Creating an Annual Operating Plan (AOP) is a strategic exercise that requires meticulous planning and collaboration across various teams within a business unit. The AOP outlines the company’s goals and the specific actions needed to achieve them over the coming year. A structured approach not only helps creating an inspiring AOP but will also help teams involved in working backwards from the stretch goal in delivering the AOP.
A structured approach to deliver the AOP
1. Establish Clear OKRs: Begin by defining clear objectives & measurable Key Results (or KPIs) under each objective that align with the company’s long-term vision. The Key Results should be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. These KPIs will track the progress of the AOP and if required will help adjust the plan throughout the year rather than discovering suddenly at the end of the year.
2. Collaborate with Key Teams: Engage with leaders from all teams such as Growth, Marketing, Product, Platforms, Business, Risk, Partnerships, Customer support etc that might be responsible for the objectives and the key results. Each team will breakdown the OKRs into smaller tasks and that essential to delivering the AOP targets. Collaborating with difficult coworkers is not easy and hence self regulating your sense to remain calm is very essential.
3. Conduct a SWOT Analysis: Perform a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis to understand the internal and external factors that could impact the AOP. This will help in identifying the areas of focus and potential risks. Most teams that I have worked in the past, have skipped this step to find themselves grappling with changes to macro-economic & regulatory environment and not knowing how to quickly react to such circumstances.
4. Develop a strategy, not just tactics: Formulate strategies for each objective, and then break them down into actionable tactics. Most teams fail to develop a coherent strategy but instead focus on merely tactical action items. Strategy involves making hard choices and saying NO to many of them so that it acts as a guiding principle while choosing tactics. Without strategy, individual team members may go in opposing direction wasting precious bandwidth & resources.
5. Integrate Customer Insights: Product managers can bring valuable customer insights into the planning process. By understanding customer behaviors, preferences, and pain points, they can help the business team prioritize features or services that align with market demands.
6. Create a Roadmap & align across stakeholders: Product managers should create a roadmap that aligns with the above customer insights, strategy and OKRs. This also needs to be aligned across stakeholders such as business, marketing, growth, engineering, risk, customer support, partnership etc to ensure buy-in and unwavering support during the rest of the year while executing the roadmap.
7. Work Backwards: To ensure a high success rate, start with the end goal in mind and work backwards. Determine what needs to be achieved by the end of the year and plan each quarter, month, and week accordingly. This reverse-engineering approach helps in identifying potential roadblocks early and keeps the focus on the end goal.
8. Create a Timeline: Develop a timeline with milestones and deadlines. This will serve as a roadmap for the year and help keep teams on track.
9. Allocate Resources: Once the roadmap is clearly defined, timeline is established while working backwards from the end goal, now allocate resources based on the budget available to meet the deadline.
10. Create Feedback loops, Monitor and Adjust: Product managers should establish feedback loops where customer feedback and product performance data are used to make informed decisions, ensuring that the AOP remains relevant and customer-centric. Regularly review the progress against the KPIs. Be prepared to adjust strategies and tactics in response to market changes, competitive actions, or internal shifts.
11. Over Communicate: Product managers should (over) communicate with all the stakeholders to ensure transparency and visibility of the traction achieved so far. Without this repeated communication, stakeholders feel they are left out of the process and hence do not remain invested in the success of the project and individual initiatives.
Top reasons why teams fail to deliver on the AOP
- Not all teams are involved
- Lack of a coherent strategy
- Not identifying potential risks that may jeopardize the plan, upfront
- Not working backwards from the end goal
- Not creating a roadmap that’s based on data or customer insights
- Not allocating sufficient resources
- Not measuring the right KPIs, frequently enough
- Not course correcting fast enough
- Not (over) communicating with the stakeholders