Finalizing the Strategy - Pulling it all Together

So last week I just wasn’t feeling it and did a bunch of other things but writing a Blog entry was not one of them. I just wasn’t very motivated last weekend. Well, let’s get back to it shall we? We have discussed several things to this point, doctrine, definitions, end state, current operational environment or COE and they all feed into the development of your strategy. If you recall, in the simplistic definition of a strategy it is the methodology or the “way” that you get from where you are at to where you want to be. The development of your overall strategy feeds into the development of your plan of action on how you will implement your strategy to achieve your end state.

For me, my strategy encompasses the creation of Line of Efforts (LOE) and Intermediate Objectives (IO) along each LOE. Military planners also combine LOEs with what are called Line of Operations (LOO) but this is not relevant to this discussion. Still I will briefly define what LOO is just so you have an idea of what it is. 

LOOs and LOEs. Military planners use these two terms and they have different meanings and purposes. A LOO focuses on establishing control of a geographic or force-oriented objective; this is not we we are doing as REIs. LOEs on the other hand do correspond to what we are doing as investors. An LOE links multiple tasks, is event driven, uses the logic of purpose and is designed to focus efforts towards achieving your end state conditions. Like the name implies, it is the "effort" we are putting forth to achieve our goal. 

Now, if you noticed, I used the plural term and said LOEs instead of LOE. An LOE, as stated earlier, links MULTIPLE TASKS which in a nutshell means that there are multiple LOEs. Your LOEs are a series of operational level tasks that you feel you must achieve to reach your end state. You determine what they are based on your COE and your end state and it is often a series of trials, analysis and corrections. So let me show you what my set of LOE’s encompass.

Everyone will have a different set of LOEs based on their analysis but this is what I determined were important lines that I needed to pursue. I will also give you a summary of each so you understand my thought process.

Education – This encompasses my need to learn and understand REI basics, advanced concepts, theories and tactics. It is critical in my ability to move forward and establishes a strong base of knowledge from which to formulate my actions.

Capital Generation – This encompasses the requirement to generate capital for the procurement, maintenance and sustainment of my business. Even if I procure a house using owner financing, I still will need capital to rehab it or a myriad of other things.

Entity Establishment – This is the creation of two LLCs. One to use for the purposes of me being a Realtor and the other to govern my investment and consulting activities. These act as tax shelters while also helping to protect my personal assets.

FLIP – This is one of the “Ways” that I will use to achieve my end state. In of itself some consider this a strategy, within the confines of my structure, I consider this a tactic as it is designed to achieve the IO that I have along this particular line.

Buy/Hold – This is another “Way” and, as you will also see when I lay out my IOs, it supports my over all strategy.

Contract Development/Management – This is an administrative LOE but critical as it establishes the type of contracts I will need to execute my plan as well as the management mechanisms I will put in place to do so.

Systems Development/Management – This is another administrative LOE but this one focuses on systems development that clearly define process and systems I will use to run my business. I was told once when I was a young Army Captain, “Good units (organizations) do great things every now and then. Great units do routine things routinely.” If you think about this, it makes sense. When you are able to consistently perform key tasks consistently things run smoothly and allow you the freedom to attempt and achieve great things frequently as opposed to every now and then. Systems are critical to ensuring you keep things flowing smoothly, efficiently and economically.

Partnerships – This is my recognition of the fact that there are people and organizations that I can partner with that will greatly enhance my success. These are both strategic partners, developers and tactical partners, contractors that are critical in helping me do what needs to be done.

When I first started to develop my LOE’s I laid them out then started to map out my IO’s along each line. As I did so, I determined what an actual LOE was and what was really just a supporting IO within an LOE. This allowed me to reduce the number of initial LOEs to the final ones I chose. To understand what I mean let me walk you through just one of my LOE’s so you see how I approach it. You may approach it differently but the important part is to define both your LOE and your IOs along that LOE.

I chose Education as an LOE because I realized that there was a lot to learn and understand before I could even consider going into REI. To this end, this was an effort that I needed to pursue so that I had the knowledge I needed to made educated and logical decisions as I started down this path. I then asked myself the question, “What do I need to know?” Well, there is a lot! One thing is certain, the more you know, the more you realize that there is a ton out there that you DON”T know. Understanding this, I still needed to develop some intermediate objectives that I felt were important to getting to where I wanted to go.

