tag:blogger.com,1999:blog-336054972024-03-08T05:58:20.128-08:00Strategy and InnovationDenise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-33605497.post-48490937162018948562010-05-20T08:18:00.000-07:002010-05-20T08:27:05.198-07:00<strong>Three Keys to Recovery Success: Re-focus Your Efforts to Outperform Your Competition</strong><br /><strong>Denise HarrisonVice President, CSSP, Inc.</strong><br /><br />Recently I was talking to a company president - he was frustrated that a large project was off track. What happened? Well, during the recession, his team bid on a significant contract for a large company; the contract included requirements that were a stretch for his company. Traditionally the team focused on the small to mid-sized businesses, but during the recession they decided to bid on this contract in order to bring in additional revenue. The result? Resources were being pulled off other projects to meet these requirements, and unfortunately the large customer was not happy because the project was not progressing smoothly. Even worse, the smaller traditional customers were unhappy because resources normally available to them were working on the large project. Has the recession caused your company to take on business that is pulling you away from profitable business?<br /><br /><p><strong>Re-focus Your Efforts</strong><br />Yes, during a recession it is easy to look at any business as good business. But often companies take on business that does not leverage their competencies and/or causes it to misallocate resources. This new business may cause resources to be spread too thinly, working on projects that may bring in revenue, but are not profitable, or, more critically, divert resources from core, profitable customers. In order to emerge from the recession in a strong position, it is important that you take the following three steps:<br /></p><p>Re-assess what your company does well: <strong>"Know thyself</strong>"<br />Understand where your competencies are: what are those skills, processes and knowledge that are most valuable to your customers?<br />Know what your company does do well, and what it does not do well, so you will concentrate on serving the customers who value what you do not only during the recession, but for the long term.<br /></p><p>Identify market segments or customer groups that you currently serve - and focus on the ones who value what you do well: "<strong>Cherish thy core</strong>"<br />Do these segments/customers select your company because they value the things that you are good at doing? These are the customers that will be profitable.<br />Or are there some segments/customers that simply came to you during the recession when you were trying to get business - any business to shore up the top-line. Re-focus on the profitable segments.<br /></p><p>Once you have identified the segments that value your competencies then look within the segment and identify who the winning customers will be during this recovery: "<strong>Know thy customers</strong>"<br />Customers who were doing well before the recession may not be the same ones who are doing well after the recession.<br />Some customers within these segments are not positioned to grow during the recovery. Many have taken cuts that will not allow them to take advantage of the recovery. Others are still hurting financially.<br /></p><p>Industries may have changed and requirements for gaining market share may have altered - different companies make take the lead. Look at how the landscape in the financial industry has changed - some market participants are gone - others merged with more successful companies. Identify who the winners will be during this recovery.<br /></p><p>Often recessions cause you to de-focus your efforts. As you develop your <a href="http://www.cssp.com/">strategy</a> for the recovery make sure your team re-focuses its efforts so that it is concentrating on leveraging the competencies that you have and that your customers value. These will be the segments and customers that will allow your company to grow profitably during this recovery. This renewed focus will allow your team to outperform your less disciplined competitors who are still chasing business, as if any business is good business.<br /></p><p>Denise Harrison is Vice President at the Center for Simplified Strategic Planning, Inc. She can be reached at: <a href="mailto:harrison@cssp.com">harrison@cssp.com</a> </p>Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-24446610975504508812009-11-04T05:46:00.000-08:002009-11-04T05:55:50.177-08:00<a title="Permanent Link to Strategic Planning: When Good Goals Go Bad" href="http://www.cssp.com/strategicplanning/blog/?p=510" rel="bookmark">Strategic Planning: When Good Goals Go Bad</a><br />By Denise Harrison, Vice President<br /><a href="http://www.cssp.com/strategicplanning/blog/wp-content/uploads/2009/05/denise1.jpg"></a><br /><br />“As the housing market collapsed in late 2007, Moody’s Investor Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.”<a href="http://www.cssp.com/strategicplanning/blog/wp-includes/js/tinymce/plugins/paste/blank.htm#_ftn1" name="_ftnref1">[1]</a><br /><br /><br />Banks failing, real estate loans made to people who did not have the means to repay them, institutions using derivatives without fully understanding the risk - what happened? Were executives just trying to meet their short-term goals? Did these goals enable them to qualify for significant bonuses? Did this achievement of short-term goals lead to long-term instability?<br />Many of the financial institutions currently in distress did not pay heed to the warnings of a real estate bubble. Instead many institutions developed plans to keep the top line growing in spite of the increasingly risky nature of the borrowers and the overvaluation of the underlying collateral.<br /><br /><br /><br /><p><strong>Could this have been prevented? </strong></p><br /><p>Well, hindsight is 20-20, but the lessons here are important and should be a part of your strategic planning process:</p><br /><ul><br /><li>Evaluate external forces - (e.g. is there a bubble?) Are your goals consistent with the external environment? How are you positioned if the bubble bursts in 1 year? 2 years? 3 years? Are you making the naïve assumption that business will continue to grow? Do your goals explicitly take risk into consideration?</li><br /><li>Are top line growth goals in line with long-term stability and profitability and perhaps survival?</li><br /><li>Are you not investing in key projects in order to make the top line?</li><br /><li>What will the consequences be if you do not invest? Will it impact your long-term growth? Will your phone system go down if you do not invest?Will you have a safety issue if you do not continue with training?</li><br /><li>Will you have inadequate staff for the upturn if you do not replace key positions now?</li><br /><li>Are you taking on customers who are a time sink in order to make your top line?</li><br /><li>Are you using the right metrics? Are you measuring success from a customers’ viewpoint? (If you are UPS should you measure package delivery or package receipt - i. e. did the addressee really get the package?)</li></ul><br /><p>During economic turbulence, be sure you set realistic goals that do not jeopardize your company’s long-term viability. Position your team and your company for the recovery by setting reasonable targets that are not solely focused on short-term results.</p><br /><p><br /><a href="http://www.cssp.com/strategicplanning/blog/wp-includes/js/tinymce/plugins/paste/blank.htm#_ftnref1" name="_ftn1">[1]</a> “How Moody’s Sold Ratings and Sold Out Investors”, Kevin G. Hall, McClatchy Newspaper, October, 2009. </p><p><br />Copyright 2009 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI -- Reprint permission granted with full attribution.</p><p>Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at: <a href="mailto:harrison@cssp.com">harrison@cssp.com</a> .<br /></p>Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-14908573802417333882009-10-19T13:45:00.000-07:002009-10-19T13:52:23.656-07:00<a title="Permanent Link to Acquisitions: Developing a Successful Integration Process" href="http://www.cssp.com/strategicplanning/blog/?p=498" rel="bookmark">Acquisitions: Developing a Successful Integration Process<br /></a>October 6th, 2009<br />By Denise Harrison, Vice President<br /><br />At the conclusion of the due diligence process you should have at your finger tips a great deal of knowledge concerning the acquisition target. At this point you will be making a go/no go decision. If the decision is a “go,” you have the information that you need to start your integration process if you decide to move ahead with the acquisition. You now know where the strengths and weaknesses are and where the differences are in policies and procedures. You also have an idea of what the organizational structure will look like once the <a href="http://www.cssp.com/AcquisitionWorkshop?b=2&refer=workshops.php&t=Strategic%20Planning%20Tools">acquisition</a> is completed. But you can not develop the integration plan in a vacuum; you need the buy-in of the key players of the acquisition target.