Category: Strategic Planning during the COVID-19 pandemic

What we need when there is great future uncertainty

Over the years, I’ve taught many concepts that are vital to good strategy.  One of the key struggles many have with strategy is that our assumptions can turn out to be incorrect, rendering some of our strategies less useful.  Right now, many of us are struggling to revise our strategies because we simply cannot predict what the future will look like because of future uncertainty.  Unfortunately, not changing your strategy is not really useful – you are simply betting that the old recipe will work in the future.

Good strategic planning calls for good assumptions, but great future uncertainty makes it extremely difficult to make reliable assumptions about the future. We are certainly in a time when it has become very difficult to make good assumptions. When you cannot make good assumptions about what will happen next year or even next month, there are a couple of key strategic concepts that come into play:

1. Flexibility becomes more valuable
2. Having reserve resources is key
3. Multiple paths to success are required to win

With these concepts coming to the fore, there is one strategy that is much more likely to yield positive results – and it’s the one strategy that many companies have had trouble embracing.  This strategy maximizes flexibility, builds intangible resources of support with employees, suppliers and customers, and enables profitability in multiple scenarios.  This strategy is the specialty strategy, and you will see companies using it prosper at the expense of their commodity competition in the next few years.

Why a different strategy works better with future uncertainty

Why is this strategy so useful in times of uncertainty?  Partially, it is because the specialty strategy at its core is about making more money because you do something well.  The alternative approach – the commodity strategy – involves making money because you do something cheaply.  There are three reasons why the commodity strategy is particularly difficult in times of change:

1. Volumes are unpredictable

Commodity strategies in the modern world involve thin margins which only create large profits when volume is high.  In most high fixed cost businesses, this translates into much higher volume sensitivity.  In a world where volumes are unpredictable or reduced, finely tuned commodity businesses struggle to make ends meet.

2. Distribution channels are stressed

Distribution is one of the most critical processes that a commodity focused business can optimize for.  In many industries, distribution is the key element to gaining a critical 4-5% advantage on cost that enables a commodity to succeed.  Unfortunately, the companies that make up those channels are the most likely to focus on a highly tuned commodity strategy, which makes them less flexible and resilient.  When the people who make up your channels don’t have predictable futures, the whole system suffers, and that cost advantage disappears. In a true commodity business, loss of cost advantages are the kiss of death.

3. Caring about what you do is a two-way street

As we’ve said many times, the commodity strategy ultimately causes companies to focus more on what thing cost rather than whether they are good.  A well-tuned commodity-oriented business applies this thinking to its suppliers, products or services, and people.  Unfortunately, this means that customers come to expect whatever you sell them to be barely adequate.  Customers simply do not expect excellence from their commodity suppliers – and focus almost entirely on the cost.  This means there is nothing you can do for commodity customers besides lowering your prices, and there is nothing they are going to be willing to do for you.

Key advantages of specialty strategy with future uncertainty

Beyond these critical problems for commodity-focused businesses, specialty strategies offer some excellent advantages when properly executed:

1. Specialty strategies are more flexible.

Imagine you are running a restaurant.  You local government (if not your market) has probably shut down your operation for the past several weeks.  As restrictions loosen, you’ll likely find you can re-open with reduced capacity.  This is ok for the specialty restaurant, because you have the margins to profit with reduced seating.  But what about the commodity restaurant?  With thin margins, reduced capacity means you’ll have to pay for your fixed costs with even less money – and you aren’t nearly as likely to make it, in that scenario.  Specialty strategies give you both price and volume flexibility that are not available to commodity strategies.

2. Specialty strategies create advantages that don’t disappear when there is disruption.

The main benefit of the specialty strategy over commodity strategy is the preference of the customer.  Disruption is far more likely to damage the advantage of the commodity strategy, which is price.  This is because the superiority of the specialty product or service is simply less disruptable than the cost advantage of commodity products and services.

Being good at something in business involves a mindset that works for customers, employees and suppliers.  It’s easier to be good at what you do with the full support of those three groups.  Also, you have many options to make a profit this way that don’t take anything away from customers, employees or suppliers.  With commodity strategy, the simplest, easiest way to increase profit is to take something away from those players – by paying employees less, paying suppliers less, or delivering less than your customers expect.  If you want your customers to care about your business, you have to care about your customers, your employees, and your suppliers.  If you do that, you will find a great reserve of support for your company in all three of those groups.

