Strategic Planning: Sometimes a Road Less Traveled is Best
Larger airlines chose to compete in the busiest airports. This head to head competition led to inevitable price wars. Piedmont, on the other hand, continued to build its network in the southeast servicing many airports that other airlines would not even consider. This strategy paid off as the company was voted "Best Airline", clearly differentiating the airline as the high quality service provider in the industry. Next US Airways purchased them, and you know the rest of the story!
Market trends are some of the key factors to look at when developing a strategic plan. But in addition to looking at the market attractiveness a company must also look inside and assess its own strengths and weaknesses. Compete on strengths and avoid areas of weakness. All of the airlines developed their respective strategies by evaluating the markets, looking at demographics and transportation trends. Piedmont chose to avoid competing with better-financed airlines in popular hubs. Instead it looked to service the area where it was already well established and an area that was less attractive to its larger competitors.
In recent years many companies saw the Internet expansion as a key trend to enhance growth. Pundits argued that the new economy was immune to business cycles — the new management mantra was "get big fast — or go home". Webvan embodied that mantra — to what end?
"Webvan Group, Inc. said it shut down its online grocery-delivery service and will file for Chapter 11, marking one of the most spectacular and expensive failures of the Internet era....Webvan poured ...$830 million... into high technology warehouse facilities and a 26-city expansion plan that most observers have since said was too ambitious." WSJ, July 10, 2001
This is only one example of how companies assumed the Internet was the "land of opportunity" pouring millions of dollars into plans that were ill-conceived and based on invalid business models.
Intelligent Information Systems, Durham, NC
During this dot.com boom Intelligent Information Systems (IIS), a software-consulting firm, was evaluating different potential growth strategies. IIS was clearly differentiated by its high quality standards and its commitment to total customer satisfaction. To many, "quality" and "total customer satisfaction", are just buzz words, but to the team at IIS these phrases are driving principles. While many technology firms in the Research Triangle Park were taking advantage of the lucrative public offerings, the senior management team at IIS knew that a public offering would cause the team to lose its focus on customer satisfaction and zero defects. After a public offering, associates would be imagining what they could do with their newfound wealth, watching the stock price daily, hourly, assessing minute to minute his or her net worth. This myopic self-interest would cause the company to lose its competitive advantage.
A difficult decision to make during a critical time frame, but 20/20 hindsight shows that the IIS team chose the optimal course and direction for their firm by focusing on the key areas that set the company apart from the competition.
How do you choose the road less traveled?
First evaluate external forces: what impacts your business from the outside?
Begin evaluating your core business by dividing it into market segments. Market segments are groups of customers with similar needs and preferences. Evaluate what the customers require 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 evaluate trends in technology, supplier issues, economic trends, and any changes in the regulatory environment.
As we saw with Piedmont, the change in the regulatory environment is the catalyst that set off the changes in the airline industry requiring major revisions in strategic direction for all of the airlines.
Next look internally, what are your company's strengths and weaknesses? What is the key intellectual capital that sets us 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 we pursue in order to achieve our growth and profit goals? What prospects are right for us to consider given the strengths and intellectual capital identified.
Careful analysis leads to focus. Focus allows you to select the best road to travel.
A clearly defined strategy that optimizes the future potential of the business is the goal.
This clearly defined strategy will include the following:
- What you are going to do in your core businesses?
- What new opportunities you will pursue?
- What will you need to accomplish internally in order 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. It is your company's ability to capitalize on its unique mix of assets and capabilities that will give it a sustainable competitive advantage in the market.
Denise Harrison is a Consultant with Center for Simplified Strategic Planning, Inc.
She can be reached via e-mail at ");