by M. Dana Baldwin, Senior Consultant
Good strategic planning should lead a company to growth, increasing profitability and growing market share over time. But what happens when a company refuses or neglects to listen to and understand what is happening in the markets they serve?
There are many instances one may cite about companies that were successful for many years that relatively suddenly ran into serious problems. IBM was very successful in supplying and maintaining mainframe computers, to the point they ignored for too long the changes in the market place. Until Lou Gerstner restructured the company, they were declining rapidly in their performance because they didn’t listen to what was really happening in the market place.
Polaroid went through a similar set of problems. RIM is suffering from not adopting the technologies of Apple. And, most recently, Kodak found itself floundering to the point where it had to file for Chapter 11 Bankruptcy Protection.
Why do great companies like those above fall into such difficult circumstances? IBM did because it chose to listen primarily to those who had the most to lose if mainframes went away. Because IBM didn’t look at the big picture, they nearly missed significant trends toward distributed processing.
Kodak is an even more troubling case. Kodak was a significant leader in the development and implementation of digital cameras, yet they almost blindly hung on to their film manufacturing business to the detriment of the digital camera until the competition outstripped them and they became a lower tier competitor.
When a company, particularly an industry leader like Kodak, weds itself too tightly to its current technology, and ignores industry trends because it has been so successful with its approach for so many years, the rest of the market, which is apparently so open to innovation and developments outside the current technology, can and often will pass the old technology by, leaving constantly diminishing returns and market share for that company. Unchallenged recipes for success can be the worst enemy of any company’s future.
What should be the lesson learned from the companies’ plights as shown above?
One should analyze how much risk one should take as seen from two different points of view. First: If the company stays with its current technology, what risks does it run to future sales growth, technological leadership, return on investment, etc.? Second: If the company invests in new technology, what should it expect in terms of future sales, competitive position, ROI, etc.? Included in the analysis should be looking at the upside and downside of each alternative and comparing the alternatives to reach the optimal decision.
Will the changes to be made be incremental, or will they become radical in nature and effect? What amount of risk can the company endure? What are the risks of staying put versus those of investing in change? What is the likelihood that the new technology will actually lead to the changes in sales, profitability and return on investment that the company is seeking? What will be the impact on the market place and how will competitors react?
While the approach above certainly is not complete, using it as a starting point should help your company select an approach which will help maintain your competitive position. Effective strategic planning can help your company select those opportunities which should lead to increased leadership in the market place. If strategic planning is not helping your company as you want it to, please contact me at: firstname.lastname@example.org for planning leadership and guidance. For more information on how to position your company in the face of changing technical trends please read: Xerox Positions Itself to Succeed in the 21st Century: What You Need to Do to Ensure Your Company Does Not Become Obsolete.
M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. and can be reached at email@example.com.
© Copyright 2012 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.