So, I came up with key IOs that I felt were necessary to achieve my end state. When you determine what your IOs are and set them up, you want to number them and then place them along your line. You will have a matrix that lists each IO number and what it is separately so you can reference them. For my purposes, I identified six IOs that I felt I needed to achieve and laid them out along my line. I put them in what I felt was the correct sequence to proceed but this does not mean that you will not pursue IO’s in parallel. Case in point, I am reading multiple books that cover 1, 2 and 6 at the same time. I literally have the books scattered around and grab one to read. I tend to flit back and forth between the books without focusing solely on finishing one book before I start the other. Yes, I have ADD!

Now, doing the same thing with all the other LOE’s gives you something like this:

What you will notice are two things. First, there are repetitive IOs. IO 16 is found both on the FLIP and Buy/Hold LOE and this is because these two LOEs share this IO which is, “Identify Target Market.” This is common as you will realize that some objectives repeat themselves across your LOEs. Rather than making a new IO for each LOE, it is easier to define it and share it across relative LOEs.

The second thing you will notice is that several of my LOE’s are red which means I consider them Critical Requirements (CR). Remember from my previous posts, a CR is an essential condition, resource and means. This is subjective in nature and what you consider a CR may be different but, this is important to define as it also may become a key decision point to the execution of your overall strategy.

If you recall earlier I said that I laid out my IO’s in what I felt was the correct sequence to achieve them but, it is not unusual for a plan to have IO’s being pursued or executed in parallel. The reason I mention this again is so that you understand a key component that I and most military planners do when they start to lay out their strategy, linking.

Linking is the analysis of your IO’s to determine what IO’s along different LOEs have a relationship and, which ones must be done on one LOE before another LOE can proceed any further. By relationship I mean that the IO has a degree of impact on the other IO. It may be critical or, it may be minor but if it affects another IO, you should identify and understand what impact it has. This also serves the purpose of helping you to prioritize your efforts by understanding what affects what and what things that must be done first in order to move forward. Below is how I currently see my IO’s along my LOE’s and how they affect other IO’s on different LOEs.

The dashed lines represent the links, what I have not done is put an arrow on the end of the lines which I normally do. This indicates what feeds into what and establishes priorities of effort. For example, IO number seven is “Secure initial working capital.” IO’s one, two and three must be done before I can achieve IO seven. These IOs are, “Understand Capital Resourcing, Understand Financing Options and Understand Cash Flow Process.” For me, I want to have a grasp on these concepts before I attempt to secure my initial working capital. For others, they may have money available but decide that before they can proceed to IO eight, “Create Capital Investment Pool” that they need to understand IO’s one, two and three. It is all subjective and based on what you feel is important.

Another example where the IO impacts another but will not stop it from moving forward is IOs 19 and 35. IO 19 is, “Identify contractors” while IO 35 is “Establish Relationships.” When I say establish a relationship I mean establishing a habitual relationship that is predicated on mutual trust through either working together on multiple projects or engaging with the individual or company routinely. I can still identify a contractor and proceed without establishing a relationship other than a contractual one. I could remove the line entirely and not affect either but I know from years of experience that building relationships are important to success. What is important though is to understand how IOs along different LOEs impact each other.

What I have not gone into is HOW I achieve my IOs. This is because everyone will approach it differently and that gets down into the nitty gritty of the strategy. Some people will write out a detailed plan of action for each IO, others, myself included, have a good understanding of what is needed and will just start executing based on what we feel we must do. I will eventually take this plan and convert it to a program that tracks my progress. Whether this is through the use of MS Project or the online resource www.trello.com is still undetermined. I like both with one being more detail oriented than the other.

When you have everything laid out what you now have is your strategy to achieve your end state. This being said, always remember that no strategy is set in stone. Things change, markets go up and down so you must always be flexible. When you understand this, you will also start to identify your Critical Vulnerabilities (CV) and risks then assess and develop plans to either remove or mitigate risk. This usually produces a risk matrix that you keep with your overall plan and establishes conditions or criteria to monitor as you proceed with your plan. This is a whole new subject that spans a huge amount of tactics, techniques and processes used by the Military, corporations, government agencies, blah, blah, blah, blah. I’d rather not go down that road as there are way better articles, blogs and books out than anything I could cover. 

This ladies and gentlemen is pretty much how I approach any major project or undertaking. I am in the midst of also planning a fundraiser for the non-profit organization I belong to and used the same exact process. My level of analysis is probably not as deep but when you do this enough times you get used to determining what level of analysis is needed. I hope this is useful to some of you in some way shape or form and look forward to reading other people's blogs so I can keep learning.

As always, I am open to comments, questions, and discussion on this as well as anything I write. We learn through interaction and constructive dissent is never bad. We may ultimately still disagree with one another but, we will have at least learned why the other person thinks they way they do and, it will add to our experience and knowledge in the long run.