We are posting a series of blog articles with tips for your strategic planning. This is the final one. These tips are taken from the article Strategy Tips first published in Compass Points in June 2004.
Your market is shrinking; can you find a new market for your product/service?
International Visual Corporation manufactures and sells modular wall display panels to department stores. Department store consolidation started a decade ago and continues with no end in sight and this consolidation reduced International Visual’s client base significantly. The two partners who own the company were driving around wracking their brains for new ways to grow the company. One day (while driving) they came upon the idea of selling this paneling to homeowners for their garages so that they could attach cabinets, shelves and other units to organize garage storage. A success!! The home building market is going strong and the company has a significant new market segment using the products that they already knew how to produce. (WSJ, 5/27/03)
Strategy Tip: Selling an existing product/service to a new market — be creative! If this new market is viable be sure that your team analyzes the distribution required and analyzes if there are any market requirements that would not be met by the existing product. Sometimes minor modifications are necessary to prevent a black eye when the product is launched into this new market.
Is your team being objective about the situational analyses you are making in your strategic planning, or is it looking through rose-colored glasses? Objectivity is key to making good decisions. Objectivity is difficult enough when interpreting the current situation. It is even more difficult when you are trying to generate the best assumptions about an uncertain future situation. The quality and objectivity of those assumptions will determine how good your strategic plan will be.
What are impediments to objectivity the team can encounter during the planning process, and how might they overcome them?
The team shouldn’t be “in love with” the products and services you offer. They can love what you do, but shouldn’t be blind to the weaknesses that each product or service might have in various markets. Capitalize on the strengths, but be sure to acknowledge the weaknesses up front, so they can take the appropriate steps to account for them in the planning process. One dated but powerful example of this is Baldwin Lima Hamilton. BLH made steam locomotives for the railroad industry. They became experts in the utilization of steam for propulsion in locomotives. They were so “in love with” their steam expertise that they didn’t realize until it was too late that the industry was moving away from steam to diesel-electric powered locomotives. By the time they woke up, General Motors and General Electric had a lead that BLH couldn’t overcome, and they basically disappeared from that market.
The team also shouldn’t be unrealistic about the position of their products and services in the market place. When the team does the Market Segment Analysis for each of their market segments, it can be dangerous to select the definition of the market segment in such a way that it appears the company is dominant in its markets. If that is reality, great. But, if it isn’t, then the misrepresentation of the true competitive position can lead to strategies which will not help the company to be a viable competitor in the long run. When the team does the analysis, be sure that someone is skeptical and calls for justification of the conclusions the group has proposed. Step back, mentally, and ask if what has been stated actually reflects what is going on in the market place. If you think you are number one or two in a market segment, and you really are a weak number three or four, the difference in your strategies could be the difference between not surviving in that segment or improving your position.
Pay attention to the changing practices and players in the markets in which you offer your products and services. How many years ago were there many different national chains for electronics and similar products? How many of them have gone away, out of business, because of the evolution of their markets? It used to be that you could go to multiple stores which concentrated in selling TVs, radios, personal electronics, etc. What happened to Circuit City, for example? They simply couldn’t compete with Walmart and Amazon. Best Buy has made changes to its approach to the market, including price matching, so that the practice of “showrooming” (going to a store to check pricing, then going on line to see if the product can be purchased for less) is no longer attractive to serious buyers. Best Buy will match prices and you can have the product right now, without the time and cost of shipping.
You have no need for this list of impediments to be completed to be convinced of the crucial need for objectivity in your situational analyses. If you need guidance in any aspect of your strategic planning, please contact me at: baldwin@cssp.com.
We are posting a series of blog articles with tips for your strategic planning. This is the third one. These tips are taken from the article Strategy Tips first published in Compass Points in June 2004.