With these advantages in mind, now is a good time to take a closer look at your business to see where your specialty strategies are working for you, and how you can build on these for success in multiple scenarios for the next few years.

Simplified Strategic Planning is an excellent framework for examining and re-thinking your strategy in times of great future uncertainty.  If your business is looking to prosper in the coming years, consider attending the Simplified Strategic Planning seminar online on August 10.  A live instructor will both guide you through how the process works and give useful tips on how to make the most impact with your strategic planning.  Sign up here!

Times of great upheaval represent a great opportunity for those who would act to get ahead.  The right moves to do this are strategically important for your company, and could literally make or break your business.

In my last article, I summarized four key steps to hanging on through the current downturn.

1. Survive.
2. Protect your strategic advantages.
3. Reconsider your channels.
4. Ask for what you need.

Instead of focusing on survival, I’ll be looking at the second item today – protecting your key strategic advantages.  These include anything that sets you apart from your competition and includes your strategic competency.  Strategic competency, as you remember is the thing that differentiates you in a way that your customers find valuable.

As mentioned previously, a couple of strategic opportunities that come up when the economy is bad are marketing and acquisition. 

If you have financial flexibility, act, since brand building and acquisitions are at their cheapest when the economy is soft.  Some resources that are less expensive in a down economy are real estate, construction, advertising, and equipment (especially second-hand).  It’s definitely worth taking a look at any big-ticket spends you might choose to make now.  If those big-ticket items are ways to crank up your strategic advantages, now is the time to buy them.

One area where you may also find some excellent strategic opportunities is investing in people with key skills. 

Even high-flying companies can end up downsizing in a bad economy.  That means some very talented people may be out of work looking for a new position.  This may require some creative thinking, since the exact experience you seek may not be available.  Bright, creative, hardworking people, however, inevitably become part of the unemployment statistics when things get bad.  Don’t be afraid to snap them up, if you can use them in your business.

A third area you may want to examine is intangible assets. 

Things like licensing, long-term contracts and outright sale of intellectual property are being considered by struggling companies now.  Are there any of these that would bolster your company’s competitive position?  In many cases, a company may be struggling because they are trying to use the wrong channels, like retail shops.  Their core IP may be valuable and strategically useful in newer channels though, that are less damaged by stay-at-home orders.

Protect your existing advantages.

These are all opportunities you may have to expand your strategic advantages.  It’s important to remember to protect your existing advantages, as well though.  The most important of these is the people whose skills and knowledge contribute directly to your strategic competency.  You not only need to be sure that they are happy, but also that they stay safe and healthy.

Take care of your suppliers.

In addition to people, supplier relationships can come under strain in a bad economy.  It’s worth remembering that everyone is working through challenges, which means that issues are more likely to come up now than every before.  Be aware that some suppliers may see a dramatic downturn in sales, reduction in resources and need to shed costs.  There are, again, strategic opportunities in this, if you can assure a constant stream of business.  Help your supplier to shed costs, or even hire some of their people (even temporarily).  Being a hero to a supplier can be a great way to cement real advantages.

Take care of your customers.

Of course, customers may be facing challenges just as suppliers are.  You’ll gain a lot of traction with those customers for anything you can do to help them survive.  This can be risky in the case of things like extending credit.  I’ve had some clients build their customer relationships by helping restaurants convert their menu offerings to take-out and delivery.  Furthermore, they’ve helped customize product and marketing, so they can be used for online sales.

This may be the perfect time for strategic planning.

If your business is seeing a downturn in demand, now is also a good time to spend time on things that will build you up strategically.  Revamping your facilities, moving to a new plant and even strategic planning are activities that you may feel you haven’t had time for – and now may be the perfect time.

If you’d like to use Simplified Strategic Planning to create a plan that will lead to success, consider attending our next Simplified Strategic Planning seminar. Like most people, you’d benefit from having an experienced professional lead you through the strategic planning process.  Then you can focus on the content of your strategies.  If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings.  Furthermore, they understand how to best use your planning time.  Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.

