Tag Archives: strategic choices

Are You Preventing Your Company from Growing? How You and Your Leadership Team Could Be Causing Bottlenecks

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strategic planning graphic2By Denise Harrison

One CEO complained that his financial person was preventing his company from growing. How was that possible? Over the years when issues arose, the financial person would develop a system of checks and balances that would prevent the issue from occurring again. While conceptually it is good to have policies and procedure to prevent issues from arising, continuously adding more and more can simply become cumbersome and impede forward motion. The CEO knew the solution to cut through the red tape was to automate the check and balance systems and to delegate the responsibility so that more than one person was responsible. The financial person had trouble giving up the responsibility and did not want to change. Eventually the CEO hired a coach to help the financial person accept and embrace the required changes.

What about us? What can we learn?

While this looks like an obvious problem, are we guilty of similar behavior? Do we create bottlenecks to our organization’s growth and success?

• Are we stuck doing things the way we have always done them, or do we continuously look for better ways? Do we listen to others’ solutions?
• Do we hold on to responsibility, stalling the growth of those who could use the challenges for professional development?
• Have we really assessed the risk and put the right amount of effort in prevention – rather than too much effort, given the risk associated with a negative outcome?
• Are we tied up in the day-to-day rather than focusing on the big areas that will really position the company for future success?

Suggested Course of Action

If you find that you are constantly being pulled into the day-to-day firefighting or that you are the rate-determining step for moving things forward, you need to reassess: what is the best use of your time? Then develop a list of:

1. What will you start doing? (E.g. more time on long-term strategic projects.)
2. What will you stop doing? (E.g., resolving minor customer service issues, rather than allowing your customer service representatives to make decisions up to a certain amount.)
3. What will you continue doing? (E.g. continue speaking at industry events to raise your company’s visibility.)

A Second Step

Have your direct reports develop a similar list. Will they be able to handle (start) some of the tasks you want to stop doing? These tasks should appear on their “start” list. Are there “stop” tasks being delegated to their direct reports?

Developing a START/STOP/CONTINUE LIST will cause you to reflect on how you spend your time and how you should be spending your time. By comparing your list with others, you will be able to have constructive dialogue on tasks that need to be delegated and what skills need to be enhanced in order to do these well. These discussions will help the senior management team cease to be an impediment to growth, but rather, free up their time to focus on the strategic projects, while enhancing middle management’s ability to participate and develop the skills needed to move into leadership positions.

To contact Denise Harrison:  harrison@thestratplan.com  or call 910-763-5194.

(c)Spex, Inc. 2016 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

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

GE Spins off Major Appliance Division: What Can Your Company Learn from this Divestiture?

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By Denise Harrison; President &  CEO

GE is spinning off its Major Appliance division, highlighting the importance of making choices in strategic planning. In this case, Jeff Immelt, GE’s CEO, is making the choice to focus on the higher margin energy, power, aviation, and health care businesses. This decision exemplifies the purpose of strategic planning:

  • Identify sound and appropriate course and direction that will truly optimize your company’s future potential
  • Sharply focus resources in support of that course and direction.

Some comments on GE: Everyone remembers Jack Welch’s focus on being number one or two in an industry or get out. However, this is just a simplistic version of what the analysis looked like. To simply try to be number 1 or 2 in an industry could lead to poor financial performance, as we saw when GM tried to hold on to its number one position by buying market share, which, instead of generating success, led to poor financial performance and bankruptcy.

Choosing Where to Play

In choosing where to play, there are a number of aspects to consider:

  • Assess where you have a competitive advantage – what do you have that has high value to your customers and differentiates you from the competition?
  • What are the growth opportunities for the business? In general, growing markets provide more opportunities to profit than markets that are shrinking. This is, of course, dependent on the uniqueness of your position.
  • What is the profitability of the industry? What is your ability to charge a premium for your products and/or services? Are you charging for the value that you are providing to your customers or are you pricing on a cost plus model?
  • What other choices do you have? Do you have a greater differential advantage in other areas? Is there more profit in other segments?

Let’s look at another GE example – this time, GE Plastics. With its plastics business, GE chose to maintain its market leadership in the engineering plastics niche of the plastics market. This is important – GE did not try to become the market leader in plastics; instead, GE selected a specific segment of the industry where it had differentiated products. Additionally, GE believed that the industry had significant growth potential and due to the uniqueness of its products, GE predicted that it could sustain a competitive advantage.

However, over time its competitive advantage eroded and engineering plastics became a niche where there was less differentiation and lower margins. At that point, GE chose to sell its business to SABIC even though it was still a market leader. GE focused instead on other businesses where its differentiation, profitability and growth were more attractive than in engineered plastics. Note: GE did not wait until its business was in trouble; it made the decision based on optimizing its future success by allocating its resources in areas where it has a higher return.

We see this scenario playing out again with its Major Appliance division. The appliance division is not in trouble, but GE decided that there were other businesses that would achieve higher returns, and thus chose to focus on these businesses. It did not wait until the business was in trouble or losing money, instead it made the decision to re-allocate its resources. By selling a healthy business it was able to achieve a high price and use the proceeds in areas where there was more potential. Being a market leader is not the only criteria for staying in a business; critically, you must also assess whether or not this business provides the highest and best use for your scarce resources.

Lessons Learned:

  • Being big or the market leader in a segment is not necessarily a reason to remain in a particular industry segment – it is only one aspect to consider
  • Selecting a niche where you can be a market leader by having a differential advantage that has high value to the customers and is sustainable, is also important
  • Understanding your choices and focusing on the few, rather than trying to spread resources around, allows you to gain traction faster

Fundamentally it is all about choices. Teams that are able to gather good information about their markets, truly understand market niches and make choices concerning the highest and best use of their resources will achieve higher margins and optimize their future potential than those who stay in businesses where differentiation is eroding.

If you have questions about how to better focus your resources and make right choices during your strategic planning process please email me (Denise Harrison) at: harrison@thestratplan.com .

Copyright 2014 by Spex, Inc. Wilmington, NC — Reprint permission granted with full attribution.