Market Feedback: Key to Identifying Growth Opportunities
Key to market segment analysis is market feedback. The retail industry is particularly prone to changing market trends and the whims of consumer. Business Week (4/04) reviewed Coach, a formerly stodgy manufacturer and retailer of handbags. In order to spruce up the image to add style and fun to the brand the CEO hired a new designer. The designer was an important piece of the revamp, however, each new style was piloted in specific retail stores to develop feedback. Changes were made based on the feedback before the product was launched. By first evaluating the success of new styles before a national launch and making course corrections where necessary, Coach has been able to double its sales in a slow growth market. Who would have known that shocking pink would be a fast selling item? This constant customer feedback (over 10,000 interviews/year) enabled Coach to gain significant market share and change its image in the market.
Strategy Tip: Be sure that you get impartial feedback from your customers. This feedback is key to spotting changing trends before your competition.
We are posting a series of blog articles with tips for your strategic planning. This is the second one. These tips are taken from the article Strategy Tips first published in Compass Points in June 2004.
Innovation: Where to look for it
A recent Compass Points article reviewed potential sources for innovative ideas. One source was looking to another industry for innovative ideas and processes.
A Wall Street Journal article (4/9/04) discussed how Allegheny General Hospital looked to the automotive industry for ideas. They took the concept of root cause analysis and applied it to their intensive care unit. Once they identified the root cause of infections they were able to change procedures and lower the incidence of infections by 90% saving the hospital $500,000 per year.
Strategy Tip: Look around; good ideas abound in other industries. What is even better, they have streamlined the application. One word of caution: be sure to understand what adjustments need to be made for your industry before moving ahead.
I’ve read a couple of interesting articles recently that assert that culture beats strategy every time. While culture is critically important – and usually part of a good strategy, nothing could be farther from the truth. Here’s why:
Strategy is about doing the right thing in the right place at the right time.
I can’t overemphasize this one. I’ve seen lots of companies tout their culture as awesome and admirable over the years. Some of them had great strategies, others had serious flaws in their strategies. Companies that are doing the wrong thing – but with great culture – still struggle to gain and retain profitable customers. Yes, the few customers they have love them, but that’s not enough to keep a good company with a bad strategy afloat.
Too much attention to culture can diminish, rather than enhance organizational effectiveness.
In the 1990’s, culture was seen as a panacea for a multitude of issues, and was used to lure promising employees (especially in tech, where big venture capital money made it easy). This ultimately led to spending on company gyms, employee playrooms and “fun in the grass” team building exercises. Properly applied, these investments can improve effectiveness, but many companies over-invested. For example, a day or two of teambuilding activities each year might yield some benefits for most companies, but ten days of such activities would show dramatically diminished returns. This issue can be seen in almost any area where time and resources can be invested in culture – but companies still end up over-invested.
Fixing a strategy issue points you in the right direction, while fixing a cultural issue can move you in the wrong direction, faster.
There is no question that attention to culture can improve effectiveness. I think of this as the speed with which you move in whatever direction you intend. Strategy, on the other hand, is about choosing the right direction. Moving faster in the wrong direction isn’t just pointless, it’s downright dangerous.
So why are people talking about the “ascendancy of culture”? There are three good reasons:
Most “strategic planning” done today is BAD strategic planning.
This is, perhaps, the worst of the lot. The strategic planning process is incredibly important and valuable. Because it’s difficult to pick out bad strategy when you are in the middle of it, it’s also easy to think you are doing good strategic planning when, in fact, you are doing easy strategic planning. Many, many companies have made the mistake of taking short cuts in their planning by avoiding the most difficult and uncomfortable parts of the process – and many strategy consultants are only too happy to skip the hard-nosed, data-driven questions that yield the best answers.
Companies that are successful with a good strategy invest their greater resources in culture.
People who shout about the value of culture inevitably cite examples of companies that have done very well over the years – companies that have already achieved a strong level of strategic competency that will guarantee a strong market share for years. The problem with this approach is that they end up spending a lot of time looking at very large companies that are already making a lot of money. If you have billions on the bottom line, it’s much easier to spend millions on culture. If you want to see what really works, take a look at what these companies did in the early years, when resources were tight. Chances are, there was excellent strategy, and any ups and downs you’ve seen in the history of such companies hinged more on their adherence to a good strategy than on culture.
There are far more people who claim expertise in culture than strategy – and these people write a lot of articles.
