Monday, 14 January 2008

Industry Practice - Strategic Planning - Theoretically Simple - Practically Complex

It is an obvious statement to make; that the internal value chain of a company (ie it's procedural functions from Purchasing to Distribution and supportive functions) needs to be aligned to create an industrial entity that best serves the consumer-base within its competitive environmentment and the broader macro-economic context. To this end the strategic planning process serves to adapt the direction and shape of a company, so enable optimum profitability.

The form a strategic plan takes depends greatly on the individual situation of a firm, its ambitions and management mentality. It is an internally generated response to the less controllable elements of the real-world, from market behavoir (B2B/B2C) to financing conditions to of course competitor actions. At the higher-level still, is the prime issue that CEOs and their Boards must contend in shaping longer-term decisions: the overall (perhaps cyclical) dynamics of their sector set within (inter)-national industrial policy; itself moulded by the situational analysis of government dvisors (inc. financiers) to drive economic growth.

Given the Car's social symbolism [freedom & status] and technical complexity [ball-bearings to hard-drives], throughout the 20th & early 21st centuries the auto-indutsry has massively influenced the world we live & work within; perhaps more than any other industrial activity. The results of this changed world are in turn re-shaping the agendas, strategic directions and innate structures of the auto-industry. CO2, congestion & 'travel value' pricing apparent in the west, versus the social mobility & industrial develelopment of BRIC+ regions. (These two apparently opposing forces are actually far more aligned in terms of industry opportunity than many first thought - effectively balancing the automotive needs, and solutions, of west & east).

Of course different industry players (auto-makers, parts-makers & distributor-retailers) have experienced dramatic change over the last decade. Mature firms having to operationally re-align to simply survive, whilst emergent firms have to contend with the very opposite problem of rapid expansion. Both mature western firms and infant eastern firms are faced with what seem like the constant re-sizing demands, along with M&A threats and opportunities. Turbulent times at both ends of the spectrum at present, eventually resulting in an enlarged, more harmonious and efficient world-wide industrial network.

More than ever, corporate success resides in the detailed precision and rapid implementation of strategic planning, spanning from big-picture PESTEL level to the opportunity potential of the single customer/product. So defining strategy must be more than the notional and overly simplistic text-book exercise, but it should not become an overtly time-sapping laborious, bureaucratic task. It must lead to more than the sum of its parts, containing inspiration yet also reservation. As for the methodologies used, there still remains a myriad of developmental types - ranging from the sole edicts of bought-in high-cost, blue-chip management consultants to internally-empowered attempts at scenario planning, to the marriage of both.

Whatever process used, it must be sympathetic yet enlightening; undertaken in a way that is internally 'believed' (ie credible) and also able to generate new perspectives and insights by which to guide corporate direction. Whether highlighting new 'drivers' that dramatically affect corporate course or if (specifically unintentionally) ratifying the previously prescribed path, the practice of strategy formulation and planning must be both in-step with general industry consensus yet also find areas of competitive advantage within PESTEL and Value Chain arenas everytime the exercise is undertaken. Without these new insights, the practice becomes tainted and eventually worthless.

Ultimately of course company culture and inherent political feifdoms (functional or otherwise) hold the power to sway the undertaking and outcome of what is ideally a non-currupted, apolitical, measurable, cause/effect/reaction process. This may be idealistic, but it is the role of the CEO and Board to maintain a vigilant eye on procedings, step by step by step. If possible, employing a team of rounded, cross-functionally insightful, high-ranking, middle-management and junior staff to act as the project team so as to encompass all viewpoints (internal & external) and to moderate any potential for over-zealous 'over-weighting' of input information and assessment rationale.

'investment-auto-motives' understands strategic planning to be the very core of company success and must encompass informed inputs (info, data, trends), critically openminded analysis and unprescribed outputs. Of course, much of what results will not shock management into radical change - that isn't the point, they should already be abreast of things - but it should provide a critical eye of the 'drivers of change'. Each piece of the puzzle critiqued fully so leading to new specific insights which are be merged to produce the new big-picture view.

In essence: "Deconstruct Today to Reconstruct Tomorrow".

And there has never been a more pertinant time in the auto-industry to hone the process and seek new growth horizons.

Under today's stressed credit conditions the financial community and broader capital markets seek greater confidence in their automotive investments. Whether to support fixed income, debt swaps or floating stock, they will demand greater and greater leadership acumen from the industry at large and offer capital to those who best see the path forward through the complex terrain.

To this end, although each is in an individually unique postion, best practice methods (if not obviously content) should be shared across VM's, Parts Producers and Distributor-Retailers. For the combination of an informed all will raise the efficiency of the industry at large, producing ever bigger pictures that Wall Street and The City can work with to assist Value Creation.