OGSM: Developing a business strategy top-down – easy to understand & do

As I received quite a few requests – here is an English version of last week’s post…

The Chinese character for crisis Weiji contains two syllables, which when read separately mean the words danger Wei and chance Jihui. If our social and economic life is currently going into a hybernation mode due to the COVID 19 pandemic, this may also be an opportunity for reflection. Off course, anyone involved in sales and marketing of sanitizers, soap, canned food, pasta or toilet paper is currently more concerned with avoiding out of stocks at PoS. If, however, we work for a branded product that does not belong to the basic range defined by the retail trade, we might want to take time out of the hectic pace of our day-to-day business and focus on the long-term strategic direction of our business. The OGSM model is very well-suited for this endeavor.

Creating an OGSM enables companies to clearly define their goals, identify core strategies & initiatives, and pin down responsibilities and timings. The brief, one-page format allows quick action, even if initiatives fall short of expectations. It works because it is simple, robust and developed in team collaboration.

What is an OGSM?

The OGSM forms the basis for strategic planning, its implementation and the subsequent measurement of targets/KPIs. It makes the core objectives of a company visible and guarantees that all activities are aligned with its KPIs. Quantitative goals are the numerical KPIs that define whether the qualitative objectives have been achieved. Strategies are initiatives that are undertaken to achieve the goals. They are decisions that can be classified as "where to play" (e.g. product categories, sales channels, consumer segments, geographical regions), "how to win" (e.g. differentiation or cost leadership) and "capabilities" (e.g. organizational skills, processes, HR or IT). Measures provide the observable implementation for the respective strategy in order to track responsibilities and timing.

Why is OGSM a very effective tool?

OGSM is an effective tool, because it unifies and weights the objectives of a company. It translates strategic goals into a clear and executable plan that is easy to follow. It is crucial to focus on three to five highly important, measurable goals (e.g. revenue, EBIT, market share, innovation quota). By using a standardized structure and process, logic and discipline are brought into the company's strategic planning process. It also forms a common language, both for the management team involved and for the entire organization.

How can an OGSM be introduced into the company?

In order to introduce it in a company, a workshop with top management is an ideal opportunity to develop the company's OGSM together. This requires little preparation: Before the workshop starts, questionnaires are distributed with questions regarding the company's situation, both externally (e.g. competition, suppliers, trade, consumers) and internally (e.g. ownership structure, finance, personnel, culture). The workshop itself lasts maximum one day, assuming good workshop preparation. It starts with a SWOT analysis, which concludes with potential sources of sustainable competitive advantage. Based on this, work on the OGSM can begin. 

Experience has shown that a discussion and confirmation of a company's vision, mission and core values is a good way to start. Because these guiding principles, described as WHY - HOW - WHAT of the "Golden Circle", offer a good guideline for the subsequent development of strategies.

The heart of OGSM are the where-to-play and how-to-win strategies. These must be iteratively syntonized with each other: A where-to-play strategy aiming at innovation leadership cannot be implemented without a matching how-to-win strategy defining an efficient launch management. Once the "heart of the strategy" is established, focus lies on required capabilities. Many workshops have shown that not always required capabilities are suficiently available at a company. For example, if a how-to-win strategy aims at category captainship, necessary market research tools and category management skills must be in place.

The workshop ends with a detailed briefing for the road map to implementation of initiatives and measures agreed upon. Thus, everyone in the company knows how their daily activities fit into the big picture as well as their individual contribution to it.

How do you work with an OGSM?

A review of the adopted OGSM should be done on a quarterly basis, as achieved results have to be compared with goals set prevously. In other words: Have the commitments been kept that were agreed before? Numerical results need to be reviewed, because only what gets measured actually gets done. By controlling the respective projects’ progress, it is possible to determine why targets were exceeded, only just met or not met. Project controlling makes it possible to make changes that are necessary to get back on track quickly. And as competition, trade and consumers are constantly evolving, the OGSM needs to be updated annually.

In today’s COVID-19 situation there are quite a few short-term improvement ideas out there: For example, the management of a company decided to award a special bonus of 1,000 EURO for the best idea of cost reduction during the lingering corona crisis. The special bonus was won by a young manager who suggested to reduce it to 500 EURO. 

But seriously, research shows that companies that acted anti-cyclically during the last recessions were able to increase their market share significantly. We already know thaz some of the current changes in the way we work are bound to outlast the corona crisis: The case studies of South Korea and Italy show how the home delivery share in food retailing has increased rapidly. And certainly, after the crisis, the proportion of people working in home offices will remain significantly higher than before the crisis. Right now may just be exactly the time to work on our own strategy...

I will be happy to provide further information, if you send an email to b.laack@serviceplan.com or call +49 173 4533331 .