The Little Black Book of Strategic Planning for Distributors

by Brent R. Grover

Communicating Strategic Goals: A Case Study from The Little Black Book

Brent Grover says in The Little Black Book of Strategic Planning for Distributors that systematic communication with subordinates makes the execution of a strategic plan much more likely because it ensures everyone understands the company’s compelling goal and their role in achieving it. Ongoing communication also builds trust, he says.

According to a 2013 survey by Ventana Research, “Long Range Planning – Steps to Achieve a More Effective Process,” executives rarely follow planning with strong top-down communication. Only one-fourth of executives surveyed said they communicate their goals clearly and consistently, and only half said they at least communicate the general idea.

Grover says the strong communication of strategic goals starts with the creation and sharing of a one-page strategic plan. Managers must also follow up regularly with workers, through monthly or biweekly staff meetings.

In The Little Black Book of Strategic Planning for Distributors, Grover shares a case study from his experience consulting with distribution companies that shows how one distributor makes consistent communication a priority.

A large HVAC distributor arranges an employee meeting every year at a location central to its 20+ branch locations. “The CEO and other leaders spend a half day updating the entire company about accomplishments and challenges, presenting awards and celebrating excellence and talking openly about what the company needs to do during the coming year and beyond.”

The CEO also provides updates and recognition on a monthly basis via a company webcast.

To learn more about this distributor’s internal communications plan, read the full case study in The Little Black Book of Strategic Planning for Distributors.

Get Outside Help in Creating Your Strategic Plan

Bringing in an external facilitator to assist in the strategic planning process improves results in several ways, says Brent Grover in The Little Black Book of Strategic Planning for Distributors. Brent recommends bringing in outside help to guide the process, for the outside perspective it provides and because of the role a facilitator plays in ensuring an accurate assessment of a company’s strengths and weaknesses.

Grover says an outside facilitator helps planning team members flesh out and prioritize initiatives, and helps them to think broadly without losing focus.

A facilitator also ensures the planning team’s growth plans don’t overtake the company’s resources. “The facilitator will help the CEO determine how much risk is acceptable. Many times the leader’s goals for the business aren’t possible without borrowing a great deal of money, personally guaranteeing bank debt, diluting ownership by finding investors or possibly investing personal capital in the business,” Brent says.

Outside facilitators are also instrumental in gathering the internal and external feedback that will serve as the foundation for planning efforts. A facilitator can screen employee surveys to ensure workers’ anonymity, which encourages participants’ candor.

He or she can also make the difference when it comes to obtaining feedback from suppliers, as Brent explains in a case study of a safety products distributor that was experiencing friction in its key supplier relationships: “An outside facilitator’s meeting with the suppliers without the distributor present revealed the root causes of the problems,” Brent says. The distributor, armed with this highly accurate feedback, was able to take actions that rectified the problem.

See Chapter 3 in The Little Black Book of Strategic Planning for Distributors to read the full case study.

Strategic Planning Tool: Employee Survey Checklist

Brent Grover says in his recent book that strategic planning is “the art of the possible.” Successful planning requires an understanding and acceptance of what is and is not achievable within a company, including an understanding of a company’s strengths and weaknesses.

Many distributors have a hard time admitting where their companies fall short according to Brent, but an objective internal and external assessment of a company’s strengths and weaknesses is an integral part of realistic planning. (For more on the importance of an objective assessment and common difficulties in completing one, see Balance the Blue Sky Mentality with Front-Line Intelligence on

Employee feedback is a necessary supplement to company leaders’ knowledge and intuition. As part of strategic planning, Brent recommends distributors incorporate information from employees, who have a more intimate understanding of day-to-day operations and supplier/customer relationships.

Follow these tips from The Little Black Book of Strategic Planning for Distributors to create an effective survey:

  • Get help from an online tool. Don’t waste resources on a paper survey when there are free online tools available to digitize and automate the process. Brent recommends Survey Monkey, a free resource where distributors can design surveys and collect and analyze the results.
  • Set the right expectations. Employees may be less responsive to your survey if they feel similar projects in the past were unsuccessful, so you may need to assure participants that their feedback is valuable and explain how you plan to use it. And for non-management-level employees, whose responses you should keep anonymous, be clear that the survey is confidential to ensure complete and candid responses.
  • Keep it short. ”The survey needs to be thorough, yet short enough to finish in 45 minutes to an hour,” Brent says.
  • Ask the right questions. Brent recommends using a combination of objective questions with ratings as well as open-ended essay questions. “The best insights often come from the answers to the essay questions,” he says.
  • Summarize and use the results. Use your survey creation software’s analysis tool to glean trends from survey responses and to create visual aids illustrating the results. Incorporate these into a briefing on your company’s internal assessment and share them with the planning team so results can directly inform your strategic planning efforts.