In scientific research, people talk about the “file drawer problem” – which happens when the results of your research don’t support your theories. The problem comes in when the research, instead of being published, ends up in the bottom of a file drawer somewhere. Because of this issue, we end up not reading the exact truth of the research, but rather handpicked studies which support the conclusions researchers are trying to determine in their work. Business articles aren’t usually written by researchers (though there are exceptions, like the excellent work done by Jim Collins). They are, however, written by people who have an axe to grind. One axe that isn’t very popular is the one that I’m grinding here (and yes, I’m being self-serving): good strategy is hard work that requires real analysis, answering difficult questions and having a willingness to discard parts of your business that aren’t working. This isn’t an easy idea to sell – and it’s not going to generate a ton of content written by people with limited business skills.
Obviously, these are just my ideas, taken from observation of dozens of companies. Based on this, I’d invest in a company with a great strategy and a bad culture before investing in a company with a bad strategy and a great culture. What do you think?
If your company needs to improve its strategies, contact us for great, experienced leadership through the strategy development process. 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.
Note: This review previously appeared in Compass Points April 2004
Thomas Ambler reviews:
Good Business, Leadership, Flow and the Making of Meaning
By Mihaly Csikszentmihalyi
Viking Penguin, 2003, 211 pages
Are you a leader who intentionally seeks to practice “bad business”? Of course not, that’s ridiculous! But maybe you are and don’t know it.
The title reveals much about the content of this book. It deals with what constitutes “good business,” is focused at leaders, promotes the concept of Flow and seeks to heighten meaning in our world.
The author is a professor of management and director of the Quality of Life Research Center at the Drucker School of Management and author of multiple, widely read books dealing with Flow, creativity and other positive psychological topics. He brings to his writing a deep understanding of history and a multi-disciplinary, philosophical approach that dares to grapple with the purpose of life.
He chose to base Good Business on intense interviews of 39 “visionary” business leaders, mostly CEO’s/owners, chosen by their peers as exemplifying “high achievement with strong moral commitment”. These leaders include people like Leon Gorman of L.L. Bean, Anita Roddick of The Body Shop, Jack Greenberg of McDonald’s, C. William Pollard of ServiceMaster, Robert Shapiro of Monsanto, Alfred Zeien of Gillette and Norman Augustine of Lockheed Martin. The author draws on quotes from these leaders as his springboard to introduce and develop each new, stimulating and often controversial idea.
You a can get a flavor for this book from the following smattering of its ideas:
Business has the most important role of any institution in providing human happiness, Aristotle’s ultimate goal of existence.
“Good business” is not limited to the generation of profit. It refers instead to transactions that make a genuine contribution to human happiness.
Flow–the experience of having a deep sense of enjoyment in which “one becomes totally absorbed and loses oneself”–is the primary source of happiness.
Leadership of “good businesses” must provide the conditions conducive to Flow for their employees and contribute to Flow for their customers and other stakeholders.
The traits shared by all visionary leaders in this study are optimism, integrity, ambition coupled with perseverance, curiosity and empathy.
“For business to really contribute to the common welfare and, thus, assure its own survival through the support of society, it will need to nurture a greater number of visionary leaders who can infuse soul in the organizations, and who can convince the rest of us that it is worth investing in their projects.” This quote begins to encapsulate the essence of Good Business.
Do I recommend this book? Absolutely! I like to visualize the organization of my knowledge as a tree. When I encounter new knowledge, I add it to my tree, if it fits well enough to be grafted. Most business-related books only qualify as twigs on that tree. Good Business is a significant idea book that is seeping into my consciousness and forming major branches on my “knowledge tree.”
Does this sound like a book that you want to read? It should, if you are a leader and are willing to risk having your intellect and values challenged. I rate it a 10 on significance and a 7 on ease of absorbing (author’s or reviewer’s problem?). Good Business is a “must read”.
As Mark Twain once famously said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” This most certainly applies in strategic planning. Your vision for the future is based on your team’s educated guesses (aka assumptions) about what might happen going forward, and not on certain knowledge of what will happen. How does one go about minimizing uncertainty?
