Archive for the ‘Strategic Decisions’ Category

Understanding the Competitive Value of Your Brand – Part Four

Friday, March 17th, 2017

By Robert W. Bradford, President & CEO

Strategic Planning Expert
Robert W. Bradford

This post is part of a series taken from Robert Bradford’s article Understanding the Competitive Value of your Brand published in Compass Points September 2005.  In Part One, we introduced the series and discussed What makes a brand valuable?  In Part Two, we discussed Why branding is important in the global marketplace.  In Part Three, we discussed How to evaluate your brand.  Finally, we will discuss So your brand isn’t that valuable – is there hope?

So your brand isn’t that valuable – is there hope?

In some cases, companies run into a “brick wall” when they objectively evaluate their own brand. This can be caused by a number of factors, but the outcome is the same: some brands just don’t mean anything to the customer, and so do not carry any premium in the marketplace. Naturally, such brands offer little defense against inexpensive foreign competition, and companies that rely too heavily on brand power that doesn’t really exist inevitably get into hot water as foreign competition uses its compelling power – the lower price – to erode the market share of domestic competitors.

Is there a “crash course” way to build brand? Yes – but it’s inherently risky and not for the faint of heart. This is because branding is driven by the brains of our customers, not our desires. In order to build a strong, positive awareness of your brand in a hurry, you will have to do something that stands out. By “stands out” we don’t mean “is a bit better” – we mean something that is truly remarkable, or, in other words “worthy of remark”. Customers don’t make remarks about brands that are a little better – they remark on differences that they find really interesting.

An excellent example of something remarkable is the Honda Element. This is a truly distinctive design in the overcrowded sport utility vehicle market. The design is, in fact, so unusual that it almost never made it into production. Marketing people at Honda were extremely uncomfortable that the design was so different from any other brand in the SUV market that they wanted to scrap it. The designers won the fight to manufacture a small number of Elements as a “niche” product, along with a more mainstream design. By the end of the first year of production, the Element was outselling the “safe” design by five to one!

The lesson here is clear: if you are behind some savvy competitors, you should be prepared to seriously consider strategic options that make you uncomfortable. We wouldn’t recommend betting the farm on outlandish new brands – in most cases – but we would suggest that having one or two every couple of years might just push your brand into the lead by giving you a reputation for having edgy, innovative products.

To learn ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

© Copyright 2017 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution

Understanding the Competitive Value of Your Brand – Part Three

Friday, March 3rd, 2017

By Robert W. Bradford, President & CEO

Strategic Planning Expert
Robert W. Bradford

This post is part of a series taken from Robert Bradford’s article Understanding the Competitive Value of your Brand published in Compass Points September 2005.  In Part One, we introduced the series and discussed What makes a brand valuable?  In Part Two, we discussed Why branding is important in the global marketplace.  In this post we will discuss How to evaluate your brand.

How to evaluate your brand

Objectively evaluating your brand is difficult, especially if you want to put an exact dollar number on it. Fortunately, this is usually not required for good strategic decision making. Still, it’s a good idea to have at least a general concept of the value of your brand when you are considering strategic options.

The most objective way to evaluate your brand is to measure the outcomes that occur with and without the use of your brand. Sometimes this is simple, because the way you market may well lend itself to testing different hypothesis about your brand. For example, a seminar company might test mailing brochures that feature (or don’t feature) specific brands, to find out the extent to which one of those brands is pulling in attendees at the seminars. Likewise, if you have the wherewithal, you might go so far as to test selling a “generic” version of your product in the marketplace to see if it can carry the same price as your current brand – at acceptable volumes. This is a little more difficult with retail products, as some retailers will insist on only stocking brand name products on their shelves. In addition, retail stores – especially large chains – typically demand some kind of compensation for the use of their shelf space, which makes retail brand testing quite expensive.