<br /><br /><strong>How do you get their buy-in?<br /></strong>Look to the future to help determine integration priorities<br />Instead of getting into the details first, we find it is important for the key players on both teams (acquiring company and target) to have a similar vision of where the industry is going (Industry Scenario) and what the key characteristics are of the winning company (Winner’s Profile). If you start with the big picture, often the details fall into place and the priorities become more obvious. Another option, if time permits, is to develop a full <a href="http://www.cssp.com/">strategic plan</a>.<br /><br /><strong>What about risk?<br /></strong>In the due diligence you develop Threats to the business - but you should do this as a joint team and assess which of the threats has a potentially high impact and a high probability. The combined team should discuss different ways of mitigating the risk.<br /><br /><strong>Now for the details</strong><br />Once you have a big picture view of the industry, have developed the key characteristics of the winning company and have assessed threats, you are ready to discuss the Acquisition Issues that arose during the due diligence process. What topics need to be addressed? At this point, you will spend time looking at the issues that arose from the due diligence - both teams need to be involved in developing solutions. In addition, you need to develop other aspects of the integration plan: Communication - what will it look like to the employees of both companies? What will we tell our customers? What will we tell our suppliers? Are there any policy and procedure changes we need to make as we go through the integration process? What is the transition plan for the health care plan and other employee benefit plans (e.g. 401k)? How are we going to transition the financial system so that we are all working on the same system and there is transparency in the numbers? What do we need to do to get the other business systems working together?<br /><br />At the end of the Acquisition Issues discussion you need to determine what the key implementation Objectives are - the key projects for the next 30, 60, 90 days and the plans that need to transition over the rest of the year. You will need to set and communicate goals so that people understand what targets they are shooting at to achieve success.<br /><br />Now you need to discuss the detailed plan with the owners of the business - ideally they have been involved in its development - but still you need to check back and make sure they are fully bought in - otherwise this can be a deal-breaker. This means you need to be brutally honest about what is going to change after the acquisition is complete. A financial forecast is a must - and this too must be agreed to - you must have a clear understanding of what the numbers will look like during the integration phase. You must have agreement on the integration plan and the financial forecast before you close on the deal.<br /><br />In addition to the integration plan you need to think through how your company will add value to the acquisition target - because if there is no value-add, this probably is not a good acquisition.<br /><br /><strong>After the closing<br /></strong>The first two quarters will be the most important in terms of getting buy-in from the acquired company. If this is the case, why do so many companies miss the importance of this time period? A common mistake is putting all the energy into “doing the deal” and then not focusing on the integration process in the “after deal let-down”. This lack of focus can seriously impact the success of the acquisition. The newly acquired team needs to know that they are now part of a new team and that they are appreciated for the capabilities that they bring to the table.<br /><br /><strong>During the initial period after the closing<br /></strong>Set-up a meeting before the month-end closing to make sure that the financial accounts have been properly transferred to the financial system. Check on progress for the integration objectives - is anything veering off-track? Can you get it back on track or do we need to reset expectations? Get into this routine right away - this will help prevent large surprises down the road. Try to get the acquisition target onto your financial system within the first quarter after closing - then the numbers should be much more transparent as everyone is working with the same system.<br />Make sure that you have sufficient resources allocated for the integration process - providing support and follow-up as required by the integration objectives. Often people do not allocate enough of these resources and the acquisition drifts and small problems grow into crises. There should be as many, if not more, resources dedicated to the integration process as you had doing the due diligence.<br /><br /><strong>Communicate<br /></strong>In a vacuum rumors spread both within the company walls and outside in the marketplace- make sure the acquiring company team is visible - talk about what is going on and what is going to happen - even if it is unpleasant. Hiding information does not make the bad news go away.<br /><br /><strong>Monitoring<br /></strong>Monthly: make sure the integration objectives are on track<br />Quarterly: do a deep dive into the financials - are there any red flags?<br />After one year - release the escrow - there should be not major surprises after 12 months - unless you have not been involved. Monitor your key metrics:<br /> - Are you meeting your financial targets?<br /> - Are you retaining the key people?<br /> - Has the acquiring company added value to the acquisition?<br /> - Would you do the deal today if you knew what you know now?<br /><br />Integration is a complex process and each deal will generate different objectives. We have found that, if you agree on a shared industry vision and the characteristics of a winning company, the priority objectives become clear to the teams on both sides of the table. Integration objectives and goals will flow from the common industry vision. This is not to say there will be total consensus - there still will be some difficult times, but this will get the team on the path to a successful integration process. This integration is often neglected during the after deal let-down, but if your team focuses on integration and resources are allocated to make the process a success, your acquisitions will be more successful. Remember, more the 80% of acquisitions fail to live up to management expectations.<br /><br /><strong>Integration Process - Option 1 - 2-3 Days<br /></strong>This process can occur either before or after the transaction is completed, ideally before.<br /> 1. Industry Scenario <br /> 2. Winner’s Profile<br /> 3. Strengths and Weaknesses<br /> 4. Threats<br /> 5. Acquisition Issues<br /> 6. Objectives<br /> 7. Communication<br /> 8. Monitoring Process<br /><br /><strong>Integration Process - Option 2 - Full Strategic Plan - 3 Months<br /></strong> 1. Situation Analysis<br /> 2. Strategy Formulation<br /> 3. Implementation<br /><br /><strong>Some Case Studies<br />Wyeth: Traditional Pharma vs. Bio Tech<br /></strong>During the mid-1990’s WyethPharma developed a vision of the pharmaceutical industry, in their scenario they saw that traditional pharmaceutical development would not be as fertile for opportunities as a biotech approach which mimics what actually occurs in nature. Understanding that this technology would foster significant future growth, Wyeth faced the decision to build from scratch or buy. The Wyeth team decided that an acquisition would be faster than building from scratch and they acquired two companies: Genetics Institute and American Cyanamid (now Wyeth Biotech). Wyeth did not hesitate - they jumped in with both feet with a significant investment to fund these acquisitions. During this timeframe many other pharmaceutical companies dabbled in biotech but dabbling did not position these companies for success. A decade later Wyeth is still reaping the benefits of its investment decision - the biotech industry is blooming. Their success has lead to their acquisition by Pfizer.<br /><br /><strong>Some Insight into the Wyeth Integration Process</strong><a href="http://www.cssp.com/strategicplanning/blog/wp-includes/js/tinymce/plugins/paste/blank.htm#_ftn1" name="_ftnref1"><strong>[1]</strong></a><strong><br /></strong>Wyeth used strengths and weaknesses analysis to help determine “best practices”. Often this analysis leads to the acquiring company bridging areas of weakness in the acquired company but not taking advantage of the strengths of the acquired company. WyethPharma saw that WyethBiotech needed to understand market needs and market niches early in the development life cycle to ensure that the resulting drugs would have commercial viability. This moved WyethBiotech from developing drugs looking for a problem to solve, to seeing a market need and solving it by developing a drug.