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

© Copyright 2020 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

It’s pretty clear by now that the economy is going to take a severe beating this quarter, and possibly the entire year.  With the strategic picture in mind, how do we steer our businesses through this rocky period?  The key to understanding the answers to this are the things that are truly strategic in your business.

When we look at strategic efforts, we ultimately end up with strategic competency and other strategic advantages. 

For any strategic advantage to work, it must not be easily copied by someone else.  This means that all useful strategic advantages are a result of spending expertise, time and money.  I say this because anything that does not require at least one of these things will be quickly copied by any competitor who loses business because you have it.  Of the three, expertise is the most replaceable – that is, spend enough time and money and you can have expertise.  Money comes in second, because it is also sometimes possible to gain money through the application of expertise and time.  Time is irreplaceable – you don’t get more than anyone else, and you cannot create it through any means.

The most strategic elements of your business, then, are those things which require great expertise, time or money to create. 

In many cases, strategic advantages require two or three of these.  These, more than anything else, should be the engine that creates value for your customers.  They also create value for your shareholders, of course, because of the competitive advantages they offer.

Currently for many, no amount of strategic competency will enable you to avoid a decline in sales and profits. 

When the whole economy shrinks, most companies shrink right along with it.  There are, however, things you can and should do to shrink less than your competitors.  More importantly, there are things you can do right now that will enable you to grab more than your current share of the growth when the economy bounces back.

First, you need your business to stay alive. 

This means that close attention to cash flow is critical for most of us.  It also means that some pruning of expenses may be necessary to stop the bleeding.  This is an area that takes care, as some expenses may be critical to your strategic advantages.  What you absolutely don’t want to do, for instance, is lose the people whose know-how differentiates you in the marketplace.  Likewise, supplier relationships that are critical to your success should be supported – now more than ever.

Secondly, you need to protect your strategic advantages. 

If your brand is the key, now is not the time to kick the legs out from under it.  Indeed, spending on marketing your brand may be one of the most efficient things you can do during a recession.  This is because many companies do cut marketing in times like this, and so the cost of marketing declines, sometimes precipitously.  In addition, if you have strategic advantage built on anything that becomes cheaper in a weak economy, you probably want to go into acquisition mode.  This means that if, for example, you have a great position in your market because of your real estate holdings or capital equipment, you should consider buying more now.  As more conventional, operations-driven companies pull in their horns and buy less, you’re likely to find some bargains.

Thirdly, you need to reconsider your channels, both marketing and distribution. 

If your industry is suffering because customers no longer show up in stores, you need to build capabilities in alternative channels FAST.  If you use conventions or travel as a means to promote and sell what you sell, you need to find another way to reach the same customers.  Many companies will fail because they won’t do this.  Others will fail because they don’t do ENOUGH of this.  This can happen because you may be hoping that things will return to “normal” faster than they will, or it could happen because you lack the expertise in new channels that you have in your old channels.  Since failure to get over this can mean the death of your business, don’t be shy about seeking outside help to move rapidly in a new direction.

Finally, it’s not a bad idea to ask for what you need. 

This is true anywhere you might have a need that you can’t figure out how to fill.  Your banker, your suppliers, your employees and your customers may have ideas, and they may even have the ability and willingness to come through for you in ways you didn’t expect.

Obviously, this is a time when many companies may want to re-think their strategic plans and initiatives.  If you’re in one of those companies, call Robert Bradford (734) 929-8846 or Dana Baldwin (616) 340-4159 to discuss how you can re-evaluate your direction and shift quickly to match the new reality.

If you’d like to use Simplified Strategic Planning to create a plan that will lead to success, consider attending our next Simplified Strategic Planning seminar. Like most people, you’d benefit from having an experienced professional lead you through the strategic planning process.  Then you can focus on the content of your strategies.  If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings.  Furthermore, they understand how to best use your planning time.  Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.

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

© Copyright 2020 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

Covid-19 and Business – How to Build Value During the Pandemic.  It’s still somewhat early to predict how the Covid-19 outbreak has changed every part of our world.  It’s not too soon to pick up some early ideas that are emerging from the disruption caused by the pandemic. Smart companies will look to use the disruption to build value for customers, while taking care to minimize emerging risks.

