Author Archives: Denise Harrison

About Denise Harrison

Denise Harrison is President and CEO of Spex, Inc.; Strategic Planning and Execution

From Near-Bankruptcy to Market Leadership: LEGO’s Success is Child’s Play

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DeniLego bricks picturese Harrison, President and CEO, Strategic Planning and Execution, Spex, Inc.

What would you do if you were faced with potential bankruptcy, with a product line that is over half a century old? Product line extension? Expansion into new lines of business? Sell the company? LEGO was facing this dilemma in 2001. While the first step was to return profitability to the core by streamlining the business; this was not enough to position LEGO to succeed in the future. Did the company need to better understand retail distribution? No, it was a better understanding of how children play that really turned the company around. How do children really play with the bricks? What do they like doing? What is missing? Learning the answers to these questions allowed LEGO to surpass Mattel in size, even though Mattel has a much wider range of products. The answers to the following questions helped LEGO reconnect with its user base and its parents:

  • Is the way that children play different in North America, Europe and Asia? By understanding the cultural differences, LEGO was better able to position itself to meeting the requirements of these different end markets. Now Asia is one of its fastest growing markets.
  • Do girls play differently and use s differently than boys? Tapping into the female market was another key to LEGO growth. LEGO Friends became a play theme that was more interesting to girls. But do girls like to build? Yes, building is one of the key attributes of this play themes success.
  • What about adults? Do they use LEGO bricks? Apparently yes, who said LEGOs are just for kids? The popularity of LEGO Architecture is one of the success stories in the adult segment.

Historically, LEGO was primarily focused on boys 5-11; but by better understanding this segment and how play occurs, they were able to introduce a number of new products and product themes. And when the team truly understood what little girls were looking for and then expanded applications to adults the company really took off.

What is next for LEGO?

Over the last few decades, video games and the overall digital experience have grown to be powerful disrupters to the traditional toy and game market, and now, LEGO must truly understand how the LEGO brand fits with the digital experience. It is currently working with ways to build structures, take a picture of the structure and have it become part of a digital game. This tailors the video game experience to the individual user as the user adds unique structure to the video experience. How LEGO integrates the building experience with the digital experience will be the next challenge the company will face.

What does this mean for me?

As you develop your strategy, it is important that you truly understand your end users and how they use the products and services that you provide. Understanding the environment and what really works and what does not work will enable you to develop a broader and deeper understanding of the application and what you can do to make it easier, better, faster, more intuitive for the user. In addition, understanding how segments that are not currently targeted could use the product is another avenue for growth. Are there unmet needs in your market because no one has thought through how different users might use your product? How often do you go to trade shows in unrelated markets to come up with thoughts of new applications for your product? What about new trends? Do you face a disruptive trend similar to LEGO facing video games as an alternative for how your customers will spend their money? Do you hide your head in the sand, or look for ways to integrate the new product or service into the experience for which your customers are looking?

Bottom-line

 Understanding your users and future users and the user experience will be important to your long-term success. Get out and spend time with customers while they are using your products and keep an open mind. This knowledge will add to the information that you will have to make good strategic decisions.

Interested in learning how to integrate information into your strategic planning process to come up with better results? Please call or email me, Denise Harrison at 910-763-5194 or harrison@thestratplan.com.

© Spex, Inc. Wilmington, NC, 2015, Reprint permission granted with full attribution.

Lessons Learned in Aligning an Organization Two Way Communication is Key

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By Denise A. Harrison, President & CEO; Strategic Planning and Execution; Spex, Inc.

Thoroughly discouraged — that summed up how I felt. For the past two years I had been president of a financial services firm and we had some key success metrics under our belt, the company was now solidly profitable, cycle time had decreased by 60%, we had earned more this past year than in the past decade — so why was I feeling so discouraged?

We had just received the employee survey back, and overall, morale was up, people were motivated, but the answers to two questions still bothered me:

  1. Are you familiar with the company’s strategy?
  2. Do you know what you need to do in your position to move the company forward?

The answers to both questions were no. Susan, director of human resources, looked as perplexed as I felt.

How had we communicated the strategy over the past two years? Each year we had a companywide meeting to kick off the year. During this meeting I presented the strategy the senior management team had developed for the next three years. In addition, I presented the key objectives for the year. We had a question and answer session following the presentation to handle any questions about the strategic plan. But this was not the only communication; I knew this one presentation was not enough: the strategy needed reinforcement on a regular basis to keep people focused on the longer term objectives rather than the day-to-day firefighting.

