The Management Business Review – Deploying Strategy With Integrated Business Planning

The Management Business Review – Deploying Strategy With Integrated Business Planning
Number 6 of 7 in the Oliver Wight Strategy Deployment white paper series
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In case you missed it – read the other papers in the series:

White Paper #1: Connecting Strategy to Execution – Deploying Strategy With IBP
White Paper #2: The Portfolio Review – Deploying Strategy With IBP
White Paper #3: The Demand Review – Deploying Strategy With IBP
White Paper #4: The Supply Review – Deploying Strategy With IBP
White Paper #5: The Integrated Reconciliation Review – Deploying Strategy With IBP

Introduction

In today’s rapidly evolving business landscape, strategy has become more crucial than ever. The CEO faces a challenging growth agenda. Companies are navigating a myriad of challenges, including technological advancements, shifting consumer preferences, and global economic uncertainties. On top of that, 70% of new product introductions fail, and 83% of mergers and acquisitions fail to deliver expected returns. These factors demand a robust and adaptive approach to strategy deployment, which IBP provides.

This paper is the sixth in the seven-paper series “Deploying Strategy with Integrated Business Planning.” It provides an overview of the fifth step in the Integrated Business Planning (IBP) process – The Management Business Review (MBR) – and its significance in shaping the future direction of the business and what it takes to be effective.

In the first white paper in this series, we introduced the concept of “Connecting Strategy to Execution,” through which individual strategies and plans at the business unit and functional levels are cascaded down through the organization (see figure 1). In subsequent papers, we explored the role of each of the steps in the IBP process in operationalizing these strategies and plans to deliver company objectives.

Each IBP review step – portfolio, demand, and supply – has specific roles in the IBP process. Each review has an executive owner responsible, for their part of the company strategy, supported by well-defined initiatives and projects. The portfolio team considers the market and decides which products to introduce or retire – they are responsible for shaping the portfolio to achieve financial goals based on market opportunity and company capabilities. The demand team develops an unconstrained demand plan based on the portfolio growth plan to meet customer expectations and improve performance. The supply team evaluates what it will take to meet the requirements of the portfolio and demand plans, assessing manufacturing, labor, input material, distribution, logistics, inventory, and cost implications.

Suppose the supply team determines it is not possible to deliver the updated plans from the Portfolio and Demand Reviews without changing the strategy, a significant capital investment, or an increase in capacity or resources. In that case, the issue is taken to the Integrated Reconciliation Review (IRR). The IRR, the subject of the fifth paper in the series, is a working session that prepares the agenda for the final stage of the IBP process – the Management Business Review.

Purpose of the Management Business Review (MBR)

IBP is often mistakenly perceived as a supply chain initiative. When used effectively, it is the way to run the business, and the MBR that makes this distinction. The MBR is the point in the monthly IBP cycle where the leadership team comes together to approve the plans from the preceding review steps and chart the business’s future trajectory. It identifies gaps that need to be resolved and determines actions to ensure the business remains on target to achieve its strategies and goals (see figure 2).

The annual budget, or annual operating plan, is created at a moment in time. However, it is outdated on the day it is published. With a monthly MBR, the business leaders have an opportunity to review and update the plan each month with corrective actions. There must be a strong bias in the MBR towards making decisions and taking action, and there are fundamental behaviors without which the entire IBP process fails. One such behavior is truth in the numbers. When things aren’t going as planned, the MBR is the opportunity to ask, What should be done differently? How do we respond, in an aligned and synchronized way across the business to reprioritize and refocus?

Leaders may be comfortable talking about stretch goals or “go-gets” but find it much more challenging to face the reality of a plan that is not working. Some executives, led by their CFOs, may use last year’s performance with some incremental management by objective improvement as the guide for the annual targets and budgets vs. using the strategy assumptions. This failure occurs because the strategy hasn’t been operationalized and vetted for credible assumptions over the strategic plan horizon – which is essential to have a plan achieve its strategic targets.

One of the most powerful aspects of the MBR is its formal escalation process. It allows managers to present critical issues to the leadership team. This process relies on the courage of individuals and a leadership culture that accepts the bringing of bad news or tough topics and the ability to be decisive. This culture still proves elusive in many companies.

The purpose of the MBR is to “size” the business by looking out over an entire four-to-24-month rolling time horizon, or even longer, depending on the nature of the business. Some organizations try to do this at an item level. The problem with this is that the items the company will be running the business with in two years probably haven’t been released yet. Think of the marker pen market, for example; the forward plan isn’t about how many red, green, and blue markers are going to be sold in two years (which is only useful when it comes time for ordering the ink), the objective instead, should be to try to understand the market, decide which areas to play in and record the key assumptions around the targets and planned activities.