Here are a few key early ideas we are seeing.

1. Virtualization is accelerating

With many in the country having a stay at home order, connections by livestream, FaceTime and videoconferencing became very common.  Now millions of people have gained first-hand experience with applications like Zoom.  Many businesses are now heavily relying on those tools.

One implication for many industries is that the video meeting has become much more common.   Now, technology exists to virtualize big chunks of many operations, especially if you’ve already started down that path.

2. Working from home is working out…or it isn’t.

Many businesses are now shifting much of their workload into work-at-home arrangements, even if they resisted such moves before.  In some cases, this works better than expected, because it has to work for the business to remain functional.  One takeaway is that structuring work so it can be done remotely may make a lot more sense today.  Companies with work at home options often have an easier time recruiting and retaining top talent.

3. Because of Covid-19, Business Priorities will change

Having so much of our lives disrupted is likely to cause many to re-evaluate what’s important to them.  People may be re-thinking their plans to buy new cars, take vacations or renovate their houses in the near future.  They may be placing higher value on the intangible dimensions of their lives.

When consumer behaviors are in flux, there is a great opportunity to form new habits and adopt new brand loyalties. Consider which customers might consider switching from one habit to using your product or service. Are you highly visible to those new customers?  Do you want to keep the customers you have? Take time to examine what you might do now to get them to come back when they can.

4. Distribution is essential

While many businesses have shuttered their shops due to the Covid-19 outbreak, grocery stores and drug stores have stayed open.  Many stores have had to offer significant wage increases to get workers to staff these stores.  It’s clear that businesses that get food and other vital products to consumers are a vital part of our lives. 

It’s clear that companies using alternate distribution channels have been able to generate revenue, even when other channels are closed.  If you don’t have alternative ways to market, it’s a great time to think how you might make those work.

5. The economy is taking a beating

There is no question that the economic numbers are going to look terrible for this quarter. This could likely extend to the rest of the year.  With millions of newly unemployed workers, the displacement alone will drive down demand for almost anything you might sell. This could be true even for things like face masks and hand sanitizer.  The closing of many retail outlets for goods and services means there is no functional way to purchase them.

6. Now might be a great time to make acquisitions.

With this kind of a downturn, it’s good to seek alternative ways to generate revenue and minimize expenses.  To be safe, you likely should prepare for a tough season or two.  If you have a fairly conservative balance sheet, how can you take advantage of it? If you already enjoy alternative sales and distribution channels, now might be a great time to make acquisitions. This is because selling prices of some great brands may soon reach bargain levels.

What other disruptions are you seeing from the pandemic?  Have you found ways to create positive outcomes from any of them?  Good strategic planning is an excellent starting point, and it doesn’t have to consume huge amounts of resources.

If you’d like to use Simplified Strategic Planning to create a plan that will lead to success, consider attending our next Simplified Strategic Planning seminar. If you’re like most people, you’d benefit from having an experienced professional lead you through the strategic planning process.  Then you can focus on the content of your strategies.  If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings.  Furthermore, they understand how to best use your planning time.  Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.

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

© Copyright 2020 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission

Pandemics affect business strategy.  If you’re like most people, the Covid-19 virus that you’ve heard news about concerns you.  Some of that concern may be personal, since anyone could be infected by the virus.  Some of that concern, however, may be about the impact on your business.  There are several ways a pandemic can affect business strategy, and it’s certainly appropriate to consider them.  In some cases, you want to take action to counter the negative effects that you may experience.

 

How would a pandemic affect your business strategy?

To begin with, it’s useful to think about how your business would normally connect with the downside of a virus outbreak.  Your company probably falls into one of these categories:

1. You are going to do better because of an outbreak.  This is most likely for businesses involved in steps you might take to prevent the disease, such as manufacturers of hand sanitizers and masks.  It might also include you if your best customers are part of those industries.
2. You will be directly hurt by an outbreak. This category includes any business that would see a direct drop in demand due to consumer precautions – companies in the travel industry are the best example of this.  Anything people will buy less of because of health concerns would be included here.
3. Your industry will be disrupted by an outbreak. This includes anyone whose supply chain may be interrupted because key suppliers are in highly affected areas, or whose normal operations involve travel through affected areas.
4. You will suffer some downside because the economy will be hurt by an outbreak.