If testing is out of the question, you can also approximate brand value by looking at the popularity and price of competing brands with little or no brand power. If you don’t have an absolutely generic “no-name” competitor, it can be difficult to be objective about this – after all, how do you decide which competitor has the least brand power? Also, there may be some confusion about value because there are several components to the success of a brand:

Brand Sales = (Cost + Margin) * Volume

If you were to attempt a calculation of brand value, you would be faced with extracting non-brand factors which affect these three numbers. For example, cost can go up or down depending on operation skills, management, underlying cost structure, and purchasing skills. Margin may be driven by brand power, pricing skill, and power in the distribution/retail channels. And volume can be affected by both cost and margin, brand power, and distribution network, as well as underlying demand for the products or services being offered.

Even so, at the end of the day your brand gets you one of two measurable outcomes: margin or volume. Comparing your margins to the competition is one way to assess the value of your brand, if you take heed of the caveat about other factors which may change margin. Comparing volume is less likely to yield a good estimate of brand value, because you can – in many markets – drive higher volumes with no brand value at all by charging lower prices. This, by the way, is a terrible strategy to be following if you are concerned about cheaper foreign competition, because there are significant costs that you simply will not be able to beat your foreign competitors on.

In the next post of this series, we will discuss So your brand isn’t that valuable – is there hope?

To learn ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

© Copyright 2017 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution

Marketing: A Key to Long Term Success Part Two

Friday, December 2nd, 2016

By M. Dana Baldwin, Senior Consultant

Strategic Planning Expert

Strategic Planning Expert

This post is part of a series taken from M. Dana Baldwin’s article Marketing: A Key to Long Term Success published in Compass Points February 2002.  In Part One, we introduced the series and discussed What is marketing?  In this post, we will discuss taking the long view.

In marketing, one must take the long view. We need to build up our image, our reputation, a perceived value we bring to each transaction over time, so that it will be sustainable over time. Example: Johnson & Johnson. A number of years ago Johnson & Johnson made a commitment to their market places that they would behave according to a predetermined set of values. They codified this in their Mission Statement. When they were subjected to the brutal attacks on their credibility with people lacing their product Tylenol with arsenic, they acted upon those stated values, pulled all of the product off the shelves, instituted new safety procedures and, when they reintroduced the same product in safe packaging, the public rewarded them with confidence in the product and reliance on the integrity of the company. Because they had built up a long term image for reliability and quality through effective long term marketing of those qualities, and because they reacted exactly as the public expected, with total honesty and integrity, they got through the crisis with no long term damage, and, essentially, an enhanced image. Had they not built this image over time through effective marketing of their image, it well could have ruined the company. An extreme case, but well worth considering how effective this long term, long view process was for them.

In the next part of this series we will discuss What is included in the marketing effort?

To learn ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Do You Listen to Your Marketplace?

Friday, November 4th, 2016

M. Dana Baldwin, Senior Consultant

Strategic Planning Expert

Strategic Planning Expert

Do you listen to your customers, to your competition, to your environment?  What influences your decisions about where to take your company in the future?  Will continuing to do what you have always done work in the future, or will it doom you to a slow spiral into oblivion?

Sometimes companies get dragged, kicking and screaming, into the future.  Other times, companies have enough foresight to be aware of the changes in customer needs and preferences, the changing economic environment and the changing social environment to be ahead of the curve.  They start changing before much of the rest of the world is even aware that change is needed and coming.

Tesla is a leader with foresight in the automotive market.  They have worked hard to develop a totally new concept in motor vehicles.  New batteries, no carbon-fueled engines, new manufacturing processes and capabilities have been experimented with, modified, changed and re-adapted to reach their desired course and direction.  Are they there yet?  No, but they are well on their way.

Compare that with the changes at General Motors.  GM was, in effect, forced to re-evaluate what its products offered the market place versus what the market place was beginning to demand.  They have responded, but the process has been difficult, as they have had to change the emphasis from their historical path to the new, more challenging path of higher efficiency electric and hybrid vehicles, etc.  The Volt was a valiant first step, but it was not an economic success, at least, to date.

Ten years ago, PepsiCo took a hard look at the direction that nutrition and snack foods were going.  They decided to make a company-wide change in direction to offer more healthful foods and snacks.  They have decreased sugar content in many foods and drinks.  They have reduced fat content significantly where possible.  Recently, they announced that in 2015 their traditional Pepsi Cola branded soft drink volume was 12% of their sales, while their nutrition brands, low calorie beverages and healthier snacks were about 45% of sales.