For more survey creation tips including a list of Brent’s favorite essay questions, see Chapter 3 in The Little Black Book of Strategic Planning for Distributors. Don’t have your copy yet? Order a print copy and receive free shipping, or purchase an electronic copy for your iPad or Nook. The book is also available on the Kindle.

Strategic Shift: Logitech’s Move Toward Mobility

Electronics manufacturer Logitech announced plans to overhaul its strategic plan after announcing an operating loss of $180 million and a year-over-year sales decline of 14 percent for its fiscal third quarter.

“These results are unacceptable, and we are taking decisive action as an outcome of my strategic review,” said Bracken P. Darrell, Logitech president and CEO. Darrell, who assumed his current role January 1, says he wants Logitech to leverage the powerful growth of tablets and smartphones by developing more mobility-related products.

“Our goal with PC-platform products is to maximize profitability, while investing selectively in growing categories,” Darrel says. “We have also identified a number of product categories that no longer fit with our current strategic direction.” Logitech plans to divest its remote controls and digital video security categories and discontinue its speaker docks and console gaming peripherals by the end of the year, Darrel says.

Logitech’s decision to sacrifice less profitable product lines in favor of those with greater potential demonstrates a willingness to make radical strategic changes that some companies lack. Author Brent Grover says in The Little Black Book of Strategic Planning for Distributors that many companies continue to invest in their largest revenue segments without regard to growth potential or profitability. Brent says distributors must always prioritize some segments above others, since time and resources aren’t unlimited.

“The strong temptation of distributors to target everything must be resisted,” he says. This means making difficult decisions about which product categories to grow, maintain (invest enough to maintain market share), harvest (keep without investing additional dollars), or discontinue.

The decision, like Logitech’s, to move into a totally new line is especially difficult because of the necessary long-term commitment of time and capital. Brent says it can also be a “zero sum game” trying to sell a new line through the existing sales force, since new products will take sales time and energy away from established ones.

While the decision to add or subtract product lines can be a difficult one, Brent says the underlying determination is simple: “The new products must be more profitable, and have more growth potential, than those they will displace.”

The Strategic (Battle) Plan

The idea of strategic planning for corporations evolved in the 1960s from military planning concepts. In The Little Black Book of Strategic Planning for Distributors, Brent Grover hints at the similarities between business and war.

Harvard professor Michael Porter was the catalyst for a corporate interest in strategy according to Brent, releasing Competitive Strategy in 1965. Brent postulates in The Little Black Book that the generation of business leaders who fought in World War II were receptive to Porter’s aggressively competitive message, leading to a wave of interest in corporate strategy and the rise of big-time consulting firms Boston Consulting and McKinsey as the strategic planning go-to experts.

The connection between military and business strategy is easy to see, especially considering the mutual importance of concepts like intelligence, speed and focus to both realms. In his recent book, Brent sometimes borrows from military verbiage to describe strategic planning concepts, such as how to evaluate what share of competitors’ business a company might be able to “capture.”

Brent recommends collecting intelligence “from the field” about competitors’ targeted business and contracts already gained and lost. “Naturally competitors are planning to attack and include business they want in their plans for the coming year,” he says. “Who will win more of those battles?”

Brent also compares strategic planning to battle planning when describing the importance of having a plan regardless of the potential need to adjust it later. Brent says all plans become obsolete, sometimes even before they are completed: “No battle plan survives contact with the enemy,” he says, “and no business plan is intact after engagement with the marketplace.”

Funding Strategic Initiatives

TECT, a family of manufacturing companies serving the aerospace and energy industries, has announced a strategic plan focused on reinvesting almost all free cash flow into manufacturing technologies and capacity expansion. To support this plan, TECT arranged a new credit facility to provide even more capital.

Distributors often also need additional capital to grow their businesses when annual cash flow is insufficient. In The Little Black Book of Strategic Planning for Distributors, Brent Grover offers three tips for considering how to fund strategic initiatives.

  1. Consider the benefits of leverage. “One of the principles of strategic planning is that many companies don’t have enough debt,” Brent says. Leverage can magnify return on investment. See Brent’s most recent book for a strategic profit model that demonstrates the affects of leverage on ROI.
  2. Understand owners’ priorities. Fast-growing privately owned distribution businesses often face a conflict between owners who want to invest in growth versus those who want to distribute profits to working or non-working owners. The strategic planning team must also consider that shareholders’ and managers’ risk tolerance may fail to align with growth strategies that involve increasing debt.
  3. Dissect your balance sheet. Heavily leveraged assets make it more difficult to secure a loan and may affect loan terms. Brent says a conservative balance sheet “has no more than $2 of debt for every $1 of equity (2:1 debt-to-equity ratio).”

How much leverage is too much depends on several factors. For more guidance, see Chapter 6 in The Little Black Book of Strategic Planning. Don’t have your copy yet? Order a print copy today to receive free shipping, or purchase an electronic copy for your iPad, Nook or Kindle  for instant access.

