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Boost Your Strategic Planning With Game Theory

Strategic planning, game theory,This post started when I read the Forbes post how aspiring CEOs can prepare for the top job. Joel Trammel recommended that budding leaders learn about game theory. Since the number one job of CEOs (and managing directors) is to make decisions, familiarity with game theory can be a useful tool in strategic planning.

Very basic definition of game theory

While some of game theory makes for dry reading, it is intriguing in its business applications. According to the Stanford Encyclopedia of Philosophy, game theory is “the study of the ways in which strategic interactions among economic agents produce outcomes with respect to the preferences (or utilities) of those agents, where the outcomes in question might have been intended by none of the agents.” In essence, it is the idea that people and organizations take into consideration benefits and risks to make decisions on what they perceive to be in their best interest. It is important to remember that there is an assumption of rational thought behind the process and decisions within situations of competition, conflict, cooperation and interdependence. Game theory is often associated with decision theory.

Game theory and strategic planning

It’s important to not get too hung up on the word, game, when looking at this theory. As you know, much of what you do as leaders of your organizations is handle uncertainty. With strategic planning, it is a guessing game to some extent. You have a vision of where you want to bring your company over the coming year and you have some information about the market you operate in. One of the key things to remember is that you are making decisions with your team regarding the future and these are not made in a vacuum or in isolation. Game theory encourages one to know the variables and to be cognisant that the business is operating in a dynamic environment.

How do you make game theory work for you?

To identify potential avenues for your strategic plan,  there is some information which will highlight the variables:

  • Experience. Very simply put, what did you learn this year? Mistakes, near-misses and gains are all lessons for you and your team to use.
  • Feedback from your staff. One of my clients was telling me this week that his staff has asked him to get out of the nitty gritty. They want him to take time to follow through on goals that were set already, work on his leadership skills and tell them what his next set of expectations are. In other cases, you might hear information about customers, new contacts and other opportunities.
  • PESTEL Analysis. This analysis (learn more about PESTEL) allows you to identify more specifically what is going on in the environment outside of your business. That means everything from politics, social change or industry regulations become more clear in its relationship to your company.
  • SWOT Analysis. This is a smaller picture than the PESTEL analysis but still provides information about what is currently going on in your business.
  • Identify the assumptions underlying all of the opinions put forth. We’re all susceptible to making assumptions. There is a tactic called the 5 Why’s. Simply asking “why” can  illuminate the information gaps, biases and faulty thinking.
  • Challenging/upsetting the current system. Using the 5 Why’s is one way to challenge the system. Keeping yourself and your staff fresh is simply done by asking open-ended questions with an attitude of curiosity. Doing things differently might not mean you’re introducing a new product or service, it might be how work and communication gets done internally.

By taking a look at all of these, you gain information about potential opportunities, risks, trends, outside events that influence your business and much more information. Then you can identify various scenarios and how your strategic plan can flex in response.

 Your strategic plan does more than provide the roadmap for the coming year

While you and your team do need to identify the goals, the steps and the responsible person for the coming year, there is more. Underlying each yearly strategic plan is the overall aim for the company over a period of five, ten or more years. Using game theory in the strategic planning process gives you alternative scenarios so that you are more able to anticipate the turbulence and dynamic quality of the business environment.

 

 

 

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7 Questions To Keep Your Strategic Plan Aligned With Business Purpose

We’re into the third month of 2012 and it’s a good time to see how your strategic plan is unfolding. IBM’s Lou Gerstner once said that having aStrategic plan is roadmap to realizing business' purpose strategy was better than having none at all. See, you can tweak a plan since real life often has some challenge that makes you stop and reassess. A strategic plan is a reflection of your thinking and choices about how you (and your team) shape actions that are taken over the year.

Your plan could reflect:

1. New offerings of products and/or services

2. Back to basics

With the economy remaining turbulent, there comes a point when you have to choose what is best for your business and yourself. Waiting for things to settle is certainly an option but you might be waiting a long time. So, it’s time to back up and remind yourself, why does your business exist? What is its purpose?