Now, they have announced a further extension of their change efforts.  They are aiming to be more cognizant of the environmental impact of their businesses across the globe.  They will be working to reduce many different types of waste and effluent, with the end goal of becoming more sustainable and being a better corporate citizen in the many countries where they exist.

All this ties back to listening to your customers’ needs and preferences, watching what your competition is doing, and heeding the impact of your company on the environment in which you work.  The nice thing about what PepsiCo is doing is that they are accomplishing this while generating a good return on investment for their shareholders.  Best of both worlds.

To learn ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

The Strategic Value of Values – Part 3

Friday, October 14th, 2016

By Thomas E. Ambler, Senior Consultant

Strategic Planning Expert

Strategic Planning Expert

Note:  This article is part of a series taken from Thomas E. Ambler’s article The Strategic Value of  Values originally published in Compass Points in April 2002.  In Part 1, we introduced the series.  In Part 2, we discussed Values’ Value.  In this post we will discuss Market Value.

Market Value

Now let’s shift attention specifically to the impact of Values in the marketplace. If you have been highly successful in the marketplace you likely have consistently done an excellent job at answering three Strategic Questions:

  • What are you going to sell?
  • Who is your market?
  • How are you going to beat or avoid your competition?

All three questions are totally wrapped up with Values. For example, will you offer only products and services that provide social benefit? Which customers (and suppliers) should you “fire” because they cause you to constantly spin your wheels over a misfit of Values? What benefits can you provide that differentiate you and your offering from your competitors’. Even if you have to compete on a Commodity basis, where price is king, what can you do to get your act together internally to reduce your customer’s total transaction costs and still satisfy your Values, including profitability?

Everywhere you look you see anecdotal evidence that Values and market success are causally related. Scores of our clients report that their Values such as trustworthiness and integrity are the reason their customers choose them over their competitors.

Values will become even more critical determinants of market success in the future as the marketplace evolves. What is known as the Experience Economy is superseding the Service Economy and will itself be superseded by an emerging Transformation Economy, in which the highest product forms are the customers themselves, transformed the way they want to be. So it is not hard to conceive of markets where Values become the most important, explicit part of an organization’s offering.

Conclusion? Values of organizations cause market success today and in the future.

The next topic in this series will be Internal Value.

For information on how to take your strategic planning to the next level, please listen to our webinar: Why Isn’t My Strategic Planning Working?

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Tom Ambler is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at ambler@cssp.com

What does good differentiation look like?

Friday, September 9th, 2016

By Robert W. Bradford, President and CEO

Strategic Planning Expert Robert W. Bradford

Strategic Planning Expert
Robert W. Bradford

One of the things we strive for in our strategies is good differentiation.  As a key dimension in strategic competency (the other is value to the customer), differentiation is what makes both specialty and commodity strategies work.  With a specialty strategy, the differentiation must help target customers to decide that our product or service is worth a premium price.  In a commodity strategy, our differentiation is what enables us to succeed at a lower price point than undifferentiated competition.

The fact that these types of differentiation are so distinctly different from each other creates incredible confusion about appropriate strategies in many industries.  Simply put, if you are seeking specialty differentiation, the customer must perceive the added value.  If you are seeking commodity differentiation, the customer already perceives value in the price – but you must have an actual cost advantage over your competitors that sets you apart.  In other words, customers can be totally unaware of your advantage – but, for a commodity strategy, it must be real, and create a tangible cost advantage.

In many industries, the lack of clear commitment to specialty or commodity strategies leads people to strategic plans with highly incompatible objectives.  Cutting labor costs, for example, is often damaging to specialty differentiation (especially in service businesses) because your workforce is often either the source of your competitive advantage or an important part of delivering the value of your advantage to customers.  This is one of the most important reasons why we strongly encourage companies to clearly identify whether they are pursuing specialty or commodity strategies.