MBR in a nutshell

Leadership empowerment: Leaders make crucial decisions about resources, investments, and priorities.

Key IBP questions: – (see the previous papers in this series).
1) How are we doing?
2) Are our plans valid?
3) Do our plans meet the needs of the business?
4) Do we have any gaps? – and what are the potential solutions?

Review assumptions, risks, and opportunities: Define key areas of alignment, what has changed from the prior cycle?

Identify gaps and initiate actions: Identify and agree on gap-filling actions.

Synchronize business plans: Ensure a unified and integrated plan.
1) Priorities are clear, and plans are resourced realistically. The plans do not include words like “hope it works.”
2) Execute strategy through a regular disciplined process, with regular checks – are we on track to meet our strategic initiatives?
3) Proactively solve the issues facing the business vs being reactive.
4) Leadership alignment and agreement.
5) Approve an updated rolling 24-month plan.
6) Set the direction for the future of the business and prioritize.

The MBR agenda

The MBR focuses is on the ”bigger picture,” – it is important that it does not become a KPI review. Driving an automobile is a good analogy; you can’t go down the highway very effectively using your rear-view mirror, or if you’re only looking just across the hood. If you do, you won’t see the backup that’s happening a mile ahead and have the opportunity to exit before you run into a roadblock.

KPIs and success indicators are, of course, part of the agenda, and “how we’re doing” is an important question to answer. In addition, though, the MBR must address the following questions:

  • How have we performed against critical measures?
  • Are there any new external trends we should understand, and do we need to act?
  • Are our strategic priorities on track, and should there be any course correction?
  • Are any key product families off track and need gap resolution?
  • Do we have a single set of aligned plans?
  • What priorities and decisions should be communicated to the teams?

It is important to turn the organization’s sights to a farther horizon, with the agenda focused on what is material to the business, comprising issues and decisions escalated throughout the monthly IBP cycle. Nobody can predict the future, so any forward plan is based on assumptions. A significant part of the MBR agenda is reviewing these internal and external assumptions and checking their validity. External assumptions are also significant because today’s world has so many influencing factors. Recent experience has taught us how business is hugely affected by global economies, conflict, geopolitical uncertainties, natural disasters, supply disruptions, and the outbreak of disease, and not just competitor activity and market share.

The issues are best summarized into a single page, encapsulating all the decisions required for an “approvable” plan. These will, of course, vary from one organization to the next, but here are some typical examples:

  • How to close the YTD revenue and operating income gap
  • Resolve capacity investments vs demand mismatches
  • The level of risk a company is willing to take on a given unpredictable marketplace
  • Lack of clarity of competing or unaligned priorities
  • Alignment of the financial plan and operational plan

These types of decisions are common and cannot be delegated. The issues should be laid out clearly and concisely, along with their strategic and financial implications, evaluated options, and recommended path forward. With the information before them, the presentation should be so compelling that no reasonable person would not make a decision.

Given this type of agenda, the MBR meeting should be based on management by exception. it would be a very good sign if the executive came to the MBR and said, “I’ve seen the agenda and completed the pre-read. I see that we have three really important issues that we need to discuss and decide on. Let’s just skip right to those.”

Conversely, focusing on the KPIs allows people to shy away from the issues that really need to be addressed and acted upon.

MBR and strategy deployment

One of the questions Oliver Wight’s Business Advisors ask when they are carrying out a diagnostic assessment of an organization is, “what is your company’s strategy?” Often the response is an aspiration rather than a strategy. For example, surveying several people in one client company was met with the consistent response, “we want to be a billion-dollar company in three years’ time.”

The IBP process helped turn this aspiration into a strategy to drive clarity, answering the question of “what are we going to go do?” and bringing it to life. The portfolio management process allowed the company to identify which products it would bring to market over the next three years to achieve its billion-dollar target. The demand review developed the channel strategy, supply reshaped its manufacturing supply footprint, and the MBR provided visibility on the primary initiatives for meeting the business objectives.

Using IBP to deploy the business strategy is advanced behavior and it is typical for organizations to first use IBP (and the MBR in particular) to deal with the low-hanging fruit; one set of numbers, organizational alignment, and a clear forward plan. Nonetheless, considering the strategy deployment, the process must be designed from the outset. As the educator and author Stephen Covey said, “You need to begin with the end in mind.” In this way, the organization will benefit fully from the IBP process.

