The 5 Strategic Imperatives you should be focused on now

The economy appears to be in recovery in spite of record deficit spending and potentially adverse tax legislation.  It is likely, however, that this recovery will be slow and steady.  Understandably, companies will be cautious about investing in growth.  But as markets begin to recover, growth must be a focus.  Given the remaining uncertainty in the economy and the likelihood that market recovery will be slow and spotty, this is the time to be very strategic in your approach to growth.  There are five key areas that companies should be paying attention to:

1. Drive straight ahead.  This is the time to regain market share in your key markets with your strongest product and service offerings.  It is the time to sell more of your current products to existing customers.


• Start by cleaning up your customer databases and renewing contacts and intimacy with key accounts.We are often astounded at how little clients sometimes know about their existing customers.
• Review and restate your value proposition.
• If you haven't already, this is the time to focus on operational efficiency in your key offerings.
•  If you haven't already, get rid of products that are dogs and get out of markets that are not performing.
• Consider voice of the customer research in your current markets to make sure you are meeting the needs of existing customer and are reaching new customers in current markets with a compelling value proposition through appropriate strategic messaging.


2. Be Strategic in your quest for growth:  The approach to growth should always be strategic; however, when markets are expanding it is easy to be seduced into growing into areas that do not leverage your core competencies or reinforce your strategy.  Now is not the time to invest in growth for the sake of growth alone.


• Re-examine core competencies
• Re-invigorate your strategy 
• Create a market attractiveness model through which new opportunities can be filtered based on a combination of market attractiveness and fit with your strategy and core competencies and capabilities.
• Resist the temptation to grow into areas that are attractive in the short-term but are not strategic in the long-term.


3. Gather Market Intelligence: The nature of competition and structure of markets have been altered over the past 18 months.  Now more than ever is the time to research markets and conduct competitive intelligence:


• Survey your current customers and  gather competitive intelligence on your existing competitors.
• Use this intelligence to re-examine your value-proposition and determine where you need to re-invest in core competencies, develop strategic messaging that is aligned with value-drivers and unmet needs, and to support the refinement of your strategy.
• Based on the market attractiveness model, research new market opportunities focusing on sizing not just the addressable market but the viable market - one that can be accessed without significant capital investment or acquisitions of new capabilities - as well as the winnable market based on an analysis of strengths and weaknesses vis a vis the competitive forces.
• Research for unmet needs to support new product development.
• Be very disciplined in only pursuing the most compelling and strategic market opportunities.


4. Acquire Talent:  Some really good people are sitting on the beach and looking for opportunities. But they will not be available for ever. Once you have renewed your strategic positioning and now where your growth opportunities lie, aggressively seek the best talent to help you purse these opportunities.
5. Make Strategic Acquisitions:  It almost goes without saying that this is a good time for strategic acquisitions.  Companies are selling at lower multiples than most times in the recent past.  


• Look for opportunities not just with distressed companies, but really good brands and companies that have been managed badly.
• Look for companies with key competencies, products or market positions that support your strategy whether or not they are distressed.
• Look internationally, for growth that leverages your competencies and capabilities and is true to your strategy.
• Focus on markets, products, and people; not the deal itself, but the ongoing opportunities beyond the transaction.

In other words, now is the time to focus on the fundamentals.  When growth is easy, companies often strategy stray from their strategy.  Use the circumstances of slower growth and a challenging environment to force discipline into your growth planning process.  Finally, the past 18 months have paralyzed a lot of businesses, now is the time to act.  To quote an unknown source, "all growth comes from activity."

Mark Towery is Managing Director of Geo Strategy Partners
Geo Strategy Partners focuses on market research and strategy for industrial and B2B markets.
http://www.geostrategypartners.co/m

Industrial research and strategy quote for the day

A clever person solves a problem.  A wise person avoids it.
Albert Einstein

The Three Elements of Performance

One of the barriers to effectively developing strategy is confusing what strategy is with what it isn’t. Sometimes it is helpful to simply the elements of competition down to their basic fundamentals to enhance our understanding. Quite simply, there are three distinct components to competing successfully:

• Strategy: a unique way of creating value that involves choosing where and how to compete
• Execution: doing things right, accomplishing them efficiently ,and in alignment with the strategy
• Power: leveraging key assets and resources to accelerate the implementation of a strategy and to prevent the competition from defeating your strategy.

In the previous blog, I discussed the difference between strategy and operational efficiency. While operational efficiency and strategy are two different things, both are important. Execution is a broader view of operational efficiency to include effectively implementing a strategy. To paraphrase the master strategist Sun Tzu, Strategy without execution is the slowest route to victory. However, in The Balanced Scorecard, Robert Kaplan and David Norton assert that less than 10% of well-formulated strategies are successfully implemented. If this is true, many organizations can unleash a lot of potential by more effectively executing a compelling strategy.

Power, is something not often discussed when thinking about business competition, but it is very important. It is part of the reason why large and successful companies are able to stay that way for a time in spite of flawed strategies and poor execution. Power includes all the assets and resources and organization can marshal to add force to the execution of its strategy. Power may include financial capital, brand equity, market position, economies of scale and production capabilities. Power is seductive, however, and can hide a lot of strategic flaws that only become apparent when market growth slows or competition intensifies.

Unlike the other two elements, strategy involves choices and trade-offs. When you choose a course, it should take into consideration the environmental conditions as well as the competencies and capabilities of the organization. Once set, all aspects of execution should follow in perfect alignment with the strategy.

