Briefing Paper: Why and How of Business
If the rate of change outside of your organisation is ever greater than the rate of change inside your organisation – it’s over”
Jack Welch. CEO General Electric 1981-2001
There are many reasons not to think strategically
It is ironic that the streamlined management teams and customer focus found in many small and medium sized businesses (typically the envy of their larger competitors); creates a huge disadvantage when it comes to an ability to commit the time and resources required to think and act strategically. Coping with a very lean workforce and reacting to customer requirements in a flexible /”can-do” manner – usually precludes the ability to take time out and assess the future before it has arrived. In fact, many organisations get so caught-up in “business as usual” that, by the time the principals notice that the world has moved on, it is too late to do much more than attempt to play catch-up. Hence the difficulty many organisations face in achieving sustained growth over a prolonged period. In fact we would go as far as to say that this is why there are so few large organisations within the UK economy today – 99.1% of all privately owned UK businesses employ under 50 staff, whilst only 0.2% are in the “large” category (i.e. over 250 staff).
Strategic Thinking – Why bother?
In the 1950s and early 1960s, nobody worried about strategy. If you could make it – you could probably sell it. However as country markets became saturated and growth began to venture across borders, competition began to have an effect. Companies could no longer take growth for granted – at least not if growth was just doing more of the same. It was necessary to consider other avenues for growth – different products, different markets, etc. – however, it was still relatively easy to make the shift. The big question for most players then was: Which of the many growth opportunities would yield the best results? Attempts to answer this question heralded the birth of Strategic Planning in the late 1960s.
Competing Effectively
| In this day and age competition and change is so intense that strategic awareness is imperative to business survival. As a director or business owner, you must be clear as to where you are taking the company: |
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- How big do you want to get?
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- Which markets do you want to be in?
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- Should you be exiting from certain markets?
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- Should you develop new products?
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- Is corporate venturing a viable way for you to access the resources you need to grow?
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- Can strategic partners get you into a market you should be in?
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- What will happen when you (as the driving force behind the business) decide you want to do something else?
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- How will you afford the changes required to keep the business competitive?
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You must also understand fully the external influences that are changing the market (and world at large) within which you operate:
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Are there entirely new concepts that preclude the requirement for your product? |
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Is legislation changing the way you can distribute your product? |
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How flexible is your organisation? Does your team have the skills to cope? Do you have the financial reserves to defend or advance your position? |
The questions are varied and challenging – especially as they do not seen to tackle the immediate issues of making profit today. Add to that the vision of expensive consultants and large impenetrable reports – and it is not surprising that many small to medium sized organisations do not move until it is too late. So how do you develop strategic awareness – in a practical way?
A measured response
| The main key to achieving sustained growth (or indeed survival) is: ensuring you always have choices (e.g. Should you under-cut the new competitor? Will you offer more to your current customers? Is it prudent to withdraw from a particular market? Etc). In order to have these choices, it is imperative that you continually gather market intelligence and have a process to act upon this intelligence in a measured manner. This eliminates the temptation to get caught up in a series of knee-jerk reactions – as ill-considered change is probably just as bad as (or even worse than) no change at all. One way to develop a considered / measured approach to change is by developing a strategic awareness. A formal approach to strategic planning combined with, consistent monitoring and effective implementation will ensure that: |
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You understand the priorities for change – because you have a constant source of information on changes that will impact your business; and, |
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You understand the implications of changes to be made, before you make them – therefore you do not get nasty surprises. |
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You are aware of impending changes before they impact upon your business – allowing you to plan ahead and therefore keep ahead of the competition. |
A formal process for Strategic Planning
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Observe your environment – Understand your market. Who buys your products? Why do they do so? How are their attitudes changing? What are the alternatives? How old are your customers? Where do they live? Will they out grow your product? Understanding the market you serve and more importantly, what changes are likely to occur within that market will ensure you can keep pace, keep ahead or get out as and when required. |
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Self-understanding – Understand what you are good at (and what you are not). Why are you different from any of your competitors? Is it the product? Your people? Your ability to change? What? You can get someone to do some mystery shopping for you so you can compare yourself to the competition or even easier still – look at the competition’s website. Use this information to work out what is feasible in terms of growing your product or company. |
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Assess Alternative Goals – Reflect on the information regarding the external environment and your company strengths and weaknesses. Use this to define or refine, alternative goals and strategies for your business. |
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Define your mission – In doing this try to answer the following: What is your company about? Why do your customers prefer you? What are your aspirations as business owners and senior managers? Where do you want the company to be in ten/twenty years? Defining your mission gives you a goal – otherwise if any destination will do, any road will take you there (or usually nowhere). Do also remember – if you define a mission in isolation of what your market is doing, there is every chance that your effort will take you at cross purposes to that market you serve – not a good idea! |
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Identify Implications – Determine the implications of working towards and actually achieving your vision on: operations, finances, people, marketing, in fact on all aspects of your business. |
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Take Action – Use the information regarding the implications of achieving your mission to define and plan the actions that need to take place. You are likely to at least need to define your:
a. Marketing plan
b. Financial plan
c. Operational plan
d. Risk Management plan (as well as listing risks; determine what contingency you will put in place to safeguard your business) |
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Allocate resources and responsibility – Turn the plan into tasks and objectives for specific team members. Ensure that timescales are included and objectives are achievable. |
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Apply your Corporate Intelligence – Stay alert and continue to review what is going on around you – what economic trends are likely to affect your market; which political issues could create advantage or disadvantage for your sector or just certain players; are there social trends or technological advances that impact on the lifespan of your products – the answers to these questions will have implications for your plan; therefore you will need to… |
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Review and update your plan – Review progress regularly and revise short to medium term targets where necessary. It is not advisable to define a new Business Strategy every year or even every other year – however, it is imperative that you adjust your plan if changes in your business environment indicate that your original goals are no longer tenable. |
Making a formal approach practical
During the early days of a business, all of the thinking contained in the steps above is usually done intuitively by the business owner (or a very tight-knit team). As the business grows management time becomes more and more focused on managing the day-to-day issues and strategic thinking takes a back seat. Depending upon the current size of your business and your plans for the future, it may be time to take a more formal approach:
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Take time out of business as usual (preferably away from the office) to start the process described above |
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If you are having an away day – prepare before hand; e.g. market research, financial analysis, etc. can be brought to the meeting to speed up the process. |
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Get as many senior team members involved as possible – most of the knowledge required for a good result resides within your team. |
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Try and rope in some outside help to ensure objectivity and challenge e.g. a mentor to the MD, one of your non-executive directors or a consultant. |
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Once you have set objectives and deadlines, make reviewing progress towards these, part of your normal board meeting agenda. |
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Ensure someone on your management team is responsible for gathering and acting upon corporate intelligence. |
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Getting value out of developing and implementing a business strategy is about commitment – not about reports or going through the motions. If you never review your implementation attempts or revisit the market assumptions you will miss a great deal of the benefits of going through the process in the first place. |
The simple steps above illustrate how easy it is to get started. Remember: Do not wait until you are fire-fighting (or indeed fighting for the life of your business!) get strategically aware now.
Disclaimer: The information in this article is for obvious reasons generic in nature. You are advised to seek professional advice before implementing any of the above. |