<br /><br />What was unusual is that WyethPharma identified some strengths within WyethBiotech that would help its traditional pharmaceutical business. It is unusual for an acquiring company to learn from its acquisition. WyethPharma made changes in two key areas:<br /> 1. Pay for performance culture<br /> 2. Flexible manufacturing, by focusing on using a small number of processes in the production of pharmaceuticals rather than a unique process for each drug.<br /><br />So, during the implementation process it is important to understand the strengths and weaknesses that both parties (each party) bring(s) to the table and to capitalize on the strengths of each to develop “best practices” that are a combination of the best from both companies.<br /><br /><strong>Pharmaceutical Company uses a Full Strategic Plan for Go/No Go Decision</strong><br />Another pharmaceutical company was looking to buy its supplier of excipients. These are the compounds that allow for the time-release factor in drugs (e.g. your 24 hour tablets). The team wanted to develop a full understanding of the supplier’s business before making the final decision. So teams from both the acquiring firm and the targeted firm set forth to develop a strategic plan. Over the course of three months the two teams went through the <a href="http://www.cssp.com/">Simplified Strategic Planning</a> process including:<br /> 1. Situation Analysis<br /> 2. Strategy Formulation<br /> 3. Implementation<br /><br />During the process, the acquiring team developed an in-depth understanding of the business including details about the markets served and the competitive environment. They also had a hand in developing and understanding the possible opportunities for the target company.<br />At then end of the process they decided to go ahead with the acquisition. Having the strategic plan in hand, they had an integration plan in place and they had developed a good working relationship with the target company senior management team. After finalizing the transaction the team kept the strategy on track through the monitoring process, ensuring a smooth transition.<br /><br /><a href="http://www.cssp.com/strategicplanning/blog/wp-includes/js/tinymce/plugins/paste/blank.htm#_ftnref1" name="_ftn1">[1]</a> ” Wyeth’s Multibillion-dollar Biotech Bet”, by Elizabeth Svoboda, Fast Company, January 14, 2009Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-33475641501318124282009-08-31T06:44:00.001-07:002009-09-08T15:19:29.745-07:00How Can Smaller Companies Compete and Win?<br />Denise A. Harrison<br />Vice President<br /><br />Smaller companies often feel dwarfed by the giants in their industry, especially during tough times. Often industry giants are better at weathering economic downturns with their wide array of resources. But Arena Resources’ <a href="http://www.cssp.com/">strategy</a> not only allowed the company to survive this economic downturn, but turn in exceptional performance – better than the industry leaders. Arena Resources, a small oil exploration and production company, has less than 2% of the revenue of the industry leaders (Shell, Exxon Mobil). In addition, very few industries have had to endure greater fluctuations than the oil industry with oil price highs of $147 per barrel in July, 2008 and lows of $30 per barrel in December, 2008. How did Arena Resources make it onto the Fortune list of fastest growing companies (#8) in spite of this industry turbulence?<br /><br />The Road Less Traveled<br /><br />Arena Resources chose not to compete directly with the industry giants, instead it focused on oil production assets in the southwestern United States that were no longer attractive to the industry Goliaths. The cost of drilling and producing oil in this region exceeded what was acceptable in the larger companies’ financial models; these companies prefer to concentrate their resources on exploration of large oil fields with large potential. When Arena purchased land in this region (approximately 11,000 acres), the land produced 200 barrels of oil per day. Arena knew through its research and evolving technology, which through investment the land could be more productive. Through Arena Resources’ focused efforts this land is now producing 6000 barrels per day. The company does pay a high cost to produce a barrel of oil - almost $35 per barrel, so when oil prices decline significantly, profitability plummets; but when oil prices are over $60 per barrel the company makes a nice profit. Arena is betting that the price of oil will remain over $60 per barrel for the significant future. The high cost of production and the relatively small output is not attractive to its behemoth competitors, so this strategy to take the road less traveled allowed Arena Resources to grow profitably without going head-to-head with the major industry players.<br /><br />What about Your Company's Strategy?<br /><br />Many companies decide to compete in markets that are attractive, even though larger competitors with greater resources are already firmly entrenched or aggressively pursing these markets. Going head-to-head with industry giants often drains the resources of a smaller player with little forward progress in their market position. Are you going after the attractive markets that set you in direct conflict with industry giants? Are there niches that you could pursue that are not interesting to the larger companies? As you develop strategy your team should consider:<br /><br />1. Market segment attractiveness (including growth and profitability)<br />2. Your competitive position in a market segment - what is the competition’s market share? Are competitors already firmly entrenched?<br /><br />a. What other companies compete in this segment? In this case companies like Exxon and Shell focus their resources on exploration, looking for the big prizes. Arena focuses on production, but the production increases that are attractive to Arena Resources are too small to concentrate on from a larger company’s perspective.<br /><br />b. What are the competencies required to compete this market? Do we have them? Are there strategic competencies that give us significant differentiation? In Arena Resources’ case, its competency is secondary recovery from known oil and gas resources – little exploration risk but a requirement for execution excellence. Their competency comes from their knowledge of the geology in the basin in which they work, combined with their technical skills in secondary recovery.<br /><br />In order to compete and win, you must consider both market attractiveness and the competitive landscape of all of your market segments before you select the ones on which you will focus. You will often find a segment that is smaller has less competition and will provide your company with significant growth and profitability. In <a href="http://www.cssp.com/">strategic planning</a> selecting the road less traveled may be a key ingredient to your company’s success.<br /><br />Copyright 2009 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI -- Reprint permission granted with full attribution.<br /><br />Denise Harrison is Vice President of Center for Simplified Strategic Planning, Inc. She can be reached by email at harrison@cssp.comDenise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-1529199760033771212009-08-11T10:00:00.000-07:002009-08-11T10:25:35.236-07:00<strong>How Does Strategic Planning Deal with Seismic Changes in an Industry? </strong>By Denise A. Harrison<br />Vice President<br />Center for Simplified Strategic Planning, Inc.<br /><br />It is often argued that strategic planning processes miss industry shifts due to a myopic focus on existing customers and market segments, as well as existing products and product lines - but is this correct? NO! While market analysis and customer segmentation are important to any strategic plan, it is paramount for the process to look outside the existing business for opportunities and changes that will have significant impact on your business. In addition, it is essential for your team to develop a scenario for your industry looking out beyond the planning horizon; looking at trends that will emerge 5-10 years in the future. This allows the team to identify industry shifts - disruptive drivers (e.g. technology, demographics, regulations, lifestyle changes) which might transform your industry. How does this work? Let's look how Wyeth Pharmaceuticals addressed a structural shift in the pharmaceuticals market. Next we will look at how Clorox used trends to identify new growth opportunities.