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Are You Zooming In or Zooming Out? Challenging Conventional Strategic Planning

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Some small businesses are founded with a strong initial intention and others are created by accident without a deliberate strategy. As a business evolves, the need to develop a conscious strategy becomes more important. This is especially true in the business of financial advice, where practitioners often use similar language to articulate their vision, mission and “unique” proposition.

Conventional wisdom recommends creating a long-term business plan for the next five years and then designing an operational or tactical plan for the near term, typically one year. The problem with this approach is that assumptions often change faster than one’s ability to execute. As with a summer suntan, a healthy glow fades away as the seasons change. Businesses require continuous planning to keep pace with changing market forces and to respond to new demands from clients and employees.

Recently I had the opportunity to listen to John Hagel, co-chairman of Deloitte’s Center for the Edge. Hagel has spent the past 25 years in Silicon Valley as a successful entrepreneur and consultant, and holds an impressive list of accomplishments.

Hagel challenged the conventional approach to strategic planning, arguing that the best-performing companies—especially in the technology arena—deploy a uniquely effective approach he refers to as “Zoom In-Zoom Out.” First, they “zoom out” to develop long-range assumptions about the forces that may impact the business over the next 10 to 20 years and to create a vision around these findings. Then they “zoom in” to focus on a very short period of time, say six to 12 months, and work on two or three initiatives that Hagel calls “needle movers.” This strategy has been found to accelerate movement toward business goals.

Hagel warned against the common pitfall of spreading skimpy resources over too many choices, thereby not impacting any one initiative. With the “Zoom In-Zoom Out” approach, investing in specific short-term objectives helps to fund the long-term plan.

At the same time, leaders must stay engaged with the status of their long-term assumptions; we all know that change is a constant in this business. Hagel explained how companies often latch onto rigid assumptions in their long-range plan, failing to alter their strategy when the market shifts. Kodak and Microsoft offer two prime examples of this mistake. Both companies once dominated their market but failed to adapt their strategy to changing times.

Hagel explained how Kodak was run by chemists who believed that the future of photography would always be in film. Oddly, they were among the first to have a patent on digital photography—but they missed the opportunity to invest in a new direction. Similarly, Microsoft accomplished its initial goal of becoming the leader in desktop computing, but then became mired in its own plan. While its original focus was successful, it was outmaneuvered in the personal technology space by the likes of Apple and Google. Kodak and Microsoft “zoomed in” to create initial success but neglected to “zoom out” to challenge assumptions, revisit their long-range vision and develop effective short-term objectives.

Further on this topic, Hagel emphasized the importance of achieving critical mass in the market before any potential competitors. Fast followers are rare and once a provider has a foothold it’s nearly impossible to topple them. Think about how you might localize this concept by creating a winning strategy other firms could not replicate easily. The strategy could revolve around a well-defined market niche, a unique solution to solve your optimal client’s biggest challenge or a recruiting program that makes your firm the employer of choice for top-performing financial advisors.

Above all, take time to develop a focus. Hagel believes that most companies fit into one of three categories based on business function: infrastructure management, innovative product development or customer-centric, meaning they provide helpful solutions to consumers. The worst performers are those who can’t decide which business they are in so they attempt to straddle all three. Hagel’s advice: “Unbundle the company. Pick one and be superior. Get out of the businesses you shouldn’t be in.”

In financial services, an example of this problem might be a firm that manufactures and distributes mutual funds, acts as a custodian or broker-dealer and has a direct retail business. A similarly over-burdened advisor might have a retirement plan recordkeeping business, actively manage mutual funds and run a high-net-worth wealth management practice. Without a strong focus, these businesses waste time and money.

Overdiversification of a business—especially into incompatible or competing activities—tends to strain resources and retard growth in each line of business. If it takes too long to explain the whole enterprise (or even diagram the sentence that describes your business), likely it is poorly structured.

Hagel’s comments got me thinking about the many advisory firms I have encountered over the years. The best-performing firms defined their optimal client, thought about what those clients might need and should expect from their advisor, and methodically built an offering to respond to that need. In addition, they consciously selected the offerings they would own and invest in and those they would rent or collaborate on. For example, M Financial consists of high-end insurance professionals who share a common resource to deliver risk-based financial solutions for complex estate planning. Individually they don’t manufacture anything, but collectively they leverage each other’s expertise as well as the balance sheet and tools of M Financial itself.

An effective “Zoom In-Zoom Out” strategy requires leaders to challenge and inform their assumptions about the business, considering the impact of regulation, demographics, new methods of competition, investment environment and emerging client needs. Hagel advised business leaders to take the time to discuss long-view issues in every management meeting, and dive deeper into specific objectives every six months. Think in terms of a six- to 12-month tactical plan around one to three initiatives. In his words, “Go fast in short increments.”

Hagel cautioned against two common failures: ignoring the big picture and focusing solely on the incremental, and adopting an overly rigid long-term strategy.

A “Zoom In-Zoom Out” strategy must be informed by the facts. While businesses tend to look at financial metrics, these lagging indicators may not be helpful in understanding trends that could affect you long term. Hagel advised developing firm-specific metrics to serve as leading indicators, such as client satisfaction, client turnover, demonstrations of loyalty through referrals and major sources of business opportunities.

Regular management meetings foster ownership in the outcome that you and the rest of your team envision. Discuss trends revealed through the leading indicators and analyze likely implications, then make decisions about the direction your business should take and the immediate steps needed to get you on the right path.


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