This being said, what does good specialty differentiation look like?  Since it must be perceived by the customer, it cannot be a subtle distinction.  The more you have to explain your differentiation to customers, the less believable it is.  This means that the best differentiation is simple and clearly communicated.  If you need a lot of words to describe it – or if you have difficulty explaining it to customers – chances are, your differentiation isn’t very good.

Specialty differentiation also has to deliver a promise of clear value to the customer.  This means that the customer must expect that there is some desirable benefit he or she will receive as a consequence of buying from you.  In our experience, each specific customer has a limited number of values that are important, and they are rarely always the same.  This is why some auto customers buy SUVs while others buy sports cars.  It’s also rare that the customer has a very long list of value benefits that are important.  Normally, customers will make their primary decisions based on three to five key value dimensions, such as convenience, appearance, reliability or ego association.

With commodity differentiation, we tend to look internally for distinctive practices or technology that reduces cost below those of competitors.  This is far more difficult for many than specialty differentiation, but it’s easier to recognize and quantify.  The easy part of commodity differentiation is that your accounting systems can probably tell you exactly what your costs are – but the hard part is having true differentiation, where you have a cost advantage that competitors cannot (or will not) copy.

What does your differentiation look like, and how do you know it’s there?

Does your company have a strategy with good differentiation?  Is your company having a hard time developing your strategic plan or thinking strategically?  Let us know how you are dealing with it – or, better yet, attend our amazing, data-driven workshop on Simplified Strategic Planning to learn how to develop and implement your strategic plan.  Our highly acclaimed Simplified Strategic Planning approach has helped many hundreds of organizations improve their strategies and bottom line results with effective, actionable strategies.  Please listen to our webinar:  Why my strategic planning isn’t working.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution

March to a Different Drummer – Part Four

Friday, August 12th, 2016

By Denise Harrison

Denise Harrison

Note:  This article is part of a series taken from Denise Harrison’s article March to a Different Drummer originally published in Compass Points in August 2002.  Although this article was written in 2002, this discussion is timeless.  In Part One, published July 1, 2016, we introduced the series.  In Part Two, published July 22, we discussed some Historical Examples.  Part Three, published July 29,2016, discussed Don’t Follow the Leader and this post will discuss How to find the right marching beat for your company.

Situation Analysis

First evaluate external forces: What impacts your business from the outside?

Examine your core business by describing your market segments. Market segments are groups of customers with similar needs and preferences. Write down what your customers in each segment now and what they will require in the future. Next evaluate your competition; what are their strengths and weaknesses? Where is each company’s soft underbelly? Next you need to assess trends in technology, supplier issues, economic trends, and any recent or pending changes in the regulatory environment.

Regulatory change was the catalyst that spurred all of the airlines, not only Piedmont, to revise their strategies.

Next look internally; what are your company’s strengths and weaknesses? What is the key intellectual capital that sets you apart from the competition? Again, IIS found that it was the relentless dedication to zero defects and customer satisfaction that set them apart from the competition.

Assumptions for the Future

Next look to the future; how will trends change? What will customers require? What new opportunities should you pursue to achieve your growth and profit goals? What prospects are right for you to consider, given the strengths and intellectual capital that you identified.

Careful analysis leads to focus. Focus allows you to purposefully select the best road to travel.

Strategy Development

A clearly defined strategy that optimizes the future potential of the business is the goal.

This clearly defined strategy includes answers to the following:

  1. What are you going to do in your core businesses?
  2. What new opportunities will you pursue?
  3. What must you accomplish internally to achieve steps 1 and 2?

Developing a strategy is defining not only what the company will do, but also what it will not do. Making definitive choices is one of the most important aspects of strategic planning. Choosing the best road for your company may or may not be the road less traveled, but it will be the right road for your company. Your company’s ability to capitalize on its unique mix of assets and capabilities will give it sustainable competitive advantage in its markets.