<br /><br />Wyeth: Traditional Pharma vs. Bio Tech¹<br /><br />During the mid-1990s Wyeth developed a vision of the pharmaceutical industry. In their scenario they saw that traditional pharmaceutical development would be less fertile for growth opportunities than the emerging biotech approach. Understanding that this new technology would foster significant future growth, Wyeth faced the decision to build from scratch or buy. The Wyeth team decided that acquisition would be faster than building from scratch and they acquired two companies: Genetics Institute and American Cyanamid (now Wyeth Biotech) which had the intellectual capital that Wyeth did not have resident inside its own company. Wyeth did not hesitate; they jumped in with both feet with a significant investment to fund these acquisitions.<br /><br />The Results<br /><br />Wyeth correctly anticipated the benefit of the biotech approach to developing drugs and now WyethBiotech is 45% of their business. A decade later, Wyeth is still reaping the benefits of its investment decision - the biotech industry is blooming and profits at Wyeth (2008) are up 12%. Many other pharmaceutical companies dabbled in biotech but dabbling did not position their companies for success. Now, these companies are playing catch-up: Eli Lilly purchased ImClone in 2008 and Roche is purchasing the rest of Genetech. Recently, Pfizer made the decision to purchase Wyeth so that it, too, can get into the biotech and enhance its pipeline.<br /><br />Clorox Capitalizes on Mega-trends² to Fuel Growth Strategy<br /><br />Clorox identified to two key trends when it defined its growth strategy: consumer focus on health and wellness, and environmentally friendly products. The recognition of these trends resulted in the acquisition of Burt's Bees® natural personal care products, the launch of Green Works® natural cleaners, and repositioning the Brita® brand as an alternative to bottled water, thus positioning Clorox as a more environmentally friendly company. It took an acquisition and new product line launch along with product repositioning in order for Clorox to capitalize on these trends. Like Wyeth, Clorox made significant moves rather than taking a "wait and see" attitude.<br /><br />Challenging the Status Quo<br /><br />Is your strategic planning process allowing you to challenge the status quo? Do you look for opportunities outside of the box? Do you look out beyond your planning horizon to evaluate industry shifts or new competitors? If you are able to see trends before your competitors, you will leapfrog the competition by positioning yourself to meet the needs of emerging markets. Remember, what made you successful today may not be the key to success tomorrow - it is important to anticipate future industry shifts. It is essential to look five to ten years in the future and develop an Industry Scenario and Winner's Profile as part of your strategic planning process. These two steps will enable your team to identify shifts that will significantly impact your business and allow your team to develop a strategy to meet these changing industry conditions.<br /><br /><br />--------------------------------------------------------------------------------<br /><br />¹"Wyeth's Multibillion-dollar Biotech Bet", by Elizabeth Svoboda, Fast Company, January 14, 2009<br /><br />²"Clorox Updates Investment Community on Centennial Strategy to Drive Long-term Growth", Press Release, June 11, 2009.<br /><br /><br />© Copyright 2009 by Center for Simplified Strategic Planning, Inc. Ann Arbor, MI -- Reprint permission granted with full attribution.Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-14591390086117636592009-06-09T11:21:00.000-07:002009-06-09T11:25:52.028-07:00<strong>Use the Recession to Trigger Rejuvenation: Develop a Strategy to Revitalize your Company</strong><br /><br />by Denise A. Harrison, Vice President<br /><br />Rejuvenation linked with recession? How can that be? It certainly causes pain - but where does this rejuvenation come from? During the 17th century Dutch economy collapsed - the tulip bubble burst - this was when a tulip bulb could cost as much as a house. But rather than resulting in Holland’s demise, the crash ushered in the Golden Age where this tiny country became the wealthiest nation in Europe.<br /><br />Why do turbulent times generate growth and rebirth? It is during tough times that management teams often make decisions which are difficult. Often these decisions should have been made earlier, but when times are good it is often difficult to make changes that are painful.<br /><br />Recession - a Burning Platform<br /><br />When times are good it is difficult to precipitate change in an organization, so you require a burning platform - a dramatic event - which forces your team to focus on transformational solutions which are not palatable when times are good. It is these transformational changes that allow your company to survive the recession and position it for future growth. So, how do you and your management team go about using the recession as a burning platform to develop a rejuvenation strategy? One technique is: take a clean sheet of paper.<br /><br />Clean Sheet of Paper<br /><br />Ask your team to think about what your company would look like if you were to start the business from scratch knowing what you know today. Have your team work in small groups and bring back their best thinking. During turbulent times, (this could be a recession, a regulatory change, a challenging competitor or any other market turbulence) you will find that the groups come up with insightful ideas if they are thinking about starting the company from scratch. Now, while there may be some things you cannot change, there will be many areas that need to be restructured in order to survive this recession, but also to be positioned to grow when the upturn comes.<br /><br />One team embarked on this exercise and found that they needed to close a regional office - the customers had moved out of the region and the office probably should have been closed several years ago. Now, with a burning platform, the team was ready to make the decision. In addition, they found that multiple regional offices with a full complement of staff were no longer necessary. Two to three super-regional offices could support satellite offices. The super-regional offices were fully staffed while the satellite offices could work effectively with a small sales and support staff.<br /><br />Another area targeted for improvement was inventory management. Times had changed and suppliers had moved offshore - the team needed to rethink the process for ordering inventory. They saw that, if they started the company from scratch, they would centralize the purchasing function - by doing this they would increase inventory turns 5 times.<br /><br />Summary<br /><br />You and your management team should use the recession as a burning platform to make the decisions that were avoided during prosperity. One way to think through what decisions make sense is to have your team think about what the company would look like if you started it from scratch. This will let the team think through what the organization should look like given what the business is like today - this will allow you to think through whether or not your legacy systems still make sense in today’s environment.<br /><br />Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at harrison@cssp.com.<br /><br />© Copyright 2009 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI -- Reprint permission granted with full attribution.Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-234288830246914202009-03-15T07:06:00.001-07:002009-03-15T07:15:33.983-07:00<strong>Board Involvement in <a href="http://www.cssp.com">Strategic Planning</a><br />Three Key Areas to Consider</strong><br />By <a href="http://www.cssp.com/DeniseHarrison.php?b=2&refer=OurPeople.php&t=Center+for+Simplified+Strategic+Planning+-+Our+People">Denise A. Harrison</a>, Vice President, Center for Simplified Strategic Planning, Inc.<br /><br />How should the Board be involved in strategic planning? This is a frequently asked question. The key objective of strategic planning is to identify the sound course and direction for the organization that optimizes the organization's future potential. Setting the strategy is the responsibility of the senior management team -- the team is responsible for the success or failure of the strategy. This team is close to both the customers and the internal workings of the company and is best suited to determine the course and direction for the company.<br /><br /><strong>How can the Board play a role?</strong><br /><br />While the Board is not responsible for setting strategy it can often give valuable input before the strategic planning process begins and act as a sounding board as part of a review process. Hence, the Board can play an important role during several steps of the strategic planning process:<br /><br /><em>Before the process starts </em>-- the Board gives guidance including an overview of future environment along with specific opportunities and issues to be considered during the strategic planning process. The Board will often have a broader vision, enabling the team to consider more choices before selecting the optimal course and direction. <br /><br /><em>After strategy development </em>-- the Board provides a review function; review of the strategy to make sure that it is internally consistent and that there are concrete implementation plans for key strategic objectives.