Quarterly Reinforcement To attain this reinforcement and to celebrate our quarterly achievements I set aside two days each quarter for small group meetings where I once again presented the strategy, the key objectives and discussed the progress made during the previous quarter. I knew people felt more comfortable answering questions in smaller groups so I kept these meetings to groups of 8-10. Even with the annual presentation and the quarterly meetings employees did not relate their day-to-day reality with the strategy.

Sadly, Susan and I both knew that even though we thought we were communicating effectively we were not getting the job done. We had to do something different to engage associates at all levels in thinking strategically. We knew that setting the strategy was the top priority of senior management and strategy development with a larger group would become large and unwieldy. We discussed getting more involvement in the research that was need for the process — yes, involving more people in the information needed to develop a strategic plan was a good idea, but still this would not solve the problem.

We already involved a broad range of people in the development of action plans to meet the year’s key objectives, we would continue doing this, but once again, it was not the solution to our problem.

Finally we hit upon the following idea: what if we had each department think about their role in moving the company’s strategy forward and develop its own set of objectives and metrics? Well, it was worth a try.

Strategic Alignment: Two Way Communication The next year we took the following approach: initially we followed the same process set out in previous years, the senior management team continued to set the corporate strategy and select the key company-wide objectives. Once again, I spoke to the whole company about the three year strategy and the key objectives for the next year, but rather than ending the meeting with the usual question and answer period I ended the meeting with a challenge to each department:

Next month we will hold a company meeting for each department to present what it intends to do in the upcoming year in order to support the company strategy and move the company forward.

There was a flourish of activity in all departments preparing for the next meeting; each department looked forward to its chance to show its importance to the rest of the company. Each department assessed the following questions to evaluate their key objectives for moving the company forward:

  1. What are we doing that moves the company forward?
  2. Is there anything we are not doing that we should be doing?
  3. Is there anything that needs more emphasis?
  4. Is there anything that we should stop doing?
  5. What is required from us from other departments in order for them accomplish what they need to do to move the company forward?
  6. How can we enlist the support from other departments to help us achieve our goals and objectives?

Each department selected a spokesperson to present its contributions to the company’s future success and proudly presenting what its contributions would be for the next year. The meeting ended with an ice cream party celebration.

After the departmental presentations do you think the associates now knew what the company strategy was? (Yes!) Do you think that each associate now knew what he or she had to do to move the company forward? (Yes!) Do you think that they came up with ideas in each department that were far better than anything the senior management team could have directed it to do? (You betcha!)

Moral: Communication has to be a two way street.

When all we did was present the strategy to the rest of the company, we had not asked the associates to think about the strategy from their perspective — what did it meant to their job? What did it mean to their department on a day-to-day basis? By asking each department to present what they had to contribute to move the company forward each department and each individual had the opportunity to think about the company strategy in the context of what they did on a regular basis.

By allowing the departments to think on a more strategic level each department became focused on the key activities of the organization — many departments streamlined their activities as a result of this process.

Asking each department to make a presentation forced each group to think through clear objectives that could be presented so that others in the company would understand. This allowed other department’s to better understand each other’s role in the company’s success and allowed for more coordination moving forward.

How do you develop a process for strategic alignment in your company? Here are some thoughts as to how you can engage each department:

Strategy Review

    • Start by reviewing the corporate strategy, goals and objectives. Make sure that the associates understand the big picture.

Situation Analysis – What is going on in your department/functional area?

    • Hold a team meeting for each department. Start by reviewing the corporate strategy, goals and objectives.
    • Ask the department who its customers are: internal and external (this helps break down silos)
    • What are the needs and preferences of the different customer groups?
    • What other issues are we facing (technology, supplier, regulatory)?
    • What are the departments’ strengths and weaknesses?
    • What new opportunities could the department pursue?

Departmental Initiatives

    • What are the 3-5 most important projects for the department to complete in the next 9-12 months?
    • How do these objectives support the overall corporate strategy? (If they do not should they be departmental initiatives?)

Execution

    • Develop action plans for each initiative.
    • Are you dependent on any other department to achieve any of the initiatives?
    • Get approval to move forward with the Initiatives.

This process gains each department key initiatives to accomplish during the next 9-12 months. It also enables the senior management team to make course corrections if they find that a department is not aligned with the company’s strategy. It also allows the senior management team to adjust corporate strategy if a department uncovers issues that need to be addressed at the corporate level.