To learn how to take your strategic planning to the next level, please listen to our webinar:  Why Isn’t My Strategic Plan Working?.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

Unintended Consequences of Well-intentioned Actions

Friday, August 5th, 2016

M. Dana Baldwin, Senior Consultant

Strategic Planning Expert

Strategic Planning Expert

In Strategic Planning, teams make decisions based on data and on the best knowledge of the planning team and organization.  Unfortunately, well-intentioned plans can result in incurring unintended results.  While analyzing what could possibly go wrong with a strategy or high level tactic, it simply is not possible to anticipate everything which could occur in carrying out the plan.  There are many factors outside of the organization’s control which can have unfortunate impacts on the efficacy and effectiveness of any action.  Of course, this is certainly possible with any action an organization could undertake, but in this analysis, we will be looking at analyzing each of our decisions about strategies for each market segment, new products or services, changes in our operations and outside resourcing.

In our core business segments, those market areas we are currently pursuing  actively, we will be making decisions about where we want to take each segment.  Do we want to stay on our current course, actively expand our efforts in this market segment or possibly even reduce our emphasis in the segment to put resources into more attractive areas, both other current market segments and possible new products or services we are considering offering?

The decisions we make in strategic planning will determine the future course and direction of the company / organization, so we want to be both aggressive and as safe as possible when we select what strategies and high level tactics we will be pursuing in the future.  To carry this out, we want to have the team look at decisions we make in our discussions about strategic issues and about the assumptions we have made in our future assessments of where each market segment is to be directed so that we can take into account the possible things that could go wrong with the actions we will be undertaking.

In our Simplified Strategic Planning seminar we give specific examples of problems encountered because the team forgot to look at the potential downside of well-intentioned objectives or strategies.  A simple example:  The goal decided upon by the city commission was to increase the ease of movement for people with physical disabilities by taking out the curbs at street crossings and putting in ramps so that wheel chair bound people and those who use crutches would be able to more easily negotiate crossing streets.  A noble intention, with positive impact on those people.  The unfortunate side effect was that it made it much easier for children on bicycles and skateboards to shoot across streets.  The potential for increased car-bike and car-skateboard accidents was increased as a result of this change.  This is a real example of a potential problem which could be caused by not taking all the factors into consideration.

While you won’t catch every possible problem, the intent of this analysis is to remind team members that things can go wrong with plans that have the greatest of intentions.  It will reward your  team by possibly eliminating or minimizing the impact of a well-intentioned action to review the decision with the mindset of trying to determine what could go wrong if not implemented properly, and , based on that analysis, deciding to proceed, with caution, or to change the objective or not to pursue it.

If your team needs guidance in performing this analysis or in your full strategic planning process, please contact me at baldwin@cssp.com or call me at 616-575-3193.

To learn ways to take your strategic planning to the next level please listen to our webinar:  Why my strategic planning isn’t working.

M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: baldwin@cssp.com

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

March to a Different Drummer – Part 3

Friday, July 29th, 2016

Denise Harrison

Denise Harrison

Note:  This article is part of a series taken from Denise Harrison’s article March to a Different Drummer originally published in Compass Points in August 2002.  Although this article was written in 2002, this discussion is timeless.  In Part One, published July 1, 2016, we introduced the series.  In Part Two, published July 22, we discussed some Historical Examples.  Here we discuss another aspect.

Don’t follow the leader!

Enron began as a natural gas company. It saw the deregulation of energy markets as the path to future growth. As it pursued this growth, it transformed itself from its roots, natural gas, becoming an energy trading company to meet the market challenges of the deregulated environment. From trading in energy futures it jumped into paper, water (although not for long), weather futures, and finally into broadband. Enron could do no wrong in the eyes of many analysts and its corporate executives. Let’s look at the history.

Enron’s foray into trading began with hedging future energy costs to combat a turbulent energy market. The company needed to lower its exposure to fluctuating energy prices by entering the market to hedge the forward price of energy. This tactic not only lowered risk, but also generated a significant amount of cash with little capital investment-very attractive results for the capital-intensive energy company. Enron jumped into the trading business with both feet, eventually resembling a financial institution more than an energy producer. The company’s rapid growth was the envy of the industry, the envy of Wall Street growing from $4.6 billion to over $100 billion, the seventh largest company on the Fortune 500 list (2001). For six year’s running it was voted the “Most Innovative” among Fortune’s “Most Admired” companies list.

Now, let’s think about this. Moving from energy producer to a trader of energy is a jump, but sometimes a jump to an adjacent competency is required when an industry is in transition, as the energy industry is in the new deregulated environment. But to assume that this new-found trading competency transcends industry/commodity knowledge is a long shot at best. Enron was initially very profitable as it benefited from its “first mover” advantage, the first to try and understand the new playing field created by energy deregulation. Its success brought competition into the field; now to maintain its profit and growth, Enron not only traded in commodities previously unknown to its personnel, but also started playing financial games to mask the truth about its slowing growth and profitability. While corporate officers either did or did not understand what was going on, their greed and egos caused the demise of Enron. Sadly, Dynegy, Mirant, and Calpine tried to follow in Enron’s footsteps and found that they too had to grow through high risk and questionable financial transactions to keep up with Enron. This was a parade that one needed to be watching, not participating in.

Not all energy companies played in the Enron band. Duke Energy was often castigated for its conservative strategy at analyst meetings during the late 90s. Analysts like the wild ride that Enron was providing (at that time the ride was up). Duke Energy stuck to its guns and remained an energy company that used trading to reduce risk rather than to become a trading company of energy futures. It did not get caught up in the hype and the smoke-and-mirrors transactions of Enron fame. Now, after Enron’s collapse, Duke Energy’s balance sheet remains strong and its prospects for realistic profit and growth are good. Companies that aspired to follow Enron into ever riskier transactions found themselves in trouble.

We will conclude this series with “How to find the right marching beat for your company” in a future post.

To learn how to take your strategic planning to the next level, please listen to our webinar:  Why Isn’t My Strategic Plan Working?.

Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com.

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

The Volume Trap

Friday, July 8th, 2016

By Robert W. Bradford, President & CEO

Strategic Planning Expert Robert W. Bradford

Strategic Planning Expert
Robert W. Bradford

Over the years, I’ve encountered dozens of companies that seem to be caught in a trap of their own making.  It’s the result of doing whatever it takes to satisfy customers that, in the end, will buy from the supplier who offers the lowest price.

The low-price strategy is a viable one – just look at companies like Southwest Airlines and Walmart, and you can see it can work.  But every successful commodity supplier stays true to one key rule:  you have to be willing to take value off the table to keep costs as low as possible.  You also have to – and this is mandatory – be the biggest player in your market.  If you aren’t, you’ll end up losing to someone with greater economies of scale.  The successful players who use this strategy all demonstrate both of these principles.

This is a trap for most companies.  There are two key problems inherent in the commodity strategy (that is, the strategy of targeting customers who choose based on price alone).  The first is that there is only one winner in any market.  You can have multiple winners in a market selling on the basis of quality, technology or convenience, for example.  But there is only one lowest price supplier, and that one gets all of the commodity customers.  Number two inevitably ends up in serious trouble – and if the two players are neck and neck on costs, both number one and number two can end up going under.

The second key problem is that low-cost/price strategy leads to operating in a very specific way.  Southwest Airlines has forgone many of the elements of running a mainstream airline, and has tailored their aircraft fleet to minimizing cost.  Walmart has invested huge sums in high-tech distribution data analysis and building a strong brand image around low prices.  These are not flexible investments, and there is no plan B for either company if their costs end up being uncompetitive.  That means that, at some point in the future, some competitor may come up with an approach that makes these large operations completely obsolete.  If you think that idea is far-fetched, take a close look at how Walmart ended up taking the discount store crown away from Kmart.

What does this mean for your company?  It means you need to take a serious look at any strategic choices that may take you down the commodity road.  Those choices could work for you, or they could be a trap.  Can you tell how it will play out for you?

Is your company having a hard time developing your strategic plan or thinking strategically?  Let us know how you are dealing with it – or, better yet, attend our amazing, data-driven workshop on Simplified Strategic Planning to learn how to develop and implement your strategic plan.  Our highly acclaimed Simplified Strategic Planning approach has helped many hundreds of organizations improve their strategies and bottom line results with effective, actionable strategies.  Please listen to our webinar:  Why my strategic planning isn’t working.

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc.  He can be reached at rbradford@cssp.com.

© Copyright 2016 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution