Business planning from the back of a napkin to a formal and detailed presentation 16

This is my 16th posting to a series on tactical and strategic planning under real world constraints, and executing in the face of real world challenges that are caused by business systems friction and the systems turbulence that it creates (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 578 and loosely following for Parts 1-15.)

I initially offered a to-address topics list in Part 12 that I have been discussing since then, and that I repeat here for continuity of discussion:

1. Different functionally focused stakeholders might reach different conclusions as to which processes and subsystems of them are core or peripheral to a business, and as to which might be secondary-peripheral of them – and if so of what type (e.g. necessary but outsourceable, or no longer needed and dispensable.) And it is important to both clarify and discuss those differences, and reach a working consensus that all key stakeholders can come to at least tacit agreement upon, and certainly if a business is to enter into and carry through upon the right transitions for its own needs, and in the right way and with the right timing.
2. Then after that, and in the context of distinguishing between core and peripheral processes, I said that I would turn to consider areas and aspects of the business that can be linearly scaled up, and areas that represent true nonlinearities – places where simply scaling up according to the pattern in place would create inefficiencies.
3. And I added that I would discuss all of this in terms of crucial information availability and communications, and in terms of two types of case study examples: a retail business, and a software development business.

I finished addressing the third of these points in general terms in Part 15 and then began to flesh out and discuss the retail example that I made note of in Point 3 of that list: the Alpha Hardware store. I focused there on how and why it chose to expand its storefront space and in a nonlinear, disruptively new direction. Alpha Hardware had the linear expansion option of simply building a second same-type storefront at a new location, using their first as a template model for it. But they chose to open into a second location across the street from their original store and to divide out what they offered there with their more traditional hardware offerings remaining in their original location and all of their more home goods offerings moving into the second. This, among other things made it possible to expand out what they could offer to their customers for both hardware and home goods. And their staff at these two locations could and did work together to help customers who needed goods and supplies from both sides of this street and both of these storefront locations.

I said at the end of Part 15 that I would at least begin to examine the three topics points as repeated above, as they specifically played out for Alpha Hardware, and then for Alpha Hardware and Alpha Home Goods: their second location. And that is my primary goal for this installment. Then after completing that line of discussion, I will turn to the second business example that I have raised as coming: a software development business example. And in anticipation of that, I note that while new products and even new types of products do arise and appear on the shelves of hardware stores, and home goods stores too, a great deal of what is offered is fairly standard and stable in function and in basic form.

Hammers and nails, pliers and plumbers’ wrenches might get new types of grips but their basic designs and their basic functions have not changed in generations. And even if electric drills and electric screwdrivers and related innovations for other tool types have appeared and continue to, the older models of these basic tools still hold customer appeal and they still sell too. And floor tiles, grout and the like have been and remain steady, stable hardware store offerings too. And similar arguments can be made on the home good side and for items such as shower curtains, pots and pans, soap dispensers, coat hooks, and so on. Styles change, so stores that deal in this type and range of products have to stay up to date on the largely cosmetic changes in the types of items that they would keep and offer in inventory. But the basic items offered are in large part consistent and reliable and of established form and function.

That situation is not going to hold true in my software business example where even seemingly consistent product types can fundamentally change in both what they offer and how and at a steady, rapid pace. But I focus here on the Alpha stores and will deal with that alternative business type later. And I begin here with the above list’s Point 1, and the determination of what is and is not central to the business and its core business model and what is more secondary to it and even dispensable to it.

Let’s begin from before their expansion into a second location. Alpha Hardware began as a straight forward hardware store. And they remained that for a long time. Then they gradually began adding in a few items and offerings that were perhaps more home goods in nature, such as towel racks and decorative door knobs, and their customers really seemed to appreciate that. They bought these new items and while they were at it and while they were in the store anyway, they also bought that screw driver needed to install their new towel rack, or if not that, mollies so they could install it stably in sheet rock. They bought more hardware items too.

Sales personnel and the assistant manager who had traditionally worked in hardware saw that side of their business as driving its success, even as they saw value in offering home goods products too. And the assistant manager and new sales personnel who came in as home goods really took off in sales, and as more such items were offered, saw that side of the store as crucial; these people were in fact hired at least in part because of their experience in home goods. So one consequence of the transition that Alpha undertook, with its storefront specialization, was to reduce and even effectively eliminate the Point 1 differences of opinion that had been emerging, and certainly as Alpha Hardware had became more and more cramped for shelf and customer space and for everything offered, pre-expansion.

• It is a hallmark of an effective transition: here an effective expansion and in a new type of direction, that conflicts and collision points of the type noted in Point 1 above, are relieved by it. People might disagree as to the details but seemingly everyone seems to come to agreement that change of some sort is needed, and they generally agree on basically where it is needed too.

And the nonlinear expansion of sending different product lines and categorical types of them in two directions, and into two separate if closely located store spaces, allowed for real growth, and I add linear expansive growth in the range of items and options that this overall business could now offer, and in its now two locations and for both traditional and new hardware items, and for home goods as well.

I mentioned the next step possibility of dealing with gardening and related supplies in a similar manner, in Part 15. If Alpha does pursue this path to expansion and with a third location in a next round of growth, then the disruptively new and novel of their second storefront expansion would become their new linear, now-templated approach to further expansion. What starts out as disruptively new, becomes a next step linear growth pattern, and certainly if it succeeds.

And this brings me to what might be the single most important word in Point 2: “inefficiencies” as drivers, and shapers of change.

• It was the inefficiencies created by overcrowding that limited the number of types of items that this business could offer, in its single storefront initial form, and that created conflicts of interest challenges and disagreements as to what types of product line needed how much of the too limited shelf space that was available.
• Expansion into a second storefront that was very close to the first, meant that communications between these two locations were as easy and direct as possible.
• And this also meant that a customer who walked into one of these stores who also needed supplies from their other, could walk there in a minute or less. That has meant few potential sales lost because of their two location storefront expansion.
• I discussed this expansion and its motivations in Part 15, in large part in terms of an analysis of where efficiencies and inefficiencies would arise, depending on how it was carried out, so see that first half of this case study example for further Point 2 related discussion and analysis.

I am going to specifically consider Point 3 from the above list, in terms of these Alpha businesses, in a next series installment. Then after that, I will turn to consider my second case study example as promised: a software development business. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory.