Tag Archives: Differentiation

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.

 

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.