The SET Model For Strategic Planning

Understanding the three important numbers that define your business strategy, future-readiness,?and?company culture!

When developing business strategy in a rapidly changing and competitive environment, you simply cannot afford to overlook possibilities for expansion and transformation. This holistic perspective is the main strength of the SET Model, it?helps analyse?the three primary strategic investments?every organisation should make: Survive, Expand and Transform.?

Shockingly, these three important strategic resource allocation numbers that provide critical insight about the future readiness of the organisation are often completely overlooked during the strategic planning process. These numbers indicate how much you are investing into operations, expansion, and transformation of your business.

Strategic resource allocation within the SET Model, refers to all aspects of business resource allocation, investments, operations, costs, employee hours, management attention and education are some of the best-known examples.

The Three Phases of The Set Model Explained:

1. Survive

The “Survive” phase represents every investment, every resource dedicated to your “daily business” and keeping it afloat. Simply put, everything you do to keep your business up and running. This involves everything from operations, services, production, administration, etc. and the goal of it is to keep the company alive and pay for all recurring costs.

The strategic objective at the survive phase should be to improve operational effectiveness, improve price-performance ratios, reduce costs of running the business while also improving the quality of offerings/services and customer satisfaction.

The projects and initiatives involved in the Survive phase are typically low in complexity, uncertainty, and business impact.

Survival is often the biggest priority for new businesses, they must focus disproportionately on surviving the present before seeking to Expand or Transform.

2. Expand

Typically, during the "Expand" phase, most efforts and resources go toward improving existing products and services, upgrading their features, and prepping for eventual introduction to?new?markets and customer segments. The expansion is a two-prong mission: you expand your product or product lines, but you also seek new markets where these improved products are likely to?attract first-time customers.?

The first mission is the incremental innovation of existing products, processes, services, and more. This involves the preparation of the company to be agile, innovative and provide new, personalised and customised offerings to better meet customers’ expectations. Typical areas also involve expanding existing products with new features, apps, software offerings, and much more.

The second mission is market expansion (scaling geographically and in volume). This can involve increased product marketing to existing customers, selling to new customer groups/segments and geographical expansion into new markets.

The projects and initiatives involved at this phase have average complexity and levels of uncertainty.

3. Transform

The "Transform" phase is arguably the most important but mostly overlooked phase for most organisations. This is the investment the company makes to create radical innovations to their products, services, processes and business models. This phase is intended to allocate resources for?the fast and efficient commercialisation of fresh/new business ideas.?

One could think of this as an “outside-the-box thinking”?budget to drive creativity and innovation. For example, Google's “20-Percent Rule” encourages every employee to allocate a fifth of their work hours to any project they think would benefit Google the most.?

The outcome of?the third phase of the SET Model is often uncertain and?has a high difficulty level. Consequently, the elevated risk and complexity involved in?the Transform?phase has the added benefit of preparing your business to withstand unexpected and radical changes in its business environment. ?

Typically, industry/market leaders tend to have a higher resource allocation to the Transform phase. These companies tend to set the standard for their industry peers, typically investing more in new products, services, processes and strategies for market entries/growth. In an evolving and dynamic business environment, resource allocation to the Transform phase takes a higher priority.

What is the right strategic resource allocation model for your organisation:

Unfortunately, there is no golden rule to the SET Model, no SET resource allocation figure is either good or bad. It always depends on the industry, the company strategy?and?its position in the market. For example, Google allocates 60% of its resources to keeping the business running, 20% to improving and expanding, and 20% for radically new ideas. But this 60/20/20 rule might not be ideal for every industry or organisation. The faster an industry evolves or grows, the more the market entrants and?the higher the probability for potential disruptions. Organisation operating in these dynamic business environments should allocate more resources to the Expand and the Transform phases. Typically, organisations in more mature, older and stable industries have a much lower proportion of their resources invested in radical innovation.?

When analysing a company, this simple measurement of splitting the strategic resources into these three factors “Survive, Expand and Transform” provides an objective overview of the ratio of the organisation's resources invested in building agility to become a driving force within the industry. Companies with low Expand and Transform investments are more prone to be laggards in the market and need to follow the industry leaders. This puts them at a strategic disadvantage which can ultimately lead to failure in the market.

Conclusion

While it is common to use different financial measures during the strategic planning process, this simple model that can quickly identify problems within the company. The SET model has a clear formula embedded in its philosophy: as soon as you become comfortable in your business environment (Survive), it is time to look up and maximise your growth potential (Expand), and then dare explore your alternative options (Transform).

While there is no golden rule for the “right” allocation of resources between Survive, Expand and Transform, it is important to understand the power of these three numbers.

At the heart of every organisation's strategy is the important decision to either lead or follow the leaders within the industry. The strategic implications of this choice reflect on the efficiency of resource allocation.? If you consider your business more of a leader than a follower, you should invest more in the “Expand” and “Transform” phases. ?

No matter your line of business or industry, the SET Model can provide powerful insights about your industry and organisation.