<br /><br /><em>During the year </em>-- the Board should monitor progress to ensure the strategy stays on track or changes when business conditions necessitate change. <br />Some Boards participate in all three steps -- others in steps two and three. In the case where the Board is not close to the business then the process should include just steps two and three. If the Board has members who do have broad business experience and understand the industry than participation upfront is often beneficial.<br /><br /><strong>Board Involvement before the Strategic Planning Process Begins</strong><br /><br />Typically Board members work through the following steps:<br /><br /><em>Industry Scenario</em> -- this allows Board members to give the strategic planning team their insight into industry trends. <br /><br /><em>Winner's Profile </em>-- Board members may see characteristics of the Winner that team members may not see (Board members may have a better understanding of what a company will look like at $100 million than the team members of a $50 million company looking to grow to $100 million.). <br /><br /><em>Opportunities</em> - to be evaluated -- the broader make-up of the Board may uncover additional opportunities to be researched. <br /><br /><em>Threats/Issues </em>-- the Board members may have a broader vision of what the risks are in the business. <br /><br />The Board should be providing guidelines and suggestions rather than edicts. The senior management team should then use the input as they work on the strategic plan. Some ideas may be incorporated into the strategic plan -- others, while considered, may not make it into the plan. This does not mean that the ideas were not good, it just means that with limited resources the team had to select the few items to work on rather than choosing a large number and becoming unfocused.<br /><br />This is a general format for Board involvement before the process begins -- however, due to the individual nature of a Board's relationship with the senior management team we continue to work with companies to design programs that work for their specific requirements. The key thought is that Board members often have wide ranging experience and you need to ask yourself the question: How can we best leverage their expertise when developing a strategic plan?<br /><br />Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at harrison@cssp.com.<br /><br /><br />© Copyright 2009 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI -- Reprint permission granted with full attribution.Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-25664945339347461922009-01-05T14:21:00.000-08:002009-01-05T14:22:31.907-08:00<a href="http://www.cssp.com">Strategic Planning</a>: Can Goals be Bad?<br /><br />Banks failing, real estate loans made to people who do not and did not have the means to repay them, institutions using derivatives without fully understanding the risk – what happened? Were executives trying to meet their goals? Did these goals enable them to qualify for significant bonuses? Did this achievement of short-term goals lead to long-term instability?<br /><br />Many of the financial institutions currently in distress did not pay heed to the warnings of a real estate bubble. Instead many institutions developed plans to keep the top line growing in spite of the increasingly risky nature of the borrowers and the overvaluation of the underlying collateral. Could this have been prevented? <br /><br />Well, hindsight is 20-20, but the lessons here are important and should be a part of your strategic planning process:<br />1. Evaluate external forces – (is there a bubble?) Are your goals consistent with the external environment?<br />2. Are top line growth goals in line with long-term stability and perhaps survival?<br />3. Are you not investing in key projects in order to make the top line?<br />4. What will the consequences be if you do not invest? Will it impact your long-term growth?<br />a. Will your phone system go down if you do not invest?<br />b. Will you have a safety issue if you do not continue with training?<br />c. Will you have inadequate staff for the upturn if you do not replace key positions now?<br />5. Are you taking on customers who are a time sink in order to make your top line?<br /><br />As your team weathers these turbulent times be sure you set realistic goals that not only allow you to survive the downturn, but also position your team for the upturn when itDenise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-2860142581630069882008-08-01T14:52:00.000-07:002008-08-01T15:00:04.259-07:00Acquisitions: 8 Steps to Success<br />By Denise A. Harrison<br /><br />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:<br /><br />1. How well does the company fit with strategy? How well does the company actually fulfill the desired objectives of the acquisition?<br />2. What else comes with the acquisition? Very few acquisitions are pure plays.<br />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?<br />4. Will the targeted company’s culture fit our culture?<br />5. What will happen to the key people? Will they walk? Do we want them to walk?<br />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?<br />7. What are the industry dynamics? Are there any significant threats on the horizon? New competitors? New technology?<br />8. How will this acquisition change the competitive landscape? Will the acquisition enhance the company’s competitive position? Where will it detract?<br /><br />Let’s explore each one of these criterion.<br /><br />Fit with strategy<br />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 up front, you will have no way to evaluate how one company stacks up against another company.<br /><br />Other Baggage<br />“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 no interest. It may have products and/or services not part of your strategy; it may also not be in your strategic market. Now what? Whew, 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.<br /><br />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.<br /><br />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.<br /><br />Strategic Competencies<br />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:<br />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.<br />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.<br />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?<br />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.<br /><br />Cultural Fit<br />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?<br /><br />A government contractor was looking to make an acquisition to enhance their market share in a particular government agency. They knew 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!<br /><br />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.<br /><br />Key People<br />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.<br /><br />Market Position<br />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.<br /><br />Return to the agriculture services company mentioned earlier. Yes, they purchased a fertilizer company. Unfortunately, it was only ranked number 4 or higher (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.<br /><br />Industry Dynamics<br />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.<br /><br />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?<br /><br />As you consider purchasing another company, it is important to consider these eight 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!<br /><br />For more information on <a href="http://www.cssp.com">strategic planning</a> please visit us at: <a href="http://www.cssp.com">www.cssp.com</a> <a href="http://www.cssp.com"></a><br /><br /><br />Denise Harrison is Vice President of Center for Simplified Strategic Planning, Inc. She can be reached by email at: harrison@cssp.com<br />© Copyright 2008 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI -- Reprint permission granted with full attribution.Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-56134008856703358732008-03-13T04:43:00.000-07:002008-03-17T10:06:54.778-07:00<strong>TEN REASONS FOR STRATEGIC PLANNING</strong><br /><br />1. As CEO are you tired of acting as a referee caused by turf battles between businesses or functional areas? Developing a strategic plan allows team members to develop a shared base of knowledge which allows the team to come to consensus on key company priorities and allocates resources based on these priorities. After a strategic planning process often CEOs can put away their striped jerseys and quiet their whistles.