Business 20. Lecture #5: Planning & Decision Making

Transcription

1 Lecture #5: Planning & Decision Making

2 planningdemotivator.jpg

3 He who fails to plan is planning to fail. Winston Churchill, World War II,

4 Remember The Lemonade Stand Planning Organizing Controlling Leading

5 Mission Statement Mission: The purpose of an organization. Starbucks: to inspire and nurture the human spirit one person, one cup and one neighborhood at a time. Google: Organize the world's information and make it universally accessible and useful. Toyota: Attract and attain customers with highvalued products and services and the most satisfying ownership experience in America. El Camino College: Offer quality, comprehensive educational programs and services to ensure the success of students from our diverse community.

6 Goals (Vision): A desired future state. Starbucks Vision Our Coffee It has always been, and will always be, about quality. Our Partners We always treat each other with respect and dignity. And we hold each other to that standard. Our Customers When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers even if just for a few moments. Our Stores It s about enjoyment at the speed of life sometimes slow and savored, sometimes faster. Always full of humanity. Our Neighborhood We can be a force for positive action bringing together our partners, customers, and the community to contribute every day. Our Shareholders - We are fully accountable to get each of these elements right so that Starbucks and everyone it touches can endure and thrive.

7 Values: Philosophical priorities the organization is committed: Focus on the user and all else will follow. It s best to do one thing really, really well. Fast is better than slow. Democracy on the web works. You don t need to be at your desk to need an answer You can make money without doing evil. There s always more information out there. The need for information crosses all borders. You can be serious without a suit. Great just isn t good enough.

8 From Mission to Goals and from Goals to Plans Choose Goals Identify Actions Allocate Tasks Review Progress Make Adjustments Choose Goals Identify Actions Allocate Tasks Review Progress Adjust

9 Levels of Planning Sets the context for Corporate-level Strategic plan (CEO) Business-level strategic plan (heads of businesses) Operating plans (heads of functions) Shaped by input from Unit plans (heads of departments, teams, individuals

10 Look Familiar? Remember the Lemonade Stand General Managers Functional Managers Frontline Managers

11 Types of Plans Strategic plans: A plan that outlines the major goals of an organization and the organization-wide strategies of attaining those goals. Operating plans: Plans that specify goals, actions, and responsibility for individual functions. Tactical plans: The action managers adopt over the short to medium term to deal with a specific opportunity or threat that has emerged. Unit plans: Plans for departments within functions, work teams, or individuals.

12 Zappos Example Strategic Plan Operating Plan Tactical Plan Unit Plan

13 From Strategy to Action at Zappos World Class Customer Service Hire great people Recruiting, Compensation, Benefits, Location Train employees Training programs, monitoring, supervision, customer feedback Customer Friendly Policies Free Shipping, Free Returns, 24/7 Availability Advertise Tell the world!

14 Types of Plans Standing plans: Plans used to handle events that reoccur frequently. New Store Opening (Starbucks), New Employee Orientation (Zappos), New Product Introduction (Movie Studio)s Single-use plans: Plans that address unique events that do not reoccur. Merger / Acquisitions (AT&T buys T-Mobile), Merger, New technology integration (LAUSD updates their accounting system)

15 Types of Plans Contingency plans: Plans formulated to address specific possible future events that might have a significant impact on the organization. Supplier Problems (Toyota after Tsunami, Employee Strikes (supermarkets) Crisis management planning: Plan formulated specifically to deal with possible future crises. Major Earthquake, Civil Unrest, etc. Scenario planning: Plans that are based on what if scenarios about the future. What if there s a worldwide recession? What if the price of commodities skyrocket?

16 Zappos Example Standing Plan: New Employee Orientation, New Product Launches Single Use Plan: Integration with Amazon.com after acquisition Contingency or Scenario Planning What happens if there s a strike at UPS? What will we do if our main servers go down? How should we react if Apple starts an ishoes store?

17 Strategy Must Be Realistic SWOT Analysis Strengths, Weaknesses, Opportunities, Threats Strengths: Huge Selection, Great Customer Service Weaknesses: High Cost Structure, No Discounts, Limited Product Lines Opportunities: Other Product Lines (clothes, handbags, housewares, etc.) Threats: Low Price Competitors, Better Automated Customer Service SWOT Analysis: Amazon.com July 22, 2009

18 Strategic Planning Process Feedback External analysis (opportunities and threats) Review progress against plan Mission, vision, values, and goals SWOT analysis Create Strategies Draft action plans Implement Internal analysis (strengths and weaknesses) Assign subgoals, roles, responsibilities, timelines, and budgets

19 When Planning Fails: Why didn t Blockbuster Adapt? Escalating Commitment: Sunk Costs Strategy was to open and operate stores Prior hypothesis or availability error bias When experience fails us Netflix was an unknown and new threat Reasoning by Analogy: Too simplistic Netflix was not a virtual Blockbuster, it was an something entirely new customer experience

20 When Planning Fails: Why didn t Blockbuster Adapt? Representativeness: Generalizing from anecdote My friend said that Netflix didn t have good movies Illusion of control: Too big to fail No one can ever match our size but the Internet is bigger! Framing Bias: When defining the problem IS the problem Blockbuster was in the movie rental business, Netflix is in the entertainment business Rule: 80% of consumers will still want to rent and return to a physical location

21 Sub Optimal Decisions Risk Averse: Make a Choice 1. Pay me $100 for a 1% Chance at $100, Get paid a guaranteed $100

22 Sub Optimal Decisions Risk Averse: Make a Choice Groupthink Trip to Abilene Lack of Diversity Fear of Questioning Authority Poor Framing Cognitive Bias

23 Avoiding Planning Pitfalls Devilʼ s advocacy: The generation of both a plan and a critical analysis of the plan by a devilʼ s advocate. Dialectic injury: The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action. Outside view: Identifying a reference class of analogies past strategic initiatives, determining whether those initiatives succeeded or failed, and evaluating a project at hand against those prior initiatives.