Strategic Thinking

I have started and led several companies, as well as research centers at universities.  Often, things get started with a serendipitous opportunity.  Suddenly, you have a paying customer or a willing investor, and soon an employee or two.  You begin to formalize things.  People ask about your strategic plan.  Winning another contract or securing another major donation seems much too tactical.  What’s your strategy?

Answering this question begins with articulating your vision, typically in terms of your value proposition.  What value will you provide that will cause customers to spend their scarce resources on your products and services, rather than the offerings of your competitors?

You might respond, “We can mow peoples’ lawns better and less expensively than anyone else.”  This implies that you are providing (almost) commodity services at the lowest price.  That could work, until someone offers lower prices by, for instance, using robots to mow lawns, and thereby greatly reducing labor costs.

The problem with selling commodity products and services is that profit margins asymptotically approach zero as your competitors cut prices to gain market share.  Selling products and services in commodity markets is brutal.  You are constantly trying to find a margin somewhere, perhaps anywhere.

Escaping this conundrum involves differentiating your offerings from those of your competitors.  Ideally, you want your offerings to include some attributes that cannot be obtained elsewhere.  This won’t guarantee you winning the sales, but it means that customers will not gain your unique attributes if they purchase elsewhere.

What might be these attributes?  The functions and features of your offerings are certainly attributes.  Underlying technologies and their performance are relevant.  Quality and timeliness of service could be included.  Location, convenience, and atmosphere are relevant if customers come to your bricks and mortar facilities, e.g., for meetings, eating, or entertainment.  Finally, of course, there is price and how it is paid, e.g., purchase vs. loan vs. lease.

To assess your market situation, consider the attributes of your offerings and honestly determine which are outstanding, which are acceptable, and which are inferior.  Next, you need to consider which attributes you need to improve to be competitive.  Ideally, these improvements would be difficult to copy, or at least very expensive to copy.  This is where technologies can provide a competitive advantage.

Your vision might be an enhanced or a new value proposition in the marketplace. Your goals are measurable things to accomplish within specified time frames.  Goals might be expressed in terms of milestones such as technologies proven, new offerings released, initial sales goals, and later market share goals.  Plans are the paths to achieving the goals, including the resources committed to these pursuits.

This all seems pretty straightforward.  Decide what you want to accomplish, abandoning things you no longer want to pursue, for example, because they are no longer competitive.  Next, decide what success means in terms of goals.  Finally, formulate plans and commit resources to their execution.  Monitor progress and revise as needed.

What goes wrong?  I have been through this process a couple of hundred times in engagements with a range of organizations.  The biggest problem is that plans never get executed, in part because they are unrealistic and under-resourced.  The plan documents, often PowerPoint slides, are filed or shelved and not revisited until next year’s planning process.

The second biggest problem is incentive and reward systems that are not realigned with new directions.  Consequently, people continue to march to the old drummer.   A great example of this is when the vision requires greater collaboration but the incentive and reward system remains focused on individual accomplishments.  This disconnect is common – and pervasive in universities.

Given the hard work required to formulate useful and feasible visions, goals, and plans, as well as the likely modes of failure, is there an alternative?  There is, and it is quite common.  Many organizations develop documents that simply portray what they are already doing.  This assures success, at least in the near term, requires little investment, and avoids irritating any of the stakeholders in the status quo.  Execution is easy – they are already doing it.

This is rarely a path to greatness.  However, the pursuit of greatness is risky.  It can be very expensive.  It also can take a long time.  If your scorecard is quarterly, or perhaps yearly, stewarding the status quo might seem like a very prudent idea.

Leave a Reply