<br /><br />2. Do you find your team does not get key projects accomplished throughout the year? Do you constantly give your team new assignments? Strategic planning forces a team to select 8-10 key objectives to accomplish during the next 12-18 months. Once selected new opportunities or projects must be brought to the team for evaluation. If the project needs to move forward, then one of the other objectives must come off the list. If the list needs to stay the same this project can be evaluated during the next cycle of strategic planning. Adding projects without evaluating what is already on the plate causes the team to suffer under the weight of too many initiatives.<br /><br />3. Your team is not executing your vision. A strategic planning process allows all team members to analyze market trends and competitor movement along with your company's strengths and weaknesses. In this way the team develops a shared vision of the future and develops plans in order to achieve that vision. The strategic planning process develops buy-in from the total team.<br /><br />4. Your management team needs professional development in order for the company to move to the next level. Strategic planning allows team members to see the big picture and enables them to lead given company priorities rather than specific functional requirements. It is a great way to develop your team member management capability.<br /><br />5. Your company is stagnant and you need to find new avenues for growth. Strategic planning addresses opportunities for growth by looking at new markets, new products and services for existing markets and new ways to leverage existing strategic competencies. As a team you develop a large number of possible opportunities and cull the list down to the few that have high return and, ideally, lower risk, in order to get back on the desired growth path.<br /><br />6. Your team is repeatedly stymied by unexpected events. During the strategic planning process you evaluate risk in two areas: first, Threats--outside forces that may significantly impact your business, but you have little or no control over; and second, How can we shoot ourselves in the foot? This exercise has the team look at ways it might be sabotaging (unknowingly) itself. The two exercises allow the team to understand key risk areas and develop plans to mitigate the risk.<br /><br />7. Your team is striving for perfection and not focusing on the key areas of the business. During the strategic planning process you constantly rank strengths and weaknesses so that you focus on making the strengths that have made you successful better and only focus on improving or eliminating the weaknesses that are critical to your future success.<br /><br />8. Competitors are outwitting you in the marketplace. Key to strategic planning is understanding your competitors: where they are today and what they are planning to do in the future. This information allows the team to make informed decisions as to where your company has a competitive advantage in the marketplace.<br /><br />9. Your team does not see a significant shift in technology or a supplier goes out of business. Strategic planning provides the discipline for your team to look at all external forces--markets, competition, technology, suppliers, economic and regulatory--which allows issues to be brought up and analyzed in each area lowering the possibility of a surprise.<br /><br />10. You miss a significant industry shift and you are now competing against different competitors for different customers. The purpose of the 10 year Industry Scenario and Winner's Profile is to force the team to develop possible industry shifts so that your company does not get caught flat footed. <br /><br />Do you have other reasons why a CEO should consider strategic planning? If so put your thoughts and ideas on this blog.<br /><br />To thank you for your comments please click on free <a href="http://strategytips.cssp.com/?blog">Strategic Planning Tune-Up Book </a>and get a complimentary copy of Strategic Planning Tune-Up -- Ten Great Strategy Tips (a $14.97 value) PLUS a no-cost subscription to Course and Direction, Center for Simplified Strategic Planning's bimonthly newsletter containing more great tips and articles.<br /><br />For more information on <a href="http://www.cssp.com">strategic planning</a> please visit us at: <a href="http://www.cssp.com">www.cssp.com</a> <a href="http://www.cssp.com"></a><br /><br />Denise Harrison is Vice President of Center for Simplified Strategic Planning, Inc. She can be reached at harrison@cssp.com<br /><br />© Copyright 2008 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI -- Reprint permission granted with full attribution. <a href="http://strategytips.cssp.com/?blog"></a><a href="http://strategytips.cssp.com/?blog"></a><a href="http://http://strategytips.cssp.com/?blog"></a><a href="HTTP://strategytips.cssp.com/?blog"></a>Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-62925391180107082842008-01-09T17:06:00.000-08:002008-01-09T17:13:50.554-08:00<div align="center"><br /><a name="63407"></a><strong>WD-40 Finds Growth for 50 Year-old Product</strong></div><div align="center"><strong>How to Find New Customers for Existing Products</strong></div><div align="center"><strong>By Denise Harrison, Vice President</strong></div><div align="center"></div>WD-40 Faces a Growth ChallengeWD-40, a well-recognized brand faced the growth dilemma -- the chairman put out a goal to grow the business by $100 million from new products (or product innovations) introduced during the next three years (Gary Ridge, Wall Street Journal, May 23, 2006). This would be difficult for a product like WD-40, which has been in existence for over 50 years. What could be new? In order to meet the challenge the WD-40 Team Tomorrow looked for new and/or underserved customers. They knew that WD-40 was present in many households, but primarily a mainstay of the garage -- where it is used to solve a variety of problems. According to the web site WD-40 fulfills five basic functions:<br /><br />1. CLEANS: WD-40 gets under dirt, grime and grease to clean. It also dissolves adhesives, allowing easy removal of labels, tape and excess bonding material.<br />2. DISPLACES MOISTURE: WD-40 displaces moisture, it quickly dries out electrical systems to eliminate moisture-induced short circuits.<br />3. PENETRATES: WD-40 loosens rust-to-metal bonds and frees stuck, frozen or rusted metal parts.<br />4. LUBRICATES: WD-40's lubricating ingredients are widely dispersed and tenaciously held to all moving parts.<br />5. PROTECTS: WD-40 protects metal surfaces with corrosion-resistant ingredients to shield against moisture and other corrosive elements.<br /><br />But what about inside the house -- were there no applications inside the house? Are there no cleaning issues in the house? Is nothing stuck inside the house? Are there no squeaks in the house?The Team Tomorrow set out to find the answer. Yes, they found that inside the house there were many potential uses -- oven doors that were stuck, ceiling fans squeaking and crayon marks on the walls. But why was the product not used inside? Research showed there were several issues:<br /><br />1. The WD-40 was in the garage -- the can was not convenient to store in the house.<br />2. WD-40 didn't smell very good.<br />3. The WD-40 can sprayed too much for the indoor application -- it got all over everything when a spot application was required.<br /><br />The team was happy to hear that the product was needed inside the house and set about making the product indoor-friendly. They developed the pen application idea -- actually before Tide perfected it with its Tide to Go™ product. But the idea was the same -- a pen-like product that could deliver WD-40 in a small dose at a specific point. According to the web-site: "The WD-40 No-Mess Pen delivers the same trusted, multi-purpose product users know and love, with the precision of a pen-shaped applicator. It is pocket-sized, fitting everywhere from glove boxes and desk drawers to backpacks and purses. The WD-40 No-Mess Pen can lubricate hinges, doors, and drawers, remove sticky labels, remove gum and crayon...it can do everything a regular can does without messy overspray and with minimal odor!" Since it was not an aerosol it did not have the smell associated with WD-40. It did not drip if you were using it to take crayon off the wall. It worked upside down if you were trying to take the squeak out of a ceiling fan.<a id="trk191419" href="http://www.tailorednews.com/r/fXW80aq3Q4VAbuxpd.cfm" target="_self"></a>The No-Mess Pen™ is now a global product for WD-40 with many years of growth expected. The new pen delivery mechanism enabled increased product acceptance -- what can you do to re-invigorate one of your 50 year-old products or services? Look for potential applications in a different environment and see what needs to change to make your product work for that specific environment.