In addition, it will help each department and the senior management team resolves interdepartmental issues before they become problems.

Developing a strategy will help your company optimize its future. Ensuring that the whole company is aligned with corporate strategy will help you achieve corporate goals and objectives in a shorter time frame.

Denise Harrison is President of Spex, Inc. Strategic Planning and Execution. She can be reached at: harrison@thestratplan.com .

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© Copyright 2015 Center for Simplified Strategic Planning; Reprint permission granted with full attribution.

The Importance of Scenarios when Dealing with Uncertainty

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Denise Harrison                                                                                                                       President, Strategic Planning and Execution, Spex, Inc. 

How can we better deal with uncertainty when we develop our strategic plan? Many strategic planning teams struggle with this issue. While it is important to understand what you know as facts and what your assumptions for the future are, I have found that some good scenario planning helps a team prepare for a wider range of possibilities that might occur in the future. By looking at different scenarios, the team can assess what will work in each scenario and then select the approach that will benefit the company in the most likely scenario, but still balance that approach by not closing out options that will work if another scenario unfolds.

Generating Different Scenarios

Some teams generate a probable scenario and then move to generate an upside and downside. For example, the probable scenario is that we achieve 10% growth and the upside is 12.5% and downside in 8%. While this works, I find that high performing teams that discuss actual events/trends and then develop scenarios corresponding to possible outcomes, is a better way of generating scenarios. Some examples of trends and events include:

  1. Product launch is delayed by 12 months.
  2. Oil prices plummet and stay down longer than our probable scenario (this could be good or bad depending on what your company does and who your customers are).
  3. Acquisition has unexpected fall-out and customers leave and go to competitors.
  4. Customers’ preferences change faster than we anticipate (Blackberry).

You should have your team members come up with ideas for different scenarios. Generate what these environments will look like out 5-10 years. Ask the question: What will we need to do to be successful if this is the competitive landscape? You will notice before you start working, that several of the outcomes will have similar results. Select scenarios that will generate different actions.

Once you have generated different “success” strategies, then evaluate which scenario is most probable, and then look to see what you can do to accommodate other “success” strategies so that you maintain your flexibility moving forward.   While you may not be able to keep all options open, you may be able to keep some avenues open until time passes and you have a better view of what the future has in store for your company.

Another benefit of this exercise is it allows the team to think more broadly and be more aware of the external factors that impact your business. This will help the team deal with the changes that will inevitably happen during the planning horizon. As you start to see movement that makes another scenario unfold, bring the team back together and recast your strategy. If you anticipate this movement faster than your competition, it will help position your company to gain market share or weather an industry downturn better than your competitors.

If you are interested in discussion more about how to generate scenarios that will enhance your team’s flexibility please give me a call at: 910-763-5194 or email me at harrison@thestratplan.com.

(c) 2015 Spex, Inc. Strategic Planning and Execution

Acquisitions: 8 Steps to Success

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Denise Harrison President & CEO Strategic Planning and Execution: Spex, Inc.

Once we have determined an acquisition is part of the solution to achieve our strategy, we must evaluate the potential candidates. This evaluation step is paramount to the financial success of the acquisition. One recurring error is that only one company is identified, or a specific company becomes available and is deemed to be the solution. DO NOT LET COMPANY AVAILABILITY DRIVE STRATEGY OR LIMIT THE CHOICES YOU EVALUATE. Once your team identifies potential acquisition candidates, rate each company based on criteria:

  1. How well does the company fit with strategy? How well does the company actually fulfill the desired objectives of the acquisition?
  2. What else comes with the acquisition? Very few acquisitions are pure plays.
  3. Do they have competencies (then rate to see if they are strategic), or do they have strategic assets (knowledge resident in one or a few individuals)? How is the competency shared and documented?
  4. Will the targeted company’s culture fit our culture?
  5. What will happen to the key people? Will they walk? Do we want them to walk?
  6. What is the targeted company’s market position in all of its markets? Are they the number 4 player or number 1 or 2?
  7. What are the industry dynamics? Are there any significant threats on the horizon? New competitors? New technology?
  8. How will this acquisition change the competitive landscape? Will the acquisition enhance the company’s competitive position? Where will it detract?

Let’s explore each one of these criterion.

Fit with strategy

Very rarely is a targeted company a “perfect” fit. All candidates must be evaluated based on how closely they fulfill the strategic objective for the acquisition. Does the company meet the customer relationships set out as part of your objective? Does it have the required products and/or services? Does it have the distribution channels that we need? It is important that the team sets up key criteria before acquisitions are evaluated. If this is not done upfront, you will have no way to evaluate how one company stacks up against another company.

