Strategic Planning for Different Business Units – A Case Study

Strategic Planning for businesses with different business units

This case study describes how a large corporation with several business unites developed and implemented a consistent group-wide process for strategic analysis and strategic planning for the first time.

Larger companies normally have a number of different strategic business units (SBUs). Depending on the degree these SBUs differ from each other, there will be distinctive strategies for them.  Those SBU-strategies should ideally be aligned around the overall corporate strategy and vision. On the other hand, they have to be specific enough to fit the individual market situation, customer preferences and driving forces of each particular business unit. In most cases, the corporate strategy will provide a framework that gives direction – but also limits – for the SBU-strategies. It can become a demanding task to balance the different requirements of corporate center and business units.

The initial situation and the intention of a group-wide strategy process for all business units

This case study is about a global player I worked for about ten years ago. It was a leading industrial and automotive supplier with a wide product range. In general, most of their products had in common that they were high-precision metal parts. The company built its competitive advantage on its engineering expertise. Thus it tried to compete in the fields of quality and innovation and to avoid price competition.

Despite these commonalities, the company had around 50 strategic business units with fairly diverse characteristics at that time. They had a matrix structure that was organized either around product groups, customer groups, or applications of the products. In some segments they had a comfortable market leadership position in terms of volume and technology – sometimes nearly a monopoly. In other segments they were threatened by low-cost competitors from far-east. And, of course, there was everything in-between.

They had products in every section of the Boston Box: Stars with high future potential, cash cows that did not require much investment but provided a secure stream of revenues, dogs that had fallen behind and some question marks that would need some effort to reposition them.

Obviously, SBU-strategies were quite different too. They did not only depend on each segments specific situation, but also from the skills of each SBUs management. Some of them had a really strategic mindset with a vision and enough foresight. Others had excellent product and market knowledge, but lacked the ability to transform this knowledge into a strategy.

I guess I just described the typical situation of most large companies. As many others, our example company realized that they had to improve their strategic planning on corporate and SBU level. Until then, each SBU-management was free to develop their strategies as they felt comfortable with. As long as their performance met expectations, everything was accepted.

That was not enough anymore. Top management decided to set up a group-wide consistent strategic planning process with an annual strategic planning meeting that was mandatory for each business unit. They hoped to achieve a number of objectives with this joint strategy process:

  • Improve the quality of group-wide activities for strategic analysis and strategic planning
  • Gain a better understanding of the competitive position of each business unit stand alone and in comparison to each other
  • Have an analysis that allowed comparing the strategic situation of all SBUs by a common scheme and with common measures
  • Assess the strategic abilities of the business unit managers
  • Identify areas for improvement in terms of strategy development and existing strategies

The first approach for a group-wide strategy process for all business units

Besides the organizational effort, the main problem was to develop a standard strategic analysis that would lead to meaningful results for all the diverse strategic business units. The intention was to have an analysis that allowed comparing the strategic situation of all SBUs by a common scheme and with common measures.

At the same time, we at the strategic planning department had to make sure that the analysis gave enough space for all the individual characteristics of each SBU. That was imperative because

  • You would not come up with meaningful results if you leveled out specific sources of competitive advantage or specific threats
  • You would never gain any acceptance for the process among SBU managers without taking into consideration their individual situation.

In order to achieve this, we focused on some standard strategic analysis tools. We started with a questionnaire that covered general things like market situation, market volume and expected growth rate, our market share and competitive situation, comparison of our own products with competitive offers (in terms of quality, price, technological level etc.) and more. The results of those questionnaires were used as a basis for a standard presentation for each SBU.

Each presentation contained the same set of charts and figures, mainly on our positioning in relation to our competitors. Those standard figures were accompanied by a number of empty boxes for commentaries and explanations. That was an important feature to give each SBU the opportunity to present its individual specifics and to support the standard charts with individual background information.

The storyline of the presentation was structured in a way that led from external to internal analysis. Results were to be summarized in a SWOT-chart. After that, SBUs were asked to present their proposals for strategic developments, together with a rough estimate of the financial expectations.

Results and lessons learned from the first year

In the first year, this process did not work perfectly, but rather good. It was the first time that the company made efforts to compare different SBUs in their current position and their future prospects. Of course, not everything went well.

In the first cycle we realized that not all SBU managers had enough strategic knowledge for such an exercise. They were good managers who knew their products and their markets, but many lacked the ability to summarize this knowledge in the required way. One lesson for me was that many people claim to know a SWOT-analysis, but few are able to do it correctly.

Another learning was that the task to describe the strategic position for 50 + strategic business units with a pre-defined set of measures and tools was far more challenging than we expected. For example, we struggled with different definitions of market share in group controlling and in some business units.

Thus, the acceptance of the whole process among business unit managers was fairly low. Some of them perceived the whole process as just another embarrassing initiative from corporate headquarter that prevented them from more important work. They came up with all sorts of avoidance strategies:

  • General lack of cooperation
  • Lengthy discussion of every detail of the figures, visual presentations, definitions etc.
  • Discussion of the meaningfulness of the whole process
  • Misuse of the comment boxes in the presentation for whatever they considered their message – sometimes without any relation to the standard charts and analyses
  • Neglection of the required standard presentation in exchange for their own slide decks

Process improvements in year two

Despite all initial problems top management decided not to make major changes in the strategic planning approach and in the analyses involved. However, we from the corporate strategy team made all efforts to improve the process as a whole. We realized that our most important lever was to gain the buy-in of the business unit managers:

One important step was to discuss all definitions and figures to be used together with the business unit managers and the finance department well in advance. Thus, everybody involved had a common understanding of all terms and figures.

Moreover, we from the strategic planning department offered SBU-managers much more help. We had them do the questionnaire and some initial comments in the presentations. Then we set together with each one of them and went through the whole presentation step-by-step. Basically, it was a structured interview. We asked them for the relevant information and helped them to identify the really important aspects within their wealth of knowledge. Like a sparring-partner we discussed with them the implications of major findings and trends as well as of their strategies. Thus, we did most of the strategy-writing. That improved results significantly, and thus satisfaction of all participants increased too.

Even if it still wasn’t the perfect consistent group-wide process, we had made a step forward and had achieved as much as we had hoped to achieve.

This is the extended version of a post that first appeared at Eddielogic.com – The Blog on Strategy


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