Envision a competitive rowing team. Strategy is the coxswain sitting in the stern of the boat with his hand on the tiller steering the boat. Like the CEO of a corporation, he has two main duties: steering the boat (strategy) and motivating and directing the rest of the team to row in unison (execution). Most of the energy of the organization is expending in execution. For this reason, it is easy to focus only on execution and lose sight of the importance of strategy. If the rowers get out of synch their energy is obviously applied inefficiently; however, if they get off course, they will lose to competitors with a truer line. Finally, the conditioning of the team and the design of the boats dynamics represent power.

Strategy without execution is an impotent and academic exercise.Execution without power is weak. Power without an intelligent strategy or efficient execution results in wasted resources and a loss of competitiveness over time.  Power and Execution without strategy may defeat weaker and less efficient opponents but not equal ones with a superior strategy. The more intense the competition, the more important all three elements are applied in complete syncopation.

The danger comes when one of the three elements is relied upon too heavily or mistaken for another. Superior execution is vital but it is not a replacement for strategy and to paraphrase Sun Tzu again, can be the noise before defeat. Over emphasis on power can cause an organization to enter markets because it can, rather than because it should and when it contradicts strategy can lead to a loss of competitiveness over time. Strategy is vital, but in the words of Thomas Edison, “vision without execution is a hallucination.”

Mark Towery is Managing Director of Geo Strategy Partners

Geo Strategy Partners focuses on market research and strategy for industrial and B2B markets.
http://www.geostrategypartners.co/m

Quote of the Day

"The truth of the matter is that you always know the right thing to do. The hard part is doing it."

- General H. Norman Schwarzkopf

Operational Efficiency versus Strategy

The last two decades have witnessed an intensive focus on operational efficiency in U.S. manufacturers’ C-Suites. Six Sigma and Lean Manufacturing consulting has become a full-fledged industry.  The U.S. actually leads the world in productivity. Yet, manufacturing continues to move offshore, and many companies struggle to maintain market share.  What is going on?

Each company faces different challenges and faces them differently so it is impossible to draw general conclusions.  However, it is clear that a number of U.S. companies have rejected strategy in favor of operational efficiency.  Operational efficiency is important, but it is not a strategy and will not by itself create a sustainable competitive advantage.

The idea that operational efficiency is not a strategy is often challenged by those that offer up the strategic positioning of “low cost provider” as an example of operational efficiency as a strategy.  In fact, they are two different things.  Every company should strive for operational efficiency that is optimized to suit its chosen strategy.  However, not every company that is operationally efficient can compete as a low-cost provider.

Definitions are always a good place to start because MBA speak is often parroted without thought to its real meaning.  In simple terms, strategy is about trade-offs; choosing a unique way to deliver value and designing all aspects of your operation to efficiently deliver on that unique value proposition.  Operational efficiency does not involve trade-offs; it is in fact something that every organization can and should do within the framework of their chosen strategy.

What happens in the market place, however, can confuse the definitions.  In the 1980’s when the six sigma/lean revolution began, it was because foreign competitors exploited U.S. manufacturers’ lack of operational efficiency with a low cost market position.  U.S. manufacturing closed this gap over the next ten years, and became more competitive and even led the world in productivity.  However, these gains did not result in a commensurate gain in market share.  The reasons are many but include differing labor costs and practices, the loss of first mover advantage, and most significantly, the lack of strategy.

A model of the efficiency frontier can help illustrate this point.

Companies operating both at position 1 and 2 are operating on the operational efficiency frontier although company 1’s price is much higher than company two.

Position 3, represents operational inefficiency and is a weakened position.  In such a position your price is higher than your low-cost competitors, and your value is perceived as less than higher priced rivals.  In other words, whether your market positioning strategy involves a low cost or a premium value position, you should still be operating on the operationally efficient frontier to be competitive. 

While optimal operational efficiency can help you win in the short-term against less efficient rivals, it is not sustainable because the gap always can and will be closed in a free market.  The problem with operational efficiency is a strategy is that you can never move past the curve. 

So, while every company should strive for operational efficiency, not every company should choose a low-cost provider positioning as a strategy. And operational efficiency should never be substituted for strategy.  Even a low-cost market positioning requires more than operational efficiency t be successful.  It needs to leverage a system of activities and tactics to be able to deliver a specific value proposition at a cost lower than competitor. 

Strategy is about bending the curve to your advantage in your chosen field of competition.  Walmart competes as a low cost provider largely through its supply-chain driven strategy that leverages economies of scale and scope.  Sam Walton always said he was a logistician not a retailer.  Apple competes not as a low cost provider but as an innovator.  While they are positioned much higher up the O/E curve than Walmart, they should still be on the curve to maximize profits and maintain competitiveness.  As an exceptional innovator, they can actually shift the O/E curve to the right and be competitive for a period of time even if they are not operating at maximum efficiency, but their profits will lessen and the period of time they can maintain market dominance will be shortened by the degree to which they are inefficient.

If you assume that the iPad and the Netbook are both being produced and marketed on the O/E curve, then competition because a matter of strategy.  Winning and losing becomes about customers’ perceptions of the comparative value verses cost for features and performance.  And that – your perceived value position in the marketplace -  is the essence of marketing and strategy.

Mark Towery is Managing Director of Geo Strategy Partners

Geo Strategy Partners focuses on market research and strategy for industrial and B2B markets.

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