Typically, the business strategy comes from the three-to-five-year strategic plan. In order to be operationalized, the strategy must have identified actions. Those actions will need to be further broken down for each of the IBP review steps. It then becomes a matter of measuring and reporting the progress, which involves creating a strategic metrics dashboard. The MBR provides the forum for reviewing progress against strategies on a monthly cycle and identifying and agreeing on corrective actions needed.

As well as a summary of the latest portfolio, commercial, and supply plans, the MBR also considers (via the Integrated Reconciliation process) any issues that sit outside these three core IBP review steps, also impact the business – a major IT implementation or a change resulting from a merger that changes decision rights. These issues may not fit neatly in the IBP review steps but may impact the business.

It is often the case that input to plans and the reality of investments and resources in place, doesn’t add up. There is no connection to strategy without the MBR and the alignment around this reality via the IRR. It becomes just a theoretical exercise. If you want to get from Austin, Texas, to Paris, France, in two hours, it may be costly and potentially dangerous, and you’d need connections with Elon Musk or Jeff Bezos. If the resources are not available to achieve the plan, the plan is not viable. The company’s plans will be in jeopardy without discussing the gap between the plan and resources. Sometimes, this behavior occurs, unintentionally and without malice, where there is a culture within the leadership team of not wanting to receive bad news and top-down pressure to meet targets. In this case, people approve business plans without a realistic idea of how they will achieve them.

A key tenet of the MBR is the notion that you can be wrong but still be successful. It isn’t healthy for an organization to chase false precision in its long-term plans, yet some become obsessed with a single number. For example, if the sales target is 100, the likelihood of hitting that number exactly is relatively small even if you’ve done everything right; it’s just as likely to be 98 or 102. Nonetheless, in such a culture, a result of 99 against a target of 100 is deemed a failure. The fact is that no plan survives first contact with the competition and is wrong the moment it is published. Chasing this sort of precision is not productive. It’s important to understand that there is a range of realistic outcomes that could play out. Using scenario planning to assess their potential builds resilience within the business. There is a whole range of things that aren’t likely to happen, but there’s a smaller range that might, and these are the ones to take into account in the planning process and review in the MBR.

The MBR meeting

Working to the principle of exception-based management and restricting the discussion to only those issues that really need attention, two to two-and-a-half hours for an MBR meeting is typical. However, it is better to err on the side of too much time to avoid cutting the meeting short and not addressing critical issues.

Participants

  • CEO, MD, or President
  • Leadership team (must include the owners of the preceding IBP review steps
  • The key role of the IBP leader
  • Guests as needed – or unique functions – sustainability, HR, IT

The right people

People make the process work. One of the single most important things for the success of the MBR is having people in key roles who can identify the issues and offer potential solutions. This requires real business acumen and an aptitude for looking at things from a total business and strategic perspective. It also requires an ability to interact with and sell to the leadership team, so that no reasonable person, given the information presented could come to a different conclusion.

Remember, these aren’t discovery meetings. These are business reviews, where the issues are already known, the preparation has been completed, and the purpose is to make the right decisions. Preparation is key.

The meeting’s ownership resides with the person in charge of the business – the CEO, President, or GM. Their staff and the rest of the leadership team are also required attendees. By design, they also own the other steps in the IBP process – the most senior commercial person will represent the outcomes from the demand review, and so on. Having them in attendance means that they are not only interested, but also accountable.

Other attendees may include a Chief Information Officer, Head of HR, or chief legal counsel (sometimes as an occasional guest, according to the issues on the agenda). Including the entire leadership team means the MBR becomes the regularly scheduled forum with one cohesive decision-making agenda, and IBP truly becomes how the business is run.

The Management Business Review meeting

Outcomes

  • One set of aligned plans.
  • Product, demand, supply, marketing, sales and financial plans – aligned and synchronized.
  • Inventory plan.

People and Behaviors

  • Leadership matters – lead by example.
    • Leaders set direction.
    • Leaders provide focus.
    • Leaders clear obstacles and provide resources.
  • Owned by leaders, supported by teams. Ownership cannot be delegated.
  • Longer term focus (four-to-24+months) – the zero-to-13-week horizon is addressed by Integrated Tactical Planning (ITP).
  • Commitment to be prepared prior to and prepared to act afterward.
  • Communicate to teams – with clarity.

Summary

The MBR is the culmination of the IBP process, enabling leadership to run the business effectively. It creates a single set of aligned and synchronized plans with clear actions and decisions for the future. Timely decision-making is crucial, especially for long-term investments, new product lines, or market expansions.

Compare your MBR process with best practice, as shown in Figure 5 below:

Effective IBP enables leadership to make informed decisions that consider the holistic implications, ensuring the business meets its strategic objectives. An effective MBR is a powerful tool for achieving alignment and driving the business forward.