You must accept that you do not know for sure what will be the future results of current actions and decisions. To allow for this, you need to accept that uncertainty is not the exception, but rather the rule. In order to handle uncertainty, the team should look at each situation by considering the possible outcomes: as forecast, better than forecast or worse than forecast.
You won’t be able to determine which scenario is the absolute best because, in all likelihood, some of the elements which influence outcomes are out of your control. But what you can do is to try to determine which elements you can control, and to analyze how things might proceed in the real (future) world. Then try varying your assumptions about each scenario to see what might happen under different conditions. As an example, look for the most positive possible conditions and extrapolate the scenario forward. Does the outcome improve, and does it improve by enough to justify the optimism? Similarly, assume the worst possible set of conditions. By how much does the outcome change? If it changes only a little, and if the most positive assumptions indicate a good up-side, then the risk should be lower and the opportunity should be considered for inclusion in your strategic plan. On the other hand, if the downside is huge, and the upside is only minimal, the risk is much higher and the opportunity probably should be dropped.
All this presumes that outside influences and conditions allow your assumed conditions to be met, and this must also be examined with an eye toward reality. How likely is it that your assumed conditions will be close to reality, thus having an appropriate level of impact on the overall results? Are your assumptions about the underlying conditions realistic or idealistic, or possibly overly pessimistic? The key here is to be as consciously realistic as possible, while still considering the possibilities that lie outside your zone of comfort.
If you need help with your assumptions and your strategic planning, please contact me at baldwin@cssp.com or at 616-575-3193. We can lead your team through an efficient, effective process which will result in an actionable strategic plan which will guide your organization into the future.
Over the years, I’ve seen more than 20,000 opportunities considered. Most have been rejected for good reasons, but many have been pursued and successfully captured. Recently, I spent some time pondering which kinds of opportunities have led to the greatest successes.
There are a few key features which tend to distinguish the best opportunities. They are not, usually, the first ones you think of. In many cases, they come only after discussion of some seriously bad ideas. This is why we have a no-holds-barred brainstorming session as the beginning of the opportunity generation process in Simplified Strategic Planning.
Another feature of many great opportunities is that they are often bold strokes in the direction of your strategic competency. The best opportunities either capitalize on the unique way in which your company creates value, or they actually add to the uniqueness or the value of your competency. This, of course, requires a good understanding of your true strategic competency, and, in some cases, may just highlight the fact that your perception of your competency is too broad and mushy. Regardless, big improvements in uniqueness can yield explosive market share growth if the uniqueness is perceived and appreciated by a chunk of your market.
To go a step further, some of the best opportunities have actually pushed the company to uncomfortable limits in exploiting its competency. In a few cases, this was the key to survival in a company whose core technology was displaced by some new product or service. In every successful displacement survival I’ve seen, we found a way to apply the company’s strategic competency in a way that is compatible with the displacing products or services. The biggest difficulty you will encounter in such situations is that the people in your organization are likely to feel unease and have strong resistance to the new direction, so this approach usually only works when the organization recognizes the size of the threat it’s facing. Unfortunately, the decision to embrace a new direction often comes too late, with too little commitment, for many companies.
While I’m not a fan of commodity strategies in general or cost cutting as a specific opportunity, I have seen a few companies achieve excellent success by completely changing an important part of their cost structure. This isn’t for the faint of heart, and it often revolves around re-defining your approach to sales or distribution, but it can be a life-saver in the face of serious market share erosion. Unfortunately, you can’t achieve this through incremental cost-cutting and belt-tightening. The successful approaches always include a highly disruptive change in the way your products or services are created, sold or distributed.
Finally, blurring the distinction between service and manufacturing businesses can be a brilliant approach. Making a product look more like a service – or making a service look more like a product – can both distinguish you from your competitors (who probably tend to think like only service companies or manufacturers) and draw profitable market share from specialty thinking customers.
Opportunities are one of the most critical elements in the strategic planning process. The success you experience five years from now will likely be rooted in the significant opportunities you embrace in your strategic planning this year. How is your strategic planning driving you to the best opportunities?