Other Baggage

“Other baggage” is where many acquisitions fail. The targeted company has what you want and fits nicely into the strategy you are looking to accomplish; but it comes with many other areas in which you have interest. It may have products and/or services not part of your strategy; it may also not be in your strategic market. Now what? It looks like a minor problem; however, your team could lose focus due to these extraneous products/services and/or markets. All of a sudden, your strategic plan includes areas that are not part of your core business; and resources are diverted to these areas instead of focusing on the original strategy. Conflicts arise concerning priorities within the company and these conflicts distract the company from its original mission.

Recently a medical devices company wanted to fill a gap in its product line. They purchased an available company and began integrating the acquired company into its planning process. This acquired company was in a number of market segments new to the original company.

These segments had different requirements for the product; thus, causing a great deal of conflict in product development and future feature/ functionality requirements of the product. The product had one set of requirements meeting the acquiring company’s needs and another set meeting the extraneous segments’ needs. A product emerged which was a compromise, and neither of the markets was happy with the result. The new products were not successful, and new product development time lengthened because the product being developed served two different masters. Trying to serve these conflicting priorities sent the acquired business into a tailspin. When you make an acquisition, consider accompanying baggage when evaluating an acquisition target. You must have a plan for dealing with the baggage (spinning off, keeping) before you make the acquisition; otherwise, conflicts will occur and cause the acquisition to be unsuccessful.

Strategic Competencies

Evaluating the competencies of the acquisition target is important to understanding the true value of the acquisition. The intellectual capital may, in fact, be the reason for the acquisition. For example, your product is offered in either of two technologies: you have a strategic competency with one technology, but no in-house knowledge of the other. With a goal to expand, you find that there are specific cases where the other technology has advantages over the one you offer. In this case, you can decide to develop the expertise in house; or acquire a company where the knowledge exists. The latter is often the faster path allowing you to capitalize on the technology and the current customer base of the acquisition target. In order to fully assess the resident competencies, you must evaluate the following:

  1. Is this really a competency or an asset? Is the knowledge only held by a single person? If it is held by a single person, it is a strategic asset and this asset has legs and may walk.
  2. How is the competency knowledge passed on to other employees? Is it documented? Is there formal training in place? Is there hands-on training? You want to be sure there is an educational process in place to ensure skill, knowledge and process sharing.
  3. Is there a process for continual improvement? This may set the company apart now, but how easy is it to copy? Are there plans for the next generation? Is it possible for the competition to leap frog?
  4. Is the production or service function outsourced? If so, does this create a future competitor? Is the knowledge really resident in house? Gaining a competency is often an important part of the acquisition strategy; however, you must ensure this knowledge is positioned in a way giving you a sustainable competitive advantage.

Cultural Fit

Spend time understanding the culture of the new organization. Is the management approach top down and autocratic, or bottom up and participative? Is there a strong work ethic, or are people out at 3:00 p.m. on Friday leaving customer calls unanswered? What are the stories being told within the company? Important? You bet! Add information by looking at the HR manual — what are the policies — will they mesh?

A government contractor was looking to make an acquisition to enhance their market share in a particular government agency. They know from customer comments the company was run by a very autocratic leader having his fingers in everything. The acquisition team was sure the acquisition would flourish once the leader was out. Was this a realistic assumption? What type of leader would the next tier of management be? These were the folks who stayed with this leader for more than 20-plus years in spite of the leader’s autocratic style. Do you think good autonomous leaders would stay in this environment? No, of course not!

An agricultural services company was looking to expand customer services being offered. It decided to expand by purchasing a company selling and applying fertilizer and other soil nutrients. While working on one of the ranches, an acquiring-company principal was offered some fertilizer at a low price by employees of the acquired company. They did this by siphoning off some fertilizer going to a customer and returning the liquid to its original volume by adding water. When the employees were fired, they walked off with the account lists. Honesty should be one of the key values for which you look. So often we assume honesty is present; but if this team had asked around, I expect they would have uncovered dishonest practices by these employees. Spend time interviewing customers and people who actually work with the individuals to see if there is a pattern inconsistent with your company’s values.

