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Small Business Planning—How to Create a Quick and Effective Strategic Business Plan

Small Business Planning—How to Create a Quick and Effective Strategic Business Plan

By Bob Sproull

In my years of experience in a variety of industries, I’ve noticed that many companies have a hard time creating an effective strategic business plan. Not only is it hard for them, but it often takes days or weeks to complete. Let’s face it, typical leadership teams in most companies don’t have this kind of time available to create an effective business plan.

Create a Strategic Business Plan in a Single Day

What if I told you there was a way to create a very effective business plan in as little as a single day? In this series of blog posts, I will demonstrate just how to create an effective strategic business plan in a very short time by using a tool called a Goal Tree. While I would like to take credit for creating the goal tree, it actually dates back to 1995, when Oded Cohen casually mentioned it during a Management Skills Workshop at the A.Y. Goldratt Institute. Years later, a man named H. William Dettmer resurrected this tool and made it what it is today. Since then, I have modified this tool so that organizations can create strategic business plans in very short order.

The Goal Tree Structure

The hierarchical structure of the goal tree consists of three simple elements:

  • An organizational goal
  • Three to five Critical Success Factors (CSFs)
  • Necessary Conditions (NCs).

The owner of the organization defines the goal. It’s at the top of the goal tree, with three to five critical success factors directly beneath it. The CSFs are critical entities that must be in place before you can attain your goal. Beneath each CSF are a series of NCs. You must complete NCs to realize your CSF. You usually write the goal and CSFs as terminal outcomes, as though they were already in place. You write NCs, on the other hand, as activities that you must complete to achieve each CSF.

A Simple Goal Tree Example: Making a Fire

Here’s a very simple example of a goal tree. Suppose the goal is to build a fire. We all know that there are three critical elements required for the creation of a fire, namely a combustible fuel, a source of ignition, and a sufficient level of oxygen. Without any of these three components, you can’t achieve your goal of having a fire.

Dettmer tells us that one of the first things we must do is determine the system boundaries that we are trying to improve. We also need to determine our span of control and sphere of influence. Our span of control is the area where we have unilateral change authority. Our sphere of influence includes areas where we can only influence change decisions. Dettmer explains that if we don’t define our boundaries of the system, we risk “wandering in the wilderness for forty years.”

Before demonstrating how to create a goal tree, let’s look at the three goal tree components in a bit more detail.

The Goal

Steven Covey [1] suggested that, in order to identify our goal, we should “Begin with the end in mind.” This endpoint is where you want your company to be after you’ve completed your improvement efforts. A goal is an end to which a system’s collective efforts must be directed. Dettmer made it very clear that only the system’s owner determines what the goal of the organization should be.

Critical Success Factors and Necessary Conditions

In the goal tree, there are certain high-level requirements that must be solidly in place. If you don’t complete these requirements, then you will never realize your goal. These requirements are your critical success factors (CSFs) and necessary conditions (NCs). Dettmer recommends that you create only three to five CSFs. He also recommends that you limit yourself to only two or three levels of NCs. However, I have seen as many as five levels working very well.

The goal, CSFs and supporting NCs create a cascading structure of requirements (see the diagram below). This structure shows what must happen if we are to reach our ultimate destination. For ease of understanding, when I am in the process of constructing a goal tree, the connecting arrows are facing downward to demonstrate the natural flow of ideas. When my structure is completed, I reverse the direction of the arrows to reveal the flow of results. In learning a tool and making it my own, I have found this works well for training purposes, even though this is the complete opposite of Dettmer’s recommendations for construction of a goal tree. The figure below represents the hierarchical structure of a goal tree.

goal tree diagram

As we proceed, it’s important to understand that the real value of a goal tree is its capability to keep the analysis focused on what’s really important to the success of the organization. Dettmer tells us that a “goal tree will be unique to that system and the environment in which it operates.” This is an extremely important concept because one size does not fit all. Even two manufacturing companies, producing the same kind of part, will probably have very dissimilar goal trees. In my next post, I will walk you through how to create a goal tree and then show you how to produce an effective strategic business plan.

References:

[1] The 7 Habits of Highly Effective People, author Steven Covey, 1989

Bob Sproull

About the author

Bob Sproull has helped businesses across the manufacturing spectrum improve their operations for more than 40 years.

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