<br /><br />© Copyright 2008 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI<br />-- Reprint permission granted with full attribution.<br /><br />Denise Harrison is Vice President of Center for Simplified Strategic Planning, Inc. She can be reached by email at <a href="mailto:harrison@cssp.com">harrison@cssp.com</a>Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-10897515122598667042007-11-20T13:25:00.000-08:002007-11-20T13:36:40.013-08:00<span style="font-family:arial;">When Is It Strategic to Say No to New Business? When can higher volume lead to lower long-term profitability?</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">By Denise Harrison</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">As a company looks for additional growth, its strategic planning team needs to remember that not all growth is good growth. When searching for growth, a team can be lured by the siren song of a big customer or a high growth segment. However, the team might find the new opportunity is being sung in a different key from the music that is producing the company's current success. How can you prevent the dissonance?High volume and revenue activities have to harmonize with your strategic competencies and company values to be worthy of consideration. Some examples of high growth opportunities:<br /></span><br /><span style="font-family:arial;">1. High growth government spending on the Iraqi Conflict </span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">2. Wal-Mart as a customer</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">The Iraqi Conflict</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">Some government contractors pursued opportunities in Iraq when they saw significant funding siphoned off from their existing government contracts to fund the war effort. An evaluation of threats and possible mitigation tactics is imperative before jumping into such a high-risk, but potentially lucrative area. The threats assessment includes protecting against and dealing with kidnapped or deceased employees and the stomach to handle these events if they, in fact, occur. It also requires evaluating the culture and environment, where accomplishing objectives may include methods of doing business not acceptable in the US. Preventing corruption and unsavory business practices must be evaluated upfront and evaluated on a continuous basis as new and evolving situations unfold. In addition, the contracts may be lucrative now, but what happens when the funds dry up? In pursuing this opportunity, did you lose focus on your existing business? Will you be able to utilize the capabilities developed in Iraq to generate business elsewhere? Or will this be a one-shot deal that gave the company a short-term revenue hit which then forced significant retrenchment after the funding stopped?</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">Saying No to Wal-Mart</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">Many executives have followed the beaten path to Wal-Mart headquarters in hopes of generating more volume only to find themselves in a downward spiral of lower prices, lower profitability driving lower quality and losing the brand image that enabled their market leadership position. In the article The Man Who Said No To Wal-Mart, (Fast Company, January/February 2006) Jim Wier, CEO of Snapper™, told Wal-Mart that his company would no longer sell Snapper™ lawnmowers to Wal-Mart. Wier knew that Wal-Mart's pressure on Snapper™ to lower prices would eventually lower the quality of the product. Additionally, Wier knew that Wal-Mart would not be able to sell the differentiated features or be able to service the mowers in the manner that Snapper™ desired. He feared that the brand's image would be tarnished and their profitability would suffer. "We're not obsessed with volume," says Wier, "We're obsessed with having differentiated, high end/high quality products." Wier knew that his customers were people who enjoyed cutting their lawns and were not looking for a cheaper product, but these lawn connoisseurs were looking for a better product and willing to pay for it.Bottom LineGrowth for growth's sake may cause long-term damage to a company's overall health. Make sure the opportunities and customers you pursue are consistent.</span><br /><span style="font-family:arial;"></span><br /><span style="font-family:arial;">Denise Harrison is Vice President of Center for Simplified Strategic Planning, Inc. She can be reached by email at: </span><a href="mailto:harrison@cssp.com"><span style="font-family:arial;">harrison@cssp.com</span></a><span style="font-family:arial;"> </span><br /><br /><span style="font-family:arial;">For more information on strategic planning: <a href="http://www.cssp.com/">www.cssp.com</a></span><br /><span style="font-family:Arial;"></span><br /><br /><span style="font-family:arial;">© Copyright 2007 by Center for Simplified Strategic Planning, Inc. Ann Arbor, MI -- Reprint permission granted with full attribution.</span>Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0tag:blogger.com,1999:blog-33605497.post-34462639542566950092007-02-17T12:00:00.000-08:002007-02-17T12:03:56.819-08:00March to a Different Drummer by Denise A. Harrison<br /><br />"Get big fast or go home!" was the mantra of venture capitalists. Webvan spent $830 million to expand into 26 cities at once only to file for bankruptcy after its overly ambitious strategy failed. E*Toys had a market capitalization greater than that of ToysRUs its first day of trading. Greed, irrational exuberance, call it what you may, but common sense was not part of the tune. Good business strategy is based on market knowledge and strategic focus - focus on what you do best and in areas where your competitors are weak.<br /><br />In recent years many companies saw the Internet expansion as a key trend to enhance growth. Pundits argued that the new economy was immune to business cycles. Webvan embodied growth mantra - to what end?<br /><br />"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."<br />The Wall Street Journal, July 10, 2001<br /><br />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.<br /><br />During this dot.com boom, Intelligent Information Systems (IIS), Durham, NC, a software-consulting firm, evaluated variety of potential growth strategies. IIS was clearly differentiated by its high quality standards and its commitment to total customer satisfaction. To many companies, "quality" and "total customer satisfaction", are just buzzwords, 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 company 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 their net worth. This myopic self-interest would cause the company to lose its competitive advantage.<br /><br />They had a difficult decision to make during a critical time frame, but 20/20 hindsight shows that the II management team chose the optimal direction and course for their firm by focusing on the key areas that set the company apart from the competition.<br /><br />eBay is another company that turned down easy cash as it focused on its long-term success. It focused on its customers, the sellers of products on eBay's online auction site. As traffic grew on the site, advertisers asked eBay to participate in lucrative advertising contracts. Short term, these contracts would have significantly enhanced eBay's revenue and profitability. However, when the sellers on eBay's site complained about competition from the advertisers, eBay reduced the advertising on the site. eBay focused on the customers who had made it successful to date. If these customers had not remained loyal and had jumped ship to try other auction sites, competitors would have been more successful at competing against eBay.<br />As eBay expanded, large companies looked to it as a distribution channel, sometimes to unload excess inventory, sometimes simply to have another sales channel. To protect its original customer group, eBay does not offer volume deals or special deals to these large companies. Everyone must play by the same rules. While some of eBay's original participants feel threatened by the new, larger companies selling through the site, many think that the added participation will drive more traffic to the site, enlarging the overall customer base for all participants' products.<br /><br />Historical Examples<br />Many East Coast 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?<br />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. Their strategy paid off as the company was voted "Best Airline," clearly differentiating itself as the high quality service provider in the industry. Next, US Airways purchased them, and you know the rest of the story!