Key People

The targeted acquisition opens up key channels of distribution for you in Asia. You know these channels developed through personal relationships. After the acquisition, the people responsible for making and maintaining these relationships leave and the door to Asia is closed to your products and services. It is important to know who the key players are and the intent of each of those key players. There are many ways to keep key employees around including tying the payouts to performance over future years. However, you must also ensure that there is honest knowledge transferred about backing up every key position. Before making the acquisition, you will want to know how back-up responsibilities are handled and whether or not there is a succession plan. If there is a succession plan, are the people who are designated successors being trained to handle the job? Also, ask what happens when key people go on vacation. A clear warning sign is some key people not having gone on vacation or taken more than a few days off at a time. This lack of vacation means two things: They are truly unwilling to train back-up employees and really have no back-up plan. This is not unusual in small companies, but be aware that human assets can walk. Be sure to have a plan to deal with human assets, or discount said company on this aspect of the valuation.

Market Position

Okay, everyone has heard the requirement of being #1 or #2 in a market in order to maintain significant profits. Well, the same is true as you evaluate your target company. Look and see how they stack up in their markets. If at first glance they do not do well; ask if it is because of a different segmentation or if they actually dominate specific niches. If they are not profitable in certain segments, ask questions.

Return to the agriculture services company mentioned earlier. Yes, they purchased a fertilizer company. Unfortunately, it was only ranked number 4 or higher (e.g. 5 or 6) in its market segments. Talk about pushing a string uphill! Did the acquiring team have a strategy for moving up the market position? No, and for several years the company struggled. Finally, the team assessed their strategic competencies and how these competencies could be leveraged to gain shares in their market. They also redefined the markets to target winning growers. Good news — the strategy worked — but it took five years to come to fruition. Next time, they will look harder at the target company’s market position.

Industry Dynamics

If this targeted acquisition allows you to enter a new market, you need to understand the market dynamics. Who are the competitors? Is there a new technology coming? In order to assess this, you must talk to people who watch this industry, i.e., investment analysts, regulators, and customers. Customers can often identify upcoming changes others in the industry do not see; e.g. new entrants may be presenting their concepts to the company’s core customer base. Other external forces may impact the industry dynamics. For example, there are changes in energy-efficiency regulatory requirements, you must ensure the acquisition target has plans in place and/or under development to meet these new requirements. Look to see if prototypes are available.

Anticipate the reaction of customers and potential customers’ to the acquisition. When Pepsi bought Burger King, did they anticipate Pepsi would no longer be a candidate for McDonald’s and other fast food chains competing with Burger King? Did this acquisition make sense?

As you consider purchasing another company, it is important to consider the criteria as you develop specific targets for your acquisition search. With your criteria in place before you begin your search, you will be more objective as you evaluate the candidate acquisitions. Good luck!

Denise Harrison is President & CEO at the Strategic Planning and Execution, Spex, Inc. She can be reached at harrison@thestratplan.com

(c) CSSP, Inc.

 

Listening: An Important Skill for Successful Strategic Planning

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by Denise Harrison, President, Strategic Planning and Execution, Spex, Inc.

Recently I spoke with a CEO and found that the most important thing that his team learned during strategic planning was the importance of listening. This was an unusual answer to my question asking how his team had benefitted from the strategic planning process, so I asked him to explain his answer. He said that his company was full of “idea” people who spent so much time talking about their ideas that they failed to listen to others. Without solving this problem, his company would have been stuck in the mud and perhaps gone out of business because nothing moved forward – each person was his/her own island.

Listening: An important skill for strategic planning

One of the benefits of presenting research on key topics during strategic planning is to ensure that all of the team members have a shared base of knowledge from which to make decisions. By listening to all of the research and ideas, the team can have constructive discussion concerning what is the best course and direction.   The ability to listen allows each team member to thoughtfully consider what the company should say “yes” to and, more importantly, what it should say “no” to. Important facets of listening include:

  1.  Allowing all team members to develop a shared base of knowledge, broadening their understanding of the business and the possible choices the company can make.
  2. Allowing for better discussions and the development of a broader range of solutions, due to the shared base of knowledge.
  3. Allowing each team member to better understand the impact of a variety of different forces on a particular idea, as each idea is looked at from different points of view (financial, customer, product development, production)
  4. Allowing the CEO to sit back and watch the team develop their strategic thinking skills instead of always being the one with the answer. Strategic thinking is like a muscle – the muscle develops with use, but atrophies if it is unused.
  5. Allowing the team to hear what customers have to say, rather than just presenting solutions. This listening skill can enable the company to develop a better understanding of their customers’ businesses enabling better future solutions.