VWR Succession Woes Highlight Importance of Strategic Planning

In July 2012, VWR International announced that President and CEO John Ballbach and VWR’s board of directors “agreed on his departure” from VWR. The laboratory supplies distributor also announced the start of an internal and external search for his successor and appointed Manuel Brocke-Benz, SVP and managing director of Europe, interim CEO.

More than four months later, despite VWR’s “extensive” but apparently unsuccessful search for Ballbach’s replacement, interim CEO Brocke-Benz was named permanently to the position.

While this may seem like a suitable solution to VWR’s succession problems, it creates yet another challenge. Brocke-Benz’s former position as SVP and managing director of Europe is now unfilled, and once again, VWR has announced a search for a replacement. The vacancy comes in the midst of VWR’s recent European acquisitions of Labonord SAS, Switch BVBA and Lab3 Limited in November and December.

VWR’s predicament demonstrates just how important succession planning is, especially when changes aren’t anticipated.

A more complete strategic planning process might have avoided the problem. According to author Brent Grover in The Little Black Book of Strategic Planning for Distributors, “Succession planning is the natural next step in strategic planning.” The departure of owners and managers is inevitable for every business and often occurs much sooner than expected.

Ironically, strategic planning’s role as a catalyst for succession planning may be the very reason many company leaders tend to avoid it. But Brent says if leaders can broach this sometimes difficult subject early on, it can help make the inevitable transition as seamless as possible for the next generation of owners and managers.

Video: 2013 Distribution Trends with Brent Grover

External factors should play a role in your strategic plan, says Brent Grover in The Little Black Book of Strategic Planning for Distributors. In the newly released 2013 Distribution Trends with Brent Grover video (watch below), Brent examines specific factors distributors should consider when planning for 2013.

The European debt crisis and the slowdown of growth in Asia are affecting demand for the products wholesale distribution companies sell. Further complicating things, Brent says trend researchers are predicting an economic slowdown in the U.S. in the latter half of 2013.

Despite global complications, Brent says U.S. housing starts will increase next year, and domestic vehicle production will continue to be strong. Natural gas exploration, which has given a great deal of lift to the economy, will continue to benefit distributors, especially those catering to the right customer segments in the right geographic markets.

Another trend that will affect businesses next year is an aging salesperson demographic. Brent says during the recession, few new hires were made, and those already on staff tended to stick around often due to deferred retirement plans.

Brent also discusses vending trends, the emergence of distributor “coopetition” and the need for strategic pricing in the video below. Watch now.

Factor Technology into Your SWOT Analysis

As companies reflect on the past year’s successes and failures, the SWOT analysis provides an ideal framework for discussion. A thorough examination of a company’s strengths, weaknesses, opportunities and threats can uncover aspects of customer relationships, product strategies and other areas than will help or hinder growth in the new year.

One area distributors can’t afford to ignore in their SWOT analyses this year is technology, which affects diverse business areas, including warehouse management, sales, customer service, logistics and e-commerce, says author Brent Grover in The Little Black Book of Strategic Planning for Distributors. “For distributors, well-executed technology investments make a real difference.” As such, it’s a good idea to consider the benefits of upgrading current systems.

Distributors’ ability to support and leverage current systems, whether new or legacy, also warrants scrutiny. Even the most state-of-the-art internal systems are useless if employees don’t know how to use them, and insufficient training can cause both employee and customer dissatisfaction. Using the SWOT analysis, distributors should ask themselves whether the level of technology training they provide could use improvement.

Having the right technological tools and being able to use them well will be a differentiator in 2013. Distributors who are honest with themselves about how poor technology can threaten business goals will have a clear view of potential opportunities to turn those weaknesses into strengths.

Strategic Planning-Generated Ideas: Survival of the Fittest

Strategic planning meetings are an ideal setting for forming creative and innovative ideas to move companies forward. The meetings, especially those held away from the constant interference of email and other digital distractions, help planning team members break away from the day-to-day mindset to think outside the box.

Because companies have limited resources, though, not all ideas generated in the planning process can make it past the drawing board. To transition the best ideas into actionable initiatives, the planning group must somehow select the most realistic ideas with the highest potential ROI from all of those suggested.

In The Little Black Book of Strategic Planning for Distributors, Brent Grover gives distribution strategic planning teams a system for evaluating ideas generated during the process. Brent recommends breaking the planning group into small teams to assess the ideas based on the planning process to date. Each team rejects some ideas, modifies others and creates totally new ones.

The teams then take turns pitching their favorite ideas to the group during a winnowing process, with participants vetting each idea against certain criteria. Brent says the group should ask questions such as “Is the idea big enough to make a difference? Will it ‘move the needle’? Is the idea realistic? Can the company afford to finance it?”

Brent offers more questions to help in the winnowing process and explains what to do next in The Little Black Book of Strategic Planning for Distributors, available now.