Ask entrepreneurs, business owners and executives what keeps them up at night, and the answer is typically, “How do I identify the best growth platforms?” Below are four surefire steps for identifying your organization’s business strategy:
Step 1: Identify preliminarily where you will place your bets. Developing your business strategy is akin to going to a casino and placing a bet. It’s all about winning. The initial focus must be on:
• Finalizing your offerings, meaning your products and services.
• Identifying which market segments you will grow, eliminate and play in.
• Determining your internal growth engines, such as new products and services, and external growth engines, such as acquisitions, partnerships, joint ventures and licensing opportunities.
We have developed a tool below that we use to facilitate this discussion with client executive teams.
The most successful companies thoroughly analyze each of the quadrants and avoid the temptation of going for a “home run” by introducing new products and new markets that provide huge upside but historically have the lowest success rate.
Identifying and prioritizing growth platforms is an iterative discovery process. Let the data you collect drive your decision-making. The numbers don’t lie.
Step 2: Understand your capabilities. All organizations are comprised of an architecture that involves Technology (data, applications), Organization, (culture, HR practices), and Process (core/support processes, physical infrastructure). It is important to have executive consensus on your strengths and weaknesses, and the “secret sauce” is being able to understand your current core capabilities vs. what is needed in the future for you to successfully execute your final strategy.
• Make sure there is consensus across the executive team on your source(s) of competitive advantage. Never shortchange these areas in terms of resourcing and budgeting.
• Remember, just because there is a market opportunity, that doesn’t mean you have the internal capabilities to successfully take advantage of it. Most strategies and market opportunities require certain core capabilities. If you don’t have them, then you must create this capability via one or more strategic initiatives to be able to execute your final mix of strategies.
Step 3: Finalize your strategy. This is by far the most important step in the process. It entails employing the data you’ve collected to date to evaluate alternative strategies using objective and quantifiable decision filters, such as ROI and risk analysis, and creating financial models of each strategy to make sure your final selection of growth platforms will generate the desired top- and bottom-line performance. At this time, you need to finalize decisions on the 4 P’s: positioning, price, promotion and packaging.
• Space out your strategies across your planning horizon. If you have a three-year plan, don’t try to do too much in year one.
• It’s all about prioritization. A stage two company should not have more than two to four strategies with two or three supporting initiatives per strategy. Less is more. The focus needs to be on execution.
Step 4: Identify strategic initiatives. Strategic initiatives are those projects or efforts that must be undertaken to ensure each strategy is successfully implemented. Initiatives are also used to close the most critical capability gaps you identified in Step 2.
Many management teams suffer from ADHD (attention deficit/hyperactivity disorder) and feel their job is finished once the plan is complete, so they turn their focus to the next “fire to fight.”
• Leaders must provide visible sponsorship, allocate appropriate resources and make tough decisions to ensure strategies and supported initiatives are implemented.
• No matter how well you plan, unprogrammed things happen. Develop a formal contingency plan with “triggers” around your major risk factors.
• By following these best practice steps, you are well on your way to creating a sustainable and differentiated competitive advantage for your company.