Considerations for your strategic planning process

As you go through your next strategic planning process, remember the importance of listening. Remind team members that it is not only important to have good ideas, but also important to listen to other’s thoughts. It is the team’s combined thinking that generates a great strategic plan.

Interested in how you can get your strategic planning team to listen better and to capitalize on  team-building benefits of strategic planning? Please contact me at harrison@thestratplan.com .

Strategic Planning: Are Your Decisions Based on Facts or Opinions?

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President and CEO, Spex, Inc

 By Denise Harrison, Strategic Planning and Execution

Many people return from a strategic planning retreat frustrated, often asking: Were we really concentrating on what is important or were we focusing on what was “top of mind”? Did we make the right decisions or were we swayed by the most persuasive person?

A Better Way to Make Decisions: Thoughtful Consideration Based on Research

One way to prevent making decisions based on opinions and “top of mind” thinking would be to split your strategic planning process into three steps:

  1. Situation Analysis and Research Identification
  2. Strategic Formulation (based on the above research)
  3. Implementation – Turning Strategy into Action

Critically, Step 1 starts your strategic planning process off on solid footing, focusing on the current situation and identifying the important areas of research. These should include:

  • Current business segments: Are we positioned to meet their future needs? How are we differentiated?
  • Competition: What are they up to? How are they positioned in the market?
  • Other considerations that can change the competitive landscape: technology, suppliers, economy and regulations?
  • Opportunities: What are they? What is each one’s potential? What is the downside risk?

Taking time to research these topics and any others that your team deems worthy of research before the strategy formulation session allows for better decisions in which all team members are equipped to participate . It will enable your team to develop a strategy that will really differentiate you from the competition and set you on the path for future success.

What else?

Another important component of the research phase is to have the research collected in a consistent format. Having a template for the business segment, competitor and opportunity research is particularly important. This consistent format allows you to compare each topic given the same information rather than miscellaneous bits and pieces pulled together to present the researcher’s thoughts in a favorable light. This consistency allows for rigorous discussion of where to spend your company’s resources in order to achieve the best possible benefit.

If you would like to know how to make your strategic planning sessions more fact-based please contact me at harrison@thestratplan.com.

(c) Spex, Inc. Wilmington, NC, 2015.  Reprint permission granted with attribution.

Innovation: Blue Sky vs. Short Term ROI

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What is the Right Trade-Off for Your Company?
Denise Harrison, President & CEO, Spex, Inc.

How much time should your company spend on “blue sky” opportunities and how much should you invest in opportunities with a short-term ROI? Many teams face this question as they select the projects they want to focus on for the next several years. Often a short-term results focus causes the “blue sky” opportunities to be put on the back burner. This may work in the short-term – but will it position your firm for long-term success?

In 1996, Apple faced a devastating loss of $816 million – did they pull back and focus on the short-term? No, in 1997 they launched an initiative that was to transform how people bought, sold and listened to music. There was no clear path for how this would happen, no easy technology solutions, no short-term ROI – just a lot of questions and a vision.  Even with poor financial results, Apple invested in a vision and transformed the way we buy and listen to music with the iPod ™ and iTunes ™.

Strategic planning teams are often confronted with various and often competing investment decisions as they select the “few” things that need to move forward. It is often easier to select product enhancements and product line extensions with low risk and short-term payoff, rather than investing in the higher risk “blue sky” alternative. The “blue sky” alternative can require significant investment in both time and money and often has a lower probability of success – but if successful, it is often transformational for both the company and the industry. Breakthrough innovation will give your company a sustainable competitive advantage that will give a significant boost to your bottom line – but do you and your investors have the patience?

What should you do?

There is no one simple answer that fits all companies, but here are some ways to think through the choices that your company faces. Yes, it is important to select the few projects that need to move forward; simply adding a few “blue sky” projects to an already long list of “to dos” is a recipe for disaster. By choosing too many projects you will simply lower the probability of success for all projects. Instead, you should look at your choices as a portfolio. Much like investing, you will want short-term, medium term and long-term returns.

  • Short-term: often product line extensions and enhanced features are the quick hits. These have clearly definable direction and lower risk and offer short-term return.
  • Medium-term: often new platforms can offer significantly enhanced performance/lower cost/greater ease of use. These typically require higher investment, more time and have higher risk because the outcome is less certain – but the benefit of a new platform that offers significantly enhanced capabilities is typically rewarded in the marketplace.
  • Long-term: the “blue sky” innovation targeting a problem with no clear solution, but if one is found will allow your company to leapfrog the competition.