How do you make sure your strategic plan is aligned with the purpose of your business? Click here to read more »

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Your Business Vision and a Smaller Lens

Zooming in on your business visionDo you focus on the long horizon or the short horizon? There are limits to doing either strategy exclusively. However, the short term business vision of 1 year is a building block to making your overall vision an everyday experience. How do you make sure that your current actions will lead to the big prize?

Using a PESTEL analysis or a SWOT analysis is a great way to highlight what is going on in and around your business. You need the data. It is easy to assume that the data will point out just the weaknesses or challenges. It also illuminates the strengths and opportunities.

This is the stuff that affirms your organizational vision

When you see what is working, it reminds you that you are on the right path. It’s that simple. Staying aware of the overall vision of your business is part of your foundation.

Take a moment and make the lens a little smaller. What about 2012?

See, when you engage in strategic planning for the coming year, you’re really articulating your vision for that year. Done right, it provides a stepping stone to making your overall organizational vision an everyday experience.

To make your lens a little smaller, start by answering the following questions:

1. What will be accomplished as of December 31, 2012?

2. Why is this so important?

3. Why now?

“Because the business is supposed to make money” is not an answer.

That’s a given. Any business can say that. Well, any business should say that. You have a a variety of choices of what you can offer, which service or product gets a certain focus and how you will market and sell your services and products. Why are you and your team making the specific choices you’re including in your strategic plan?

What do you see for coming year?

How is this part of your overall vision for your whole business?

About the author:  I’m Elli St.George Godfrey, a small business coach and trainer who guides established small business owners to be comfortable in their own skins, unlock the CEO within while leading and managing change in their organizations.  Whether you are expanding locally or internationally, my 3 keys coaching process helps clients move from being excited about a new business opportunity to having the tools to make it actually happen. Curious? Schedule your complimentary coaching session here.

 

 

 

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Do You Even Use Your Strategic Plan?

Small business strategic planningAs I read today’s SmartBrief On Leadership, I came across the results of their weekly poll. The survey question was “How closely do you think you will follow your strategic plan this year?” The results were thought provoking.

According to the poll:

We’ll generally follow the plan but expect a few major deviations   76.15%

We’ll follow it to the letter    11.62%

We may do a few things on the plan but generally ignore it and do something else   9.54%

We don’t follow it at all   2.68%

Is this happening in your small business too?

At the end of last year and the beginning of this year, many small business owners started thinking about what they wanted their business to accomplish in 2011. So, if we, like most small business owners, got the bones of our strategic plan put together. The three questions most associated with the strategic planning process are

1. Where are we now?

2. Where are we going?

3. How are we going to get there?

So you sat down and probably reviewed your organization’s overall mission, values or principles and what you envisioned for the year.  You probably did parts or all of a SWOT analysis. After this, you noted what big goal you’d love to celebrate on December 31st. More than likely, you identified what makes your organization special or even the specific advantage in the marketplace. You probably finished off with setting goals that will make these great aspirations reality.

So, if you went to all of this trouble, why wouldn’t you follow your plan?

There are a variety of reasons why people don’t follow their plans. For some companies, the strategic planning process was an exercise in lip service. For others, they scare themselves with their aspirations and shy away from making these dreams into reality. Sometimes things  happen (natural disasters, personal crises, major market shifts, etc) that make the plan irrelevant.

The strangest number in the poll above is 11.62%. Why do so few business leaders actually follow their strategic plan? You have to wonder what is really happening in the planning process. On the face of it, it seems like a colossal waste of time to go through the whole process and then relegate the plan to a shelf somewhere.

What’s the deal?

Why do you think strategic plans are not followed?

*For more information like this live, check out my no cost webinar, “Achieving the CEO Mindset For Small Business Success” Thursday, March 31st, 7 pm BST/2pm ET. For more information and to register, go to Programs

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