Taking the long view

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Even in today’s economy, it’s important to step back and take a big-picture look at your situation. Try to look beyond next month or next year and consider how things might look once we get on the other side of this economic cycle.” –Jim Walton, president & CEO, Brand Acceleration Inc.

It wouldn’t surprise me in the least if trucking executives and owners roll their eyes at the words “strategic planning” these days. I mean, just getting through the next week – let alone the next month or fiscal quarter – has been a horrific struggle for more than a few years now in this industry.

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And no, this isn’t about trying to snag fat bonuses and such (a la Wall Street’s so-called financial “wizards”) but more about trying to figure out how trucking companies – which haul 70% of the nation’s goods – are going be able to survive and thrive not just for a month or a quarter, but for decades to come.

“In simple terms, a strategic plan bridges the gap between where the business is and where it wants to go,” notes Jerry Osteryoung (at right), professor emeritus of finance for the college of business at Florida State University. “Starting from the business’ current position, the strategic plan develops the course of action the business will need to follow in order to achieve its future goals.”

Now, trucking executive and owners alike all know what’s involved in formulating such strategic plans, but let’s nonetheless. Professor Osteryoung points out that there are basically three primary steps in strategic planning, the first step being the SWOT or Strengths, Weaknesses, Opportunities and Threats analysis.

“Basically, this is a process used to ascertain where your business is right now and what is happening outside your company,” he explains. “In my mind, the critical thing here is to carefully examine and identify your weaknesses as these must be remedied, if possible, in your strategic plan.”

The most common weakness is communications, he feels; something most businesses just do not do this as well as they could. This is something Jim Walton (below at left), president & CEO of marketing and communications firm Brand Acceleration Inc., knows all too well.

“Having been in the marketing communications and public relations business for 30+ years, I’m surprised at how ‘short-term’ or ‘tactical’ American business has become,” he says. “In our present weakened economy, it seems to be getting worse. Many companies, communities and states are completely focused on surviving another day, let alone a century.”

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Walton noted that in Asian culture, “long-range” often has a considerably different meaning. “To them, it could mean 25, 50 or even 100 years – with five, 10 and 15 year plans considered nothing more than short-term tactical efforts.

“Maybe ‘long-term’ for you really is one, three or five years. But, it’s worth trying to look further out so that you can put ideas in place your company’s or community’s future,” says Walton. He notes that companies should consider a few key questions:

• How might the world (and the U.S.) look in two, five or ten years?

• How will these changes affect us?

• What industry changes are emerging now that will affect our future?

• How can we best position ourselves for these changes?

• How will our brand need to evolve for the future?

Engine maker Cummins offers but one example of how such “long range” planning can help a company orient itself towards a profitable future.

In a recent brief with analysts, Cummins' Chairman and CEO Tim Solso noted the company expects to see significant growth starting in 2011, and thus set a target of $20 billion sales with earnings before interest and taxes reaching 12.5% of sales in 2014. The Company also said it expects to surpass its previous peak sales and earnings, set in 2008, by 2012.

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“We still have some challenges ahead of us, especially in the first half of this year, but I am extremely optimistic about the future,” Solso said. “We also are committed to investing in the business so that we can take advantage of several promising long-term trends that we expect to drive profitable growth for Cummins well into the future.”

Those “trends” Solso highlighted include:

• Rapidly tightening diesel engine emissions standards around the world and emerging regulation of commercial vehicle fuel economy that will allow Cummins to leverage its position as a technical leader in emissions reduction and fuel efficiency, resulting in increased engine and components sales.

• The rising price of energy is expected to further increase the demand for fuel-efficient diesel engines, while the growing gap between the supply and demand for electricity in developing economies will benefit the Company’s power generation business.

• Increasing economic globalization will continue to benefit Cummins due to the Company’s competitive position in large and growing international markets such as China, India and Brazil and its worldwide distribution network.

• Increased infrastructure investment in many developing countries, spurred by government stimulus spending, will bolster engine and power generation demand in many of Cummins’ markets.

Yet it should be stressed that “tactics” still remain a critical part of this strategic mapping process; that’s something both Osteryoung and Walton agree on that. It’s just that tactics should be stepping stones for reaching strategic goals, such as what Cummins has laid out above; not become the goals in and of themselves.

“Strategically, you develop goals for the next two to five years that will allow your firm to grow and prosper,” says Osteryoung. “These goals should be both quantitative and qualitative. Quantitative goals are typically financial figures such as sales growth rates and net profits, and qualitative goals frequently include objectives like improving the customer service experience and improving the quality of new hires.”

The tactical or implementation plan charts the course that will allow a company to reach its strategic goals, including a timeline showing what has to be accomplished each year and identifies the party that is responsible for each component of the plan, he notes.

“If your longer-range strategy requires a shift in your brand position, then your tactics need to begin that evolutionary process now,” adds Walton. “Your ads, brochures, web site and other tools must begin to convey a message that is consistent with your future vision. Because if your tools are entirely backward-looking, telling the story of who you are and where you’ve been, you risk being perceived as ‘stuck in the past.’ Not a good position at all, especially if you have an up-and-coming competitor that is growing a brand position as a forward-looking leader.”

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Osteryoung feels establishing a strategic plan should typically take about six hours, with the first three hours devoted to the SWOT analysis and the remaining three hours covering goals and tactics for reaching them.

After a strategic plan has been agreed upon and written up, the next thing is to get the entire company to understand the plan’s meaning and its implications for each of them personally. “This is so important because, in order to be successful, any plan must be adopted by every person in your organization,” Osteryoung stresses.

Developing a strategic plan should not be considered an optional but a necessary practice that occurs every year or two, he adds, and should be revisited every month, with the progress – or the lack thereof – recorded and analyzed. “If perchance things have changed, then altering the plan is fine as the strategic plan should be considered a guide and not a rulebook,” Osteryoung says.

It seems basic, sure, all this meandering talk of strategic planning and tactics – but then think about it. Without fixed routes, lane density, proper equipment, professional drivers, and all of the other pieces of the trucking puzzle in place, fleets can’t make money, let alone profits. They end up just meandering along to whatever fate has in store for them. Perhaps that’s why taking a little time to contemplate the future -- and how to profit from it -- might not be a wasted exercise after all.

What's Trucks at Work?

Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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