What mix is right for your company? Well, again there is no easy answer – some companies, particularly technology companies, must invest heavily in the “blue sky”. Look what has happened to RIM, with its Blackberry eclipsed by Apple’s iPhone. RIM once provided the new platform that leapfrogged its competitors, but that advantage did not last long. Other industries may select a different mix of short/medium/long-term projects; but remember even an industry with a slower rate of change, can still be transformed. Look how Amazon changed the way we buy and read books with its Kindle. Yes, Barnes & Noble has copied the technology and was first to come out with a color version – but Borders, unable to keep up, is out of business.

How do you ensure that investments are made for the long-term “blue sky” projects?

Many companies take their long-term projects and earmark a certain percentage of their development budget to be spent on “blue sky” projects. This way the projects are not “voted off the island” because their returns are far into the future and uncertain at best. But once you set the money aside, how do you decide what projects to fund? Some companies look at a technology and think of ways to commercialize it – but this often results in a solution looking for a problem. A better way to manage the long-term portfolio is to define the problem(s) to be solved. Don’t provide the solution – this will stifle the creativity. Instead nurture the ideas and let them grow. “The fastest way to kill an idea is to criticize it,” says Scott Crump, Chairman of Stratasys. Stratasys is a market leader in the world in 3D printing – taking CAD drawings and turning them into functional prototypes, assembly tools (jigs, fixtures, patterns) and production parts, enabling their customers to accelerate their time-to-market. Crump credits Stratasys’ investment in long-term projects for developing the transformational platforms/technology that continue to position Stratasys as a technology leader in this market. These projects reaped rewards after traveling through a maze of twists, turns and dead-ends – and finally victory.

For short and mid-term projects, quantifiable selection based on risk and reward makes sense. For longer term “blue sky” projects, you should consider putting a certain amount of money aside to work on clearly defined problems. Finding these solutions will allow you to leapfrog your competition. But keep in mind the journey will not be straight and will require perseverance.

How does your company balance long-term opportunities with short-term quick hits?

For more information on innovation please read: Innovation: Where to Look for It. If you are looking for ways to add more innovation to your strategic planning process please contact me at harrison@thestratplan.com

© Copyright 2015 by Spex, Inc. Wilmington, NC — Reprint permission granted with full attribution.

 

Leadership: Four Attributes

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In honoring our veterans and the contributions/sacrifices they have made; I thought of General Walter Boomer’s four attributes of successful leaders:

  • Care about your people
  • Set the example
  • Be a person of your word
  • Know your job

Take some time to reflect on these attributes – how do you measure up?  What thoughts do you have about these characteristics?  Which one is the hardest to achieve?

Game Playing Will Be Important to Sony’s Future Success

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10056562891131CDPBy Denise Harrison, President & CEO, Spex, Inc.

Sony exemplifies how a company must continually refocus its resources in order to optimize its future potential. An earlier article: Know When to Hold ‘em and When to Fold ‘em – Knowing when to get out of a core business is key to being successful in the future discussed how Sony was exiting and de-emphasizing some of its core business to focus on areas with higher potential. As the strategy is evolving, we see that Sony is continuing to re-focus its resources to regain growth and profitability by broadening its gaming division to focus on entertainment. It will be adding complementary services and changing its focus on Sony-only hardware to becoming hardware indifferent.

How to expand the successful Game Business Unit?

  1. What is a complementary service to the gaming division? If one thinks broadly about home entertainment, one not only thinks of games, but also TV, in particular, internet TV. Sony has already successfully partnered with Viacom to distribute 20 Viacom channels, including Nickelodeon and MTV over the internet for TV viewing. Presumably using a “gaming” channel, Sony would stream games over the TV.
  2. In addition to streaming TV, Sony intends to stream its games to smart phones and tablets. By taking this step, Sony is emulating IBM when it moved from being a computer hardware provider to an information systems provider. When IBM made its move, it had to become indifferent to the hardware that their customers were using. This was a difficult step for IBM to take. It will be a difficult step for Sony, also. Its PlayStation 4 is the industry leader and may become the standard game console similar to the way VHS beat out Betamax technology. By learning from the Betamax experience, the PlayStation 4 has made it easy for companies to design games for this console. Still, to take the next step, Sony must become indifferent to the hardware if it wants to dominate the game streaming business.

It is difficult for a company to re-invent itself. Sony has already taken many steps to re-focus its resources, but many more will be needed for a successful turn-around story.

