Follow-up on the 4th Strategy Circle on October 13th, 2014

Thursday, 16. October 2014

„Small but fine!“—That’s the motto of the SOLYP Strategy Circle, our exclusive customer event, which has already been taking place for four years now. The event provides strategy professionals the opportunity to meet and network with a small group of colleagues from different industries to discuss common topics of interest and share ideas and best practices. This year's invitation to Frankfurt am Main was gladly accepted by both new and recurring participants.

Following the format of the previous years, two participants presented their companies’ strategic planning processes which were surprisingly similar despite the very different industries the companies operated in. Both companies took a somewhat traditional approach based on a comprehensive market analysis. Internal data is generated bottom-up according to format guidelines set by group management and validated by the strategy offices using externally purchased data. An approach which has proven to be quite useful—at least when it comes to established markets—, as the other participants confirmed. Based on the market analysis, customer segments are identified and defined. Strategic objectives and issues are then derived and set for each business unit by the group management. The job of the strategy office is then to communicate these objectives and issues to the business units whose responsibility it is to develop and implement appropriate measures.

The question what effective measures management might look like ran like a red thread through the entire event. In large companies with multiple divisions strategic measures may easily add up to more than one hundred which all need to be monitored and reviewed. Who should be responsible for tracking measures? The strategy department, the controlling department, the project management office, or the business units themselves? How frequently should progress be monitored? Annually, quarterly, or in even shorter time intervals? In the latter case, how can long-term strategic planning still be separated from short-term operative planning? The answers to these questions will vary greatly depending on the corporate culture and industry dynamics.

Many participants also complained about the lack of integration of strategic planning and financial planning in their companies and were interested to find out whether the use of special software might help. "Yes!" was the clear answer of Alexander Zimmermann, CEO of SOLYP Informatik GmbH. He explained that this was technically easily possible and referred to the example of Immonet GmbH, a subsidiary of Axel Springer publishing house. By integrating SOLYP3 and SAP into a single data warehouse, Immonet has successfully ensured a close link between strategic and financial planning. It is typically internal factors, Zimmermann explained further, that prevent companies from implementing such solutions. In particular, the controlling department must be willing to make strategic objectives the basis of the budgeting process.

Another topic that aroused great interest was proactive portfolio management. It turned out that many companies carry out both strategic M&As in order to achieve their growth targets as well as divestments from non-profitable businesses. For the latter, however, only few companies have established a structured process. As one of the participants mentioned at the end of the event as one of his key takeaways: It's not only important to regularly consider and decide "what we want to do, but also what we don’t want to do anymore." Achieving the right timing is difficult though, as another participant pointed out. When is the right time to abandon a business line that most likely will not generate sufficient profits in the long-term?

In this context, the discussion regarding "focus vs. diversification" usually comes up. Diversification may be necessary, for instance, to become more independent from the economic development of individual industries, one of the speakers noted. On the other hand, it is rather difficult to develop a shared vision for very different business units. "The more diversified a group, the softer the vision," one of the participants brought it to the point. There are many good reasons that speak for and against diversification. What’s important is to keep an on-going discussion about it taking into account the current and possible future developments in the internal and external business environment.

As always really, when strategists meet, the topic of communication was not left out. Even the best strategies are of little use after all if not known and understood by the employees. Everyone agreed that communication needs to be tailored to the target group and delivered through various channels. Some good examples mentioned included brief strategy videos and humorous comic strips. There are no limits to ingenuity and creativity here. And yet, there is, unfortunately, no getting around personal communication with divisional and departmental heads, even if it is extremely time-consuming and, in the case of large multinationals, means traveling around the globe.

At the end of the one-day event Alexander Zimmermann gave a brief outlook on the new SOLYP3 features currently being develop. In addition to a tablet app, which visualizes strategic core data and makes it accessible on the go, our customers can also look forward to a more compact display of data and information in PowerPoint slides.

We were especially pleased to receive unanimous appreciation from our customers for our subject matter expertise and our "great process knowledge." In addition, there was lots of positive feedback regarding the standardization and sharpening of the strategic planning process due to digitization using SOLYP3.

We would like to take this opportunity to thank once again the two speakers and other participants for their interesting contributions and their openness and willingness to share best practices with each other. We are looking forward to the next circle strategy in 2015!