Planning → Planning executability → Execution: Why is this process important for return-driven firms?
This pyramid-shaped framework has 11 tenets and 3 foundations, which, when applied properly, can help firms ethically achieve true wealth and value creation. Professor Joel Litman and Dr. Mark L. Frigo talk about this strategy in detail in the book, “Driven.” In this article, let’s focus on RDS’ Tenet 4—Deliver Offerings—and a business case study related to it. Keep reading below to know some lessons you can learn from this toy company’s downfall.
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Planning → Planning executability → Execution: Why is this process important for return-driven firms? In a past “Return Driven Strategy” article, we talked about toy company Toys R Us and some factors that led to its downfall in the lens of RDS’ Tenet 2: Fulfill Otherwise Unmet Customer Needs. There, we explained that in reality, pricing pressure comes from customers, not competitors. This means weaker-than-desired performance doesn’t come from an external competitive force but from an internal force. In Toys R Us’ case, the problem is in its inability to fulfill its target market’s needs. Today, we’ll dive deeper into the toy company’s case study, but instead of looking at it from the perspective of RDS’ Tenet 2, we’ll discuss it in the context of Tenet 4: Deliver Offerings.
RDS’ Tenet 4 is about delivering offerings through the RIGHT planning and execution. … and according to Professor Joel Litman, and Dr. Mark L. Frigo in the book, “Driven,” these two processes shouldn’t be considered as distinctly separate concepts. Otherwise, firms will miss out on the importance of the continuum of strategic planning and execution. Let’s go back to Toys R Us’ case study… For almost 20 years straight, the toy company experienced a decline in cash flow returns. It tried creating new plans and strategies to recover, but some of these are glaring examples of failure to fill the gap between successful planning and implementation. Example: In the 1990s, when Toys R Us realized the Internet and World Wide Web would be a dominant force in retail, it began to plan an online presence: www.toysrus.com. At first glance, this strategy made sense. Competitive analysis showed that the toy company had a powerful brand that would be strongly recognized whether offline or online. It also had warehouses full of ready-to-be-sold inventory, its purchasing capability for restocking shelves was strong, and all necessary toy manufacturer relationships had already been established. These are some things a new toy company simply couldn’t replicate or beat in just a short while. So… where did Toys R Us go wrong? It failed to plan executability, the concept that occupies the space between planning and implementation. Here’s what happened to the toy company as a result of the misstep: Toysrus.com succeeded in generating high online sales. The site attracted millions of visitors who bought toys online before the Christmas holiday. However, what happened was a complete disaster! Before launching the online store, Toys R Us failed to determine whether or not its warehouses were capable of pick-and-pack shipping methods. It didn’t realize that the inventory management system at the warehouses were only designed to ship large pallets of toys at a time to be displayed at store shelves. For instance: Loading a crate of Barbie dolls into a truck is different from picking up just one Barbie doll and packaging it with 3 or 4 other individually picked toys to be sent to a buyer’s address. Because of that, Toys R Us disappointed thousands of customers and failed to deliver the promised toys to buyers by Christmas time. What’s worse? Staff also experienced havoc at physical stores as angry customers went to express their online-generated grievances! Some even swore they would never buy from Toys R Us again, whether online or physically at the store. The Importance of Planning Executability Could Toys R Us’ online failure be attributed to poor strategy or poor execution? The answer is not in these two choices. Many of the toy company’s problems in the implementation could have been avoided if executability was given ample attention during the strategic planning process. The important point Toys R Us missed? In the continuum of planning and execution, there should be planning of implementation. Most firms are known for having “beta” launches before the official release of a product. The purpose of this is to make sure the execution of a particular strategy is plausible and reasonable before widely implementing it. At what point or level should a plant floor manager at Toys R Us have realized that its warehouses were not designed for a pick-and-pack inventory management system? Ideally, it should have been at some earlier stage than when it was already too late. Besides, if a manager had to choose, angering a small set of customers during test launches is better than angering a large group of them during official launches. This is why planning executability is a crucial part of strategic planning, with RDS’ Tenets 1 to 3 as primary goals of that planning process. High-performing businesses know the importance of planning, planning of implementation, and implementation. This enables them to come up with a sound strategy, execute it effectively, and deliver the RIGHT offerings to their customers. Hope you found this week’s insights interesting and helpful. Follow us on LinkedIn. Stay tuned for next Tuesday’s Return Driven Strategy! Have you heard about Graphics Processing Units (GPUs)? Learn more about the importance of having a clear and accurate communications strategy in next week’s article! |