Is your company struggling to develop a clear focus on what will enhance its future potential? Are you bogged down trying to revive legacy businesses that have slim margins when the market is valuing more recent products and service offerings?   There are several strategies that are effective in addressing legacy businesses:

  1. Maintain: Continue to maintain your market share while investing in new areas of the business. This strategy is used when the legacy business is still healthy.
  2. Contract: Get out of the products/services/customers that are no longer profitable, but continue in the areas that have a good return. This will shrink your core, but keep the areas that are profitable while you build in the new, more attractive business segments.
  3. Milk/Harvest: Gently coax resources out of the business; no new investment and use the cash generated to invest in the new areas.
  4. Withdraw: Get out of the legacy business altogether, and truly focus your resources on the new areas. A good example of this strategy was recently executed by GE when it sold its Major Appliance division to Electrolux. (See article: GE Spins off Major Appliance Division – What Can a Small Company Learn from this Divestiture?)

What is right for your company?

A thorough strategic review of your business using a structured process will enable your senior management team to select the right strategy to optimize your company’s future potential.

If you would like to learn more about how a structured process would work for your firm please contact me: Denise Harrison; 910-763-5194 or harrison@thestratplan.com.

Copyright: Spex, Inc. 2014

Choosing a Road Less Traveled Is Best

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by Denise Harrison, President and CEO, Spex, Inc.

Many readers are confronted with 800 pound gorillas in their market place – how should they compete? Should they follow the leader or devise a strategy that capitalizes on their unique capabilities?

Choose the Road Less Traveled

Many readers fondly remember Piedmont Airlines. When airline deregulation looked Piedmont in the face Piedmont knew that in this new competitive environment they would face challenges from larger, better financed airlines. How could they compete?

Larger airlines chose to compete in the busiest airports. This head to head competition led to inevitable price wars. Piedmont, on the other hand, continued to build its network in the southeast servicing many airports that other airlines would not even consider. This strategy paid off as the company was voted ”Best Airline”, clearly differentiating the airline as the high quality service provider in the industry. Next, US Airways purchased them, and you know the rest of the story!

Market trends are some of the key factors to look at when developing a strategic plan. But in addition to looking at the market attractiveness a company must also look inside and assess its own strengths and weaknesses. Compete on strengths and avoid areas of weakness. All of the airlines developed their respective strategies by evaluating the markets, looking at demographics and transportation trends. Piedmont chose to avoid competing with better-financed airlines in popular hubs. Instead it looked to service the area where it was already well established and an area that was less attractive to its larger competitors.

During the 90′s many companies saw the Internet expansion as a key trend to enhance growth. Pundits argued that the new economy was immune to business cycles – the new management mantra was ”get big fast – or go home”. Webvan embodied that mantra – to what end?
”Webvan Group, Inc. said it shut down its online grocery-delivery service and will file for Chapter 11, marking one of the most spectacular and expensive failures of the Internet era…. Webvan poured …$830 million… into high technology warehouse facilities and a 26-city expansion plan that most observers have since said was too ambitious.”(Wall Street Journal, July 10, 2001)

This is only one example of how companies assumed the Internet was the ”land of opportunity” pouring millions of dollars into plans that were ill-conceived and based on invalid business models.

Intelligent Information Systems, Durham, NC

During this dot.com boom Intelligent Information Systems (IIS), a software-consulting firm, was evaluating different potential growth strategies. IIS was clearly differentiated by its high quality standards and its commitment to total customer satisfaction. To many, ”quality” and ”total customer satisfaction” are just buzz words, but to the team at IIS these phrases are driving principles. While many technology firms in the Research Triangle Park were taking advantage of the lucrative public offerings, the senior management team at IIS knew that a public offering would cause the team to lose its focus on customer satisfaction and zero defects. After a public offering, associates would be imagining what they could do with their newfound wealth, watching the stock price daily, hourly, assessing minute to minute his or her net worth. This myopic self-interest would cause the company to lose its competitive advantage. A difficult decision to make during a critical time frame, but 20/20 hindsight shows that the IIS team chose the optimal course and direction for their firm by focusing on the key areas that set the company apart from the competition.

When developing your company’s strategy look for ways your company can capitalize on its unique mix of assets and capabilities. Do not follow the leader; choose the road that works best for your company – often the road less traveled.

Denise Harrison is President & CEO of Spex, Inc.: Strategic Planning and Execution. She can be reached at  harrison@thestratplan.com.

© Copyright 2014 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.