Many companies have a strategic planning process they engage in on an annual basis. In spite of that, MOST fail to produce and execute a strategy that supports sustained profitable growth. Why? We’ll share the secrets to successful planning in this and subsequent Insights.

But first, does it pay to pay attention to strategy, planning and execution? The answer is an unequivocal ... yes! The case study literature offers countless examples of companies that have used strategy to spectacular effect.

Consider Nike and Reebok, two athletic footwear companies that were approximately the same size in 1990, each generating annual revenues of a little over $2 billion. By the year 2000 Nike was more than triple the size of Reebok, having achieved a 42% share of the market compared to Reebok's 12%. The difference? Nike executed a better strategy: a systematic, repeatable model for expanding into new sports categories. As it does to this day, it researched new market categories like tennis and golf, entered them one at a time on a test basis, then signed a sports legend to endorse the company's products, and gradually expanded the line to include apparel and eventually hard goods like balls, rackets and golf clubs.

Reebok on the other hand relied on a disjointed acquisition approach that included buying Polo footwear, Boston Whaler boats, Ralph Lauren, Rockport shoes etc. Finally in 2005, Reebok was acquired by another sporting goods company, Adidas. In the end, Nike's smarter, more focused and better executed strategy prevailed.

Winning strategies like Nike's are based on two basic principles that provide the foundation for subsequent layers of goals, plans and strategic projects. They are 1) focus and concentration on a core business and 2) differentiation from competitors.

Focus and concentration – Do one thing perfectly. Research shows that market leaders have the best odds of growing profitably on a sustained basis. (More on this in later Insights.) They typically have better margins and more growth momentum. But to attain and retain market leadership, companies need to be the best at satisfying their particular market and at doing so cost effectively. This requires maximum focus and concentration. In business there are just too many moving parts and challenges and too little time, attention and resources for a company to do otherwise. The sports analogy is this: amateurs don't do better than pros, and pros don't play two sports. So, I encourage clients to pick an industry, market, and product/service and stick to it.

If you find that you're in too many businesses and not a leader in any, then you're not alone. Most companies do the same on the theory that even minor synergies between multiple businesses outweigh the associated management distraction and dissipation of resources. Furthermore, it's human nature to believe that diversification improves the odds of success. ("If we're in a lot of different businesses then at least one should work out.") Actually the opposite is true. The more we diversify our portfolio and split our attention without protecting our core business, the less likely we are to succeed.

Differentiation - Be different. Competitors that are all fundamentally the same typically have no option but to compete on price. This is a guaranteed formula for weak and uneven results, and long term vulnerability to takeover or failure. (Clearly some companies like Wal-Mart compete intentionally on price and do so extremely well, but it's their strategic choice, not a consequence of failing to differentiate.)

The key is to find something your company can do differently and better than your competitors and then make it available to those in your industry who care. Can your business do something faster like Domino's Pizza, or more consistently like McDonald's? Do you offer more luxury like Lexus, or a well tailored combination of products and/or services like IKEA? Are you innovative like Apple? Do you do a better job of understanding the complete needs of your customers like Nordstrom's and IBM? In short, does whatever you do differently and better create unique value for your customers?

One final note: good strategy requires research, analysis, discussion and hard choices. ("Life is the sum of all our choices". Albert Camus) The first step in developing a winning strategy is to get clarity around a few key questions: 1) Who are our best customers? 2) What are our most successful products and/or services? 3) In what geographical areas are we seeing the most success? 4) What are our key assets and capabilities? 5) What are our best distribution channels? 6) What are the dynamics and trends in our markets? 6) What are our competitors offering? 7) What are the macro external conditions and trends?

Clearly, figuring all this out is not easy. It takes time to study and understand a business sufficiently well to be in a position to make the critical choices I describe above. But this doesn't have to be done overnight. Even if it takes a year or more to hone your understanding of your core business and unique value proposition, it's still worth doing. And in the mean time, hopefully, your competitors aren't even trying, which means that eventually you'll be looking at them through your rear view mirror.

This and future Insights will explore key aspects of what is commonly referred to as strategic planning (i.e. strategy, planning and execution). Our hope is that readers who are involved in strategic planning will use this information to gradually improve their internal processes and reap the associated benefits.