the company. Business strategies - growth, innovation, culture, lean, supply chain - are examined.

"In today's highly competitive marketplace, manufacturers don't have the luxury of putting planning on the back burner. If they do they might not be around in five years," says WMEP's Jeff Moore. "To be successful, every executive, manager and employee must know why the company exists, where it's heading and how they can help it get there."

Planning investment pays off

Joe Kinsella, president of Pointe Precision, a Stevens Point contract machining company, says the company's investment in strategic planning is paying big dividends. Goals the company has achieved so far are a 10 percent increase in market share, reduced turnover (from 22 to 6 percent) and a 19 percent increase in new customers.

One of Pointe Precision's strategic goals is to become a world-class manufacturer. To that end, the company has implemented manufacturing cells, value stream mapping and 5S visual workplace techniques. The company also has diversified its customer base.

"Too many owners are so busy putting out daily fires they don't have the time to sit down and organize a strategic plan," Kinsella said. A good plan is essential because it communicates the company's vision to everyone in the organization. "All too often people get involved with their own portion of the business and don't see the big picture," he said. WMEP's Moore finds that having an outside viewpoint can help a company identify barriers to success - the things "everybody knows about but nobody wants to deal with."

Sales growth despite recession

Even the smallest companies benefit from strategic planning, says WMEP's Wayne Raisleger, who specializes in helping firms with 10 to 30 employees develop plans.

Raisleger helped Racine-based Reed Switch Developments Corp. develop a strategic plan in 1999. At the time Reed had 11 employees. Reed president Debra Berns says the process really paid off. Reed's sales rose 7 percent last year despite the recession, and productivity has skyrocketed. The plan's emphasis on an upgraded web site and lean manufacturing get much of the credit.

Reed's strategic plan anticipated double-digit annual growth. "To be that aggressive, we needed to be very focused," Berns said. The planning process identified the resources necessary to achieve that level of growth, which included a new building and employee training.

Reed recently experienced a 148 percent increase in productivity by implementing one-piece flow - producing 1,000 switches a day up from 400.

Strategic planning helps a company set measurable goals and identify strategies to help them achieve those goals. WMEP's strategic planning approach takes a company one step further, to document specific tactics and action plans to ensure that the strategic plan is successfully implemented. "Action plans are the concrete steps that assure the plan's success," Moore says. A completed plan includes a company's mission, vision and values, current business status, business strategies, annual business goals (implementation) and a measurement system.

Reviewing the plan, and adjusting it to reflect changes in your business and industry is essential. Most companies review their strategic plans quarterly and update them annually.

Companies that file the plan away in a drawer somewhere are wasting their time, experts caution. "Planning is not about some bureaucratic process you go through and endure," says Raisleger. "It's about developing a roadmap and an action plan on how to make your company more profitable - now and in the future."

8 STEPS TO A PROFITABLE FUTURE

Identify the core planning team comprised of owners, managers, leaders and employees.
Establish mission, vision and values. Who are you and what do you do, where is the business headed, and what are the guidelines for working with customers, suppliers and employees
Evaluate the current situation. What is going on in the industry today What products are profitable How will industry and global trends impact the company
Develop long-term business strategies with goals. What are the strategies the company will pursue Growth New product development Lean manufacturing
Define the supporting tactics and goals required to achieve the identified goals and business strategies.
Develop an annual action plan to achieve tactical goals.
Define measures to ensure success. Did you achieve your sales goals Have you successfully diversified your customer base Increased productivity
Review. What did you accomplish What works, what doesn't and why Adjust as required.

© Copyright 2003 by WMEP.org

WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices includinglean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.