A Fundamental Element of Strategic Planning
By Dana Baldwin, Senior Consultant
Strategic Planning Expert
Listing of a company’s strengths and weaknesses are a normal part of any attempt at strategic planning for virtually all companies. Why do we perform these analyses, and what do we expect to learn by doing them? To be sure the company is headed in the right direction, a competent, thoughtful review and updating of your strengths and weaknesses is a fundamental element of good strategic planning. We have published a series of articles with elements of analysis of strengths and weaknesses explored in each article. This is the fifth article in the series.
For each of these areas which pertain to your whole company, you should ask:
What are the things we do which the customer values and will pay for?
Are there things we do which the customer values, but will not pay for? Why?
What do we do for the customer that ends up benefiting us both?
If many of our customer services or products result in a win-win situation for us
both, how can we exploit this to our mutual advantage?
How can we take advantage of this to gain or keep a competitive advantage over
our competition?
What resources do we have within or available to the company that will add something to our relationships with our customers?
What features or benefits do we provide to our customers that are important to
them?
How can we use this to distinguish ourselves versus our competition?
How do outsiders see us and what do they perceive as being our strengths?
What do we provide that makes them want to continue to do business with us?
How can we build on this to sustain or improve our business?
What can we improve?
Are there changes we can make which will make a modest strength even stronger,
or which will add to our competitive position?
Will the customer value this and be willing to pay for it?
Is there anything we do poorly? How does this impact the customer? What do we need to do about it?
Individual areas within the company which might be considered for our analysis of strengths and weaknesses could include: (Each area should be considered based on the particular company, its markets, competition, customers, products and services offered.)
Marketing: How do we build general and specific awareness of our company in the minds of our potential customers?
Sales: Those direct activities which result in our customers ordering our products and services.
Production Capabilities/Service Capabilities: Those activities which result in our providing products and/or services to our customers.
Accounting, including A/R and A/P: While not usually included in strengths and weaknesses in most analyses, we suggest that this area be included to the extent that it impacts any interactions with customers. Done poorly, this area can be a major irritant to customers, possibly resulting in loss of business and alienation of customer personnel.
Administration: Does our leadership provide clear, unambiguous goals, communicated effectively to everyone in the company? Do our leaders allow people to function with an appropriate level of responsibility and authority, stepping in only to help guide and assist, or do they micromanage, limiting initiative resourcefulness?
Human Resources: Does HR support the mission of the company effectively, with good communication and even-handed administration of policies and benefits? How does HR contribute to the effectiveness of the company?
Intangibles – such as responsiveness, flexibility, reputation, follow through on commitments, etc.: Each of these depends on the type of company, the need for each of these characteristics in the marketplace and within the company. Each should be considered for its effectiveness both inside and outside the company.
Establishing where the company stands in terms of strengths and weaknesses is an important component of the discovery phase of strategic planning, as it helps establish the base for analysis and development of plans for the future of the company. Done well, this analysis will help the strategic planning team develop effective plans for the future course and direction of the company.
Listing of a company’s strengths and weaknesses are a normal part of any attempt at strategic planning for virtually all companies. Why do we perform these analyses, and what do we expect to learn by doing them? To be sure the company is headed in the right direction, a competent, thoughtful review and updating of your strengths and weaknesses is a fundamental element of good strategic planning. We are publishing a series of articles with elements of analysis of strengths and weaknesses explored in each article. This is the fourth article in the series.
When you have laid the groundwork for your team to begin analyzing your strengths and weaknesses by setting out expectations and limitations as discussed above, your leader should throw the floor open for ideas. While there is no single list of appropriate topics that is right for every company, a good list to consider should include (but certainly not be limited to) the following:
At the whole company level:
People
Skills
Knowledge
Capabilities
Impact on others both inside and outside the company
Experience
Attitude
Products and/or Services
Distinguishing features or lack thereof
Competitive advantages/disadvantages
Services or Features we ‘wrap around’ our product or service
Examples: Post sale service or pre-sale engineering
Quality
Speed of delivery
Installation and or service capabilities
Company
Reputation
Capacity
Responsiveness
Customer attitudes
Ethics
Reliability
Customer Perceptions
Attitudes towards customers
Follow-through
Customer service levels
Customer satisfaction levels
In our final article, we will discuss somewhat more extensively what to look for and discuss which could come out of the listing above.
One ongoing threat that might harm a company more than it helps is loss of focus. Many very good companies make a lot of money by keeping their focus on a very limited number of products or services and on the way they go to market. When Goodyear changed how they went to market with their tires, they ended up losing focus, with results which have hurt them significantly.
The impact of losing focus can be huge. When a giant customer starts to push its wishes on the supplier, a number of things can happen. For example, according to Steve Minter, writing in Industry Week:
“In 1936, due to a Federal Trade Commission order, Goodyear Tire and Rubber Co. stopped selling its tires through Sears and began a decades-long strategy of selling through a vast network of company stores, franchise dealers and independent dealers. In 1989, 70% of those dealers sold only the iconic Goodyear brand of tires.
But unfortunately, the story doesn’t end there. Goodyear fought off a takeover bid by Sir James Goldsmith in 1986 and subsequently decided to strike up a new sales arrangement with Sears. In short order, Goodyear was also selling its tires through Walmart and Montgomery Ward.
The decision to sell its tires through mass retailers had two important consequences. First, Goodyear’s premium brand was eroded as its tires were sold, for less, alongside discount and private label brands. Second, Goodyear’s dealer network felt betrayed and began to carry other tire brands. By 2001, Goodyear was operating in the red and the company endured a decade of poor performance in its stock.”
What happened was that Goodyear lost its focus on the advantages it had in the market place which made it a premium brand. When they changed the way they went to market by expanding the number and types of sales outlets, they changed the perception of their markets that they were a premium brand and they morphed into being just another competitor in the everyday trenches of low price and extensive competition.
When they left their niche of being a high quality, exclusive brand with great dealers and service, they suffered from a loss of power in the marketplace. Now the big customers were telling Goodyear what to do and how to position itself in the market, as opposed to Goodyear determining how to best go to market. The big customers were calling the shots, and those shots were aimed at increasing the benefit to the big customers (Sears, Walmart, etc.) instead of Goodyear determining what was best for Goodyear. The results were diminished financial performance and lower stock price.
If your organization needs help in defining your focus, what makes you successful in the market place, having a good strategic plan which reinforces your commitment to success can be a major help. Please contact me at baldwin@cssp.com or call me at 616-575-3193.
Listing of a company’s strengths and weaknesses are a normal part of any attempt at strategic planning for virtually all companies. Why do we perform these analyses, and what do we expect to learn by doing them? To be sure the company is headed in the right direction, a competent, thoughtful review and updating of your strengths and weaknesses is a fundamental element of good strategic planning. We will publish a series of articles with elements of analysis of strengths and weaknesses explored in each article. This is the third article.
Third: Your team must be very careful to be objective in its analyses. It is easy to get into a self-critical mode in which everything is a weakness, or, conversely, the team may lead itself into a rosy scenario in which its strengths are overstated and weaknesses understated. In every session, it is a positive idea to have an experienced process leader with no vested interest in the process beyond assuring that the right things are addressed, that conclusions are reached objectively and every effort is made to assure the financial, physical and human assets of the company are used to obtain the highest and best results for the company. We have found that some companies are too introspective, and in looking out at the real world, think that they are the only ones with problems and challenges. Others are just the opposite. They go blithely along, thinking that they are doing very well, with little consideration of what is happening in the real world. Your leader’s job is to assure that the team’s approach is fair, balanced and objective, so each analysis obtains the best, real world result.
What areas of the company should be addressed? While this varies within each company depending on what the company does and how it operates, generally, the team should look at the overall company strengths and weaknesses as well as the strengths and weaknesses of key areas within the company. It is important to look at how each area interacts with the customer world, both inside and outside the company, as well as analyzing the entity as a whole. Recognize that it may well happen that some areas have different strengths or weaknesses when examined individually, but the company performance may be totally different when viewed as an integrated unit.