Where will your company fall?

Your business could be in any of these categories, though most companies probably fall into category 3 or 4.  The outbreak will disrupt them and the economic downturn will hurt them.  If you are in category 1, this is not a bad time for you, and it may be a great time.  Many activities, such as raising capital and hiring, are likely to be easier for you, and your sales should show significant improvement during an outbreak.  If you are in category 2, the opposite is true.   You can expect your stock to take a beating, and your sales are likely to decline as employee turnover increases.  In some cases, we may see some category 2 companies go out of business, as the decline in sales can be more than they can handle.  But for most, an outbreak simply makes for a very tough year.

Have alternate sources for your critical needs.

When the outbreak occurs in key manufacturing areas, it will disrupt industries and operations.  With adequate planning, you may already have alternate sources for your critical needs, but you can still expect some disruption.  Even with alternative sources, costs may rise as interruptions in some areas test the capacity of the global economy.  Temporary interruption of supply is inevitable, and cost and quality issues are likely as you seek new suppliers outside of affected areas.

Pandemics affect everyone’s business strategy in some way.

Category 4 companies include pretty much everyone else.  Demand for your goods and services is likely to dip as the disruption of the outbreak affects your customers.  How bad this gets depends on the economic importance of the affected geography and how deep the disruption is.  If the outbreak affects a large, critical manufacturing region, one would expect the ripples from the outbreak to spread widely.  If the effect of the outbreak is very deep, some businesses may completely shut down for a month or more.  In this case, we would also expect to see a longer, deeper downturn in the economy.  Certainly, the year following an outbreak wouldn’t be a good year for anyone except companies that benefit from outbreaks.

Pandemics affect business strategy.  How can we address this threat? 

If you use Simplified Strategic Planning, it’s likely you’ve already identified some version of this threat in your strategic planning.  If you have not taken steps to directly mitigate the negative outcome, now is a good time.  As a refresher, here are the possible steps for any threat.

Prevent the threat.

1. Prevent – If you can prevent the threat, you are way ahead.  Unfortunately, we’re unlikely to be able to do that in the case of a pandemic.

Limit exposure.

2. Limit exposure – this step can be a winner. If you have prepared by arranging alternate sources of supply or targeting markets that are less affected by an outbreak, you will reap some of the benefits of that preparation when the outbreak hits.

Watch for an early warning.

3. Early warning – even after an initial outbreak, early warning can be helpful. The best early warning will give you notice that the downside is coming (or that it will be worse than expected) in time to take remedial steps.  Watching the local statistics for your region or country will help, and any data that may give you an indication that the ripples from the outbreak are affecting your customers will also give you a chance to respond.

Have a contingency plan.

4. Contingency plan – again, the best contingency plan is one you have already made, but you may want to plan for a series of contingencies. For example, one client has a general economic downturn plan with milestones at 0%, -2% and -5% growth.  If they see economic growth reaching down into lower numbers, additional steps in their contingency plan will be triggered.

Hedging

5. The final possibility, hedging, is unlikely to be economically useful after a pandemic has begun. This is because hedge markets typically accommodate the expected value of risk into pricing, driving up the cost of hedges as the probability of the risk approaches 100%.  You could still hedge some economic downturn risks after an outbreak, but their value is unlikely to be high.

How has your company addressed this kind of threat?  Do you feel well prepared for pandemics or other threats that may have a very real effect on your industry?  Good strategic planning includes an effective assessment of threats and concrete steps to reduce their impact.

If you’d like to use Simplified Strategic Planning to prepare for threats, consider attending our next Simplified Strategic Planning seminar. If you’re like most people, you’d benefit from having an experienced professional lead you through the strategic planning process.  Then you can focus on the content of your strategies.  If you’d like to explore how you could do this, please contact me at rbradford@cssp.com. Center for Simplified Strategic Planning professionals have successfully conducted thousands of strategic planning meetings.  Furthermore, they understand how to best use your planning time.  Consider holding a one-day workshop on Simplified Strategic Planning in the next few months to improve your results.

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

© Copyright 2020 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission