By Denise Harrison, Vice President
Recently I was talking to a company president – he was frustrated that a large project was off track. What happened? Well, during the recession, his team bid on a significant contract for a large company; the contract included requirements that were a stretch for his company. Traditionally the team focused on small to mid-sized businesses, but during the recession they decided to bid on this contract in order to bring in additional revenue. The result? Resources were being pulled off other projects to meet these requirements, and unfortunately the large customer was not happy because the project was not progressing smoothly. Even worse, the smaller traditional customers were unhappy because resources normally available to them were working on the large project. Has the recession caused your company to take on business that is pulling you away from profitable business?
Re-focus Your Efforts
Yes, during a recession it is easy to look at any business as good business. But often companies take on business that does not leverage their competencies and/or causes it to misallocate resources. This new business may cause resources to be spread too thinly, working on projects that may bring in revenue, but are not profitable, or, more critically, divert resources from core, profitable customers. In order to emerge from the recession in a strong position, it is important that you take the following three steps:
1. Re-assess what your company does well: “Know thyself”
a. Understand where your competencies are: what are those skills, processes and knowledge that are most valuable to your customers?
b. Know what your company does do well, and what it does not do well, so you will concentrate on serving the customers who value what you do not only during the recession, but for the long term.
2. Identify market segments or customer groups that you currently serve – and focus on the ones who value what you do well: “Cherish thy core”
a. Do these segments/customers select your company because they value the things that you are good at doing? These are the customers that will be profitable.
b. Or are there some segments/customers that simply came to you during the recession when you were trying to get business – any business to shore up the top-line. Re-focus on the profitable segments.
3. Once you have identified the segments that value your competencies then look within the segment and identify who the winning customers will be during this recovery: “Know thy customers”
a. Customers who were doing well before the recession may not be the same ones who are doing well after the recession.
i. Some customers within these segments are not positioned to grow during the recovery. Many have taken cuts that will not allow them to take advantage of the recovery. Others are still hurting financially.
ii. Industries may have changed and requirements for gaining market share may have altered – different companies make take the lead. Look at how the landscape in the financial industry has changed – some market participants are gone – others merged with more successful companies. Identify who the winners will be during this recovery.
Often recessions cause you to de-focus your efforts. As you develop your strategy for the recovery make sure your team re-focuses its efforts so that it is concentrating on leveraging the competencies that you have and that your customers value. These will be the segments and customers that will allow your company to grow profitably during this recovery. This renewed focus will allow your team to outperform your less disciplined competitors who are still chasing business, as if all business is good business.
Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at email@example.com.