Recently the Olympics dominated the airwaves for a couple of weeks. Everywhere you looked, the athletes used visualization to train, plan and improve their performance. Skiers, skaters and sliders swayed back and forth, moving their hands and bodies as they rode up the chairlifts or waited their turn before the start. They were not relaxing. They were visualizing their runs, what was going to happen and how they would respond. In some cases, athletes used VR goggles in their training, to do the same thing but with even more detail. How can we use this same competency in our planning and budgeting to get both better and repeatable results?
Recently, I spent a day with wine industry professionals about how to improve the alignment of strategy, planning, operations and budgeting. It is no secret most strategies and projects, in any industry, do not meet expectations or even fail. There are many reasons but high on the list are not understanding who is doing what, what they need to achieve their goals, lack of understanding about how the whole is interdependent and just poor communications across the organization.
One tool to use to describe and define some of these needs is a value chain. It comes and goes in corporate favor and the name may change but the basic process has been proven time and again to build a good foundation for strategy, planning and discussion. Unfortunately, it rarely sees daylight beyond the Ivory Tower of strategy, which is a shame since the operations people are critical to any plan’s success and finance will be in charge of monitoring and reporting how the plan is proceeding. It can be a great visualization tool for everyone to show how the plan will work, who needs to do what and what they need. This information is exactly what operations needs to succeed and what finance needs to build real world budgets.
A full value chain approach may involve up to eight levels from defining roles to a final strategy. This does not include multiple iterations of refinements that may be needed. There are huge benefits to a project and a company if operations and finance are included in even just the first three stages. The first two levels lend themselves well to visualization. The first –and surprisingly one of the hardest levels — is just defining the basic stages involved from concept to delivery and what functions are being done at each of those stages. What needs to happen, the order they happen and even terms everyone uses every day will come into question. That alone points to potential misalignments that could already be hindering your business. Defining these stages is often a lively conversation, so may not lend itself to visualization in development but upon completion there will be a unified virtual path that all can see.
To use a wine industry analogy, the stages from taking a fallow field and developing it into a vineyard can be seen as one stage or many. Maintaining and harvesting a vineyard can likewise be seen as one or many stages. The people, equipment, services and steps needed to establish a vineyard are distinct from those needed to operate a vineyard. Making the wine can just be called production but then broken down into crushing, production and warehousing, which can again be broken down. The framework is flexible and we can set the stages by what we are trying to accomplish. The key is that all the steps must still be done, no matter who is doing them.
The second level in a value chain lends itself easily to visualization. In this level, we want to describe what is needed to deliver all those functions in each stage. You can actually close your eyes and walk through your virtual world to do much of it. If we go back to our winery, this time we will visualize our tasting room. I am a customer walking in the door. What do I see, what do I touch and who do I talk to? Is it a standing tasting bar or are their seats? There are statistics that talk about how layouts affect consumer sales. What can I buy, what can I taste and how do I figure it out? Now, I am talking to a server and I take their role. Who am I, how was I trained, what is around me, what do I need, where is the wine, how did I get it, from where, same for the glassware, how is POS handled, how about cleaning and broken bottles/glasses and it continues. Everywhere you turn in the wine industry, there are taxes and regulations, so as I move through the world I can identify them. There is data being generated everywhere, so how is it collected and communicated, to whom and how can I use it to run my business better? The world just gets deeper and deeper as you move along the tasks and people. In the real world, everything we imagine here will need to be done and all of the items used, created or thrown away must be bought, stored or transported, thus be in your plan and a budget. What happens in the real world can be very different from what is imagined from an isolated office perch, so here is an opportunity to capture experience from people doing those tasks and use it to build and execute a better plan.
The third level in a value chain is where we actually start to build the plan. We look at who is actually doing what and supplying what. Do I want to do all those tasks and buy all that equipment? Can I afford to? The answer is always “No”. So who do you turn to buy or lease that equipment or outsource the task completely? These questions go straight to our business model, what are our core competencies, how are we going to make money, where is the best use of our money and how can we utilize others to improve our profits and cash flow. With the visualization we have done earlier these questions become much easier to answer and more options will become apparent.
Visualization is not a tool for only Olympic athletes. It is a way for anyone to plan and anticipate what is going to happen. We can already anticipate that most plans will go off track, so this exercise helps move planning from the top, down into the real world. It will also help your finance team to understand the business, plan better, anticipate the needs the rest of the organization and help everyone succeed. CFOs2GO’s Strategic Services Group can help you learn to use a value chain method to develop better business and operational strategies, improve your planning and develop budgets that are aligned with those strategies and plans.