Cannabis businesses are struggling to generate profits and meet demands in a continually evolving regulatory space. 2019 has seen a continued spree of mergers and acquisitions, firing of Board members, and flagrant disregard for regulations resulting in the demise of once largely respected licensed cannabis operators. The result is predictable if one looks to the history of consumer goods regulations. As the industry matures, compliance requirements continue to become more stringent and the consequences for violating more severe. Only strategic companies that are well-prepared to respond to regulatory evolution will survive and thrive.
By this stage of legalization, a company without a detailed strategic plan is at the mercy of the fates. Where many companies struggle the most during this process is knowing and building the quality and values of their company. Establishing these values seems like common sense, but there are companies within the industry that still weigh their total expenses against their gross income to decide if they are making money! That works when the income is flowing but, like in any other industry, complications will inevitably occur and ill-prepared companies will hemorrhage expenses and ultimately shutter their doors. As we’re witnessing in the industry, protocol is the deciding factor between successful professionals and the unfortunately naïve.
In this three-part series, four seemingly distinct elements of organizational processes will be coalesced to illustrate how Strategic Planning, Operations Planning, Quality Management, and Change Management are interrelated and co-dependent upon each other. We will review the effects of introducing Good Manufacturing Practices (GMPs) to the industry and how GMPs internally affect a company.
For this series, examples of significant change within the industry will be examined with the intent to demonstrate how each element within the organization incorporates and reacts to change. We will also discuss how change effects ownership, senior management, sales and marketing, operations, supply chain, finance, and the ripple effects of outside partnerships. Incorporating GMPs causes seismic changes within a company. It is imperative operations, the department handling GMP issues, and non-GMP departments, like sales and marketing, are educated and supported to ensure compliance is clearly communicated throughout the organization.
The Four Elements of Organizational Processes:
Strategic planning is the 30,000-foot view that captures the direction and goals of the organization. Additionally, defining benefits realization, specific measurable goals, and the objectives of ownership/senior management occurs during this process.
The responsibility of operational planning is to identify and execute the how, when, and where of the strategic plan with consideration for production budget and timelines.
Quality Management Systems
Quality Management Systems (QMS) are the application of best practices for producing a product to pre-defined specifications. As a part of QMS, variations in the production process are observed and risks to product quality are identified. Findings are recorded with the goal of continuously improving the processes that affect product quality. To most effectively utilize the data collected by QMS it is critical to include and understand the subsystem of QMS: tracking and trending.
Change management incorporates processes, tools, and techniques to manage the personnel aspect of change to achieve the required business outcome. Change Management encompasses every type of change experienced within a company: from shifts in personnel to the introduction of new equipment. The overarching goal of Change Management is to minimize disruptions to business.
Part I. Strategic Planning
The strategic plan outlines a company’s direction and goals in general terms. Owners and strategic planners define the direction and goals of the company while considering the potential dangers posed by market and regulation changes. Directions and goals can include: quantitative growth over a 5-year period, an expansion of products and services offered, or reducing production costs. Additionally, the strategic planning team prepares monthly and annual sales projections.
After defining direction and goals, the strategy team is able to specify and communicate order winners and order qualifiers. Without precisely defined order winners, such as quality or price, sales and marketing would struggle to find a clear path to win customers. Likewise, the same process is applied to specify order qualifiers so the company can legally conduct business in the cannabis industry. Order qualifiers such as the ability to properly submit for required testing and adhering to labeling laws are of equal importance to order winners when operating in an industry where non-compliance can be a business’ downfall.
A company’s strategic plan is not static rather living and adaptive as regulations evolve in tandem with maturing markets; one effect of which is order winners rendered into order qualifiers. As we will discover in this series, a properly executed system of GMPs will be able to detect crucial market changes and quickly respond by activating and documenting pre-established procedures. Just like strategic planning is not static neither is the organizational process as it is a system sustained on self-improvement and revision. Thus, like in our example, a company is able to re-evaluate and update its order winners and order qualifiers to maintain a competitive edge.
Canadian and European Union markets are requiring cannabis businesses to acquire GPP or GMP certification as a condition for licensure. This influence is not lost on Americans as law-makers are discussing overlaying GMPs into legal framework and many cannabis companies are proactively adopting GMPs as a safeguard against a barrage of industry changes. Regardless of location, it is imperative that owners, investors, and senior management understand their responsibility to provide a pathway to success for their employees in the form a well-thought out, however, flexible strategic plan to support employees with fulfilling their role within the Organizational Process.