Brian Tracy explains the benefits of strategic planning using a concrete two-day strategic planning exercise he ran with the executive team of a newly public NYSE company. Prior to planning the firm’s annual sales were about $75 million and leadership set a stretch goal of $100 million; after the two-day process they implemented strategic plans and achieved $125 million in sales within the next 12 months, attributing the improvement to those two days. Tracy contrasts corporate strategic planning (aimed at increasing return on equity and improving financial/competitive outcomes) with personal strategic planning (aimed at increasing one’s "return on life" or return on personal energy/human capital).
Questions this video answers
Two days.
About $75 million.
To grow sales to $100 million.
$125 million in sales (a $50 million increase).
Chapters
Hello. I'd like to talk to you right now about the benefits of a good strategy. What I want you to do is I want you to get into the rhythm of thinking and acting strategically for the rest of your life. Some years ago, I was invited to take the executive group of a young dynamic New York Stock Exchange company. Just went public as a matter of fact, through a two day strategic planning exercise. This company had grown very fast and largely based on the ambition, that drive of the top management people. The company was experiencing a booming market and they were intensely motivated by the potential for high personal incomes. As you can imagine, none of them had ever done any strategic planning before, including the president of the company, great guy. And at that time their annual sales were about $75 million. Their goal for the next year, which they considered a strategic goal stretch goal was to grow their sales to $100 million. Now, most of the key people in this company were in their twenties. They were skeptical of the whole idea of strategic planning. Yeah, we don't need this. They thought it was largely a waste of time. After all, they reasoned, they knew what they needed to know to get the job done. And they were doing a pretty good job anyway, weren't they? So for two days I helped them to ask and answer a series of questions about themselves, their business, their market and their future. The same questions that you need to ask yourself. As they wrestled with these questions and argued with each other, they came very quickly to the realization that they had been succeeding largely on the basis of luck, energy and a good market. As a result of this process, they did a complete reversal in their thinking. They got seriously into the work of strategic planning and they hammered out a clear set of goals and plans for the coming year. Now, the result was amazing. Instead of increasing their sales from 75 million to 100 million, which is what most of them had considered quite optimistic, they hit $125 million in sales, in revenues within the next 12 months. Imagine that, a 50 million dollar bounce. And they told me later that they attributed their entire success to the two days we spent together in strategic planning. They said that those two days were the most important two days in the history of their company. Now, the reason this strategic planning is so helpful is that it saves you an enormous amount of time and money. By thinking through key questions and concepts of strategy, you very quickly find yourself doing more and more of the most important tasks that can move you rapidly towards your key goals. At the same time, you do fewer and fewer of the things that are not particularly helpful. And you know what I'm talking about. You do more things right and fewer things wrong. You establish specific targets for the company and for everyone in it. You greatly improve your ability to measure and track results. You move onto the fast track in your work and in your life in general. When you use strategic planning. The purpose of corporate strategic planning is to increase return on equity. Equity is defined as the actual amount of shareholder money invested in working capital in the enterprise. That's aside from borrowed money and things like that. The aim of strategic planning in business is to reorganize and restructure the activities of the corporation so as to achieve a higher quality and quantity of outputs relative to inputs. It is, in other words, to improve and increase financial results. Goal of strategic planning is to achieve superior profitability overall. The goal of strategic planning is to enable the company to utilize its people and resources more effectively. The company will then function better than before. It'll be in a superior position relative to its competition. This improvement can be measured in terms of higher sales, greater market share, better profitability, higher returns on invested assets and better positioning for the future. Now, personal strategic planning is very similar. However, instead of return on equity, personal strategic planning is aimed at increasing your return on equity energy. To put it another way, it is to increase your return on life. The equity in a business is measured in terms of financial capital. Your personal equity, on the other hand, is measured in terms of your own human capital. Your personal equity is composed of the mental, emotional and physical energies you have to invest in your career. Your goal should be to get the very highest possible return on on the investment of yourself in everything you do. How well you invest yourself determines your income. This is the focal point of personal strategic planning. Sa.