<br /><br />Market trends are some of the key factors to look at when developing a strategic plan. But in addition to studying the market's attractiveness, a company must also look inside to 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. But Piedmont also chose to avoid competing with better-financed airlines in popular hubs. Instead, it decided to service the area where it was already well established, an area that was less attractive to its larger competitors.<br />Southwest - yes, another airline story-noted the hub-and-spoke configurations of the major airlines and decided to compete with a no frills, point-to-point service. They targeted the "no frills" traveler in every route they flew-no seat assignments, no first class, no food (well, okay, peanuts) just cheap, efficient service. They developed their model to keep costs low, using only one type of aircraft to maintain, one type of plane on which to train their pilots and flight attendants. Did this service appeal to all travelers? No, of course not, but Southwest excelled at providing low-cost service for the cost-sensitive flyer. Have they been successful? Yes, they are consistently profitable, often the most profitable airline in the industry.<br /><br />Alamo Rental Car identified the budget-sensitive traveler in the rental car industry. Hertz, Avis, and National were focused on the business traveler who was willing to pay for the convenience of onsite rental. Alamo saw people paying for rental cars out of their own pockets while on vacation and determined that many non-business renters were willing to trade the convenience of on-site rental for lower cost off-site rental. Here again, another success story unfolds because a company looked at the market and created new ways to serve customers whose needs were not met by current suppliers.<br /><br />Don't follow the leader!<br />Enron began as a natural gas company. It saw the deregulation of energy markets as the path to future growth. As it pursued this growth, it transformed itself from its roots, natural gas, becoming an energy trading company to meet the market challenges of the deregulated environment. From trading in energy futures it jumped into paper, water (although not for long), weather futures, and finally into broadband. Enron could do no wrong in the eyes of many analysts and its corporate executives. Let's look at the history.<br />Enron's foray into trading began with hedging future energy costs to combat a turbulent energy market. The company needed to lower its exposure to fluctuating energy prices by entering the market to hedge the forward price of energy. This tactic not only lowered risk, but also generated a significant amount of cash with little capital investment-a very attractive results for the capital-intensive energy company. Enron jumped into the trading business with both feet, eventually resembling a financial institution more than an energy producer. The company's rapid growth was the envy of the industry, the envy of Wall Street growing from $4.6 billion to over $100 billion, the seventh largest company on the Fortune 500 list (2001). For six year's running it was voted the "Most Innovative" among Fortune's "Most Admired" companies list.<br />Now, let's think about this. Moving from energy producer to a trader of energy is a jump, but sometimes a jump to an adjacent competency is required when an industry is in transition, as the energy industry is in the new deregulated environment. But to assume that this new-found trading competency transcends industry/commodity knowledge is a long shot at best. Enron was initially very profitable as it benefited from its "first mover" advantage, the first to try and understand the new playing field created by energy deregulation. Its success brought competition into the field; now to maintain its profit and growth, Enron not only traded in commodities previously unknown to its personnel, but also started playing financial games to mask the truth about its slowing growth and profitability. While corporate officers either did or did not understand what was going on, their greed and egos caused the demise of Enron. Sadly, Dynegy, Mirant, and Calpine tried to follow in Enron's footsteps and found that they too had to grow through high risk and questionable financial transactions to keep up with Enron. This was a parade that one needed to be watching, not participating in.<br /><br />Not all energy companies played in the Enron band. Duke Energy was often castigated for its conservative strategy at analyst meetings during the late 90s. Analysts like the wild ride that Enron was providing (at that time the ride was up). Duke Energy stuck to its guns and remained an energy company that used trading to reduce risk rather than to become a trading company of energy futures. It did not get caught up in the hype and the smoke-and-mirrors transactions of Enron fame. Now, after Enron's collapse, Duke Energy's balance sheet remains strong and its prospects for realistic profit and growth are good. Companies that aspired to follow Enron into ever riskier transactions find themselves in trouble:<br /><br />How to find the right marching beat for your company?<br /><br />Situation Analysis<br />First evaluate external forces: What impacts your business from the outside?<br />Examine your core business by describing your market segments. Market segments are groups of customers with similar needs and preferences. Write down what your customers in each segment now and what they will require in the future. Next evaluate your competition; what are their strengths and weaknesses? Where is each company's soft underbelly? Next you need to assess trends in technology, supplier issues, economic trends, and any recent or pending changes in the regulatory environment.<br />Regulatory change was the catalyst that spurred all of the airlines, not only Piedmont, to revise their strategies.<br /><br />Next look internally; what are your company's strengths and weaknesses? What is the key intellectual capital that sets you apart from the competition? Again, IIS found that it was the relentless dedication to zero defects and customer satisfaction that set them apart from the competition.<br /><br />Assumptions for the Future<br />Next look to the future; how will trends change? What will customers require? What new opportunities should you pursue to achieve your growth and profit goals? What prospects are right for you to consider, given the strengths and intellectual capital that you identified.<br />Careful analysis leads to focus. Focus allows you to purposefully select the best road to travel.<br /><br />Strategy Development<br />A clearly defined strategy that optimizes the future potential of the business is the goal.<br />This clearly defined strategy includes answers to following:<br />What are you going to do in your core businesses?<br />What new opportunities will you pursue?<br />What must you accomplish internally to achieve steps 1 and 2?<br /><br />Developing a strategy is defining not only what the company will do, but also what it will not do. Making definitive choices is one of the most important aspects of strategic planning. Choosing the best road for your company may or may not be the road less traveled, but it will be the right road for your company. Your company's ability to capitalize on its unique mix of assets and capabilities will give it sustainable competitive advantage in its markets.<br />Denise Harrison is a Vice President with Center for Simplified Strategic Planning, Inc. She can be reached via e-mail at <a href="mailto:harrison@cssp.com">harrison@cssp.com</a>.Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com2tag:blogger.com,1999:blog-33605497.post-1157033009345072232006-08-31T06:59:00.000-07:002007-02-17T11:55:36.445-08:00Strategic Planning and Innovation—How to Generate Innovation in Your Strategic Planning Process<br /><br />By Denise A. Harrison<br />Center for Simplified Strategic Planning<br /><br />When developing a strategic plan many companies struggle to develop new and creative ideas. Why? It is difficult to think “outside the box,” especially in challenging times when it seems you are running as hard and fast as possible just to keep up. But finding successful innovation often is the key to getting off the treadmill. Here are some places to look:<br /><br />1. Assess your customers’ unmet needs and preferences— is there anything new?<br />2. Assess your strategic competencies—can you use the knowledge base that you have developed in one industry to please a different market segment or industry?<br />3. Look at emerging trends— does a trend make sense, melded with your company’s traditional strengths?<br />4. Look at technology other industries are adopting—is there a smart way to capitalize on developments that you can tailor for your applications?<br /><br />Make innovation a key part of your strategic plan. For more ideas about strategic planning and innovation or strategic planning in general please visit the following web site: <a href="http://www.cssp.com">http://www.cssp.com</a>.Denise Harrisonhttp://www.blogger.com/profile/10382043959549362938noreply@blogger.com0