Archive for April, 2014

Strategy Working? Then Don’t Make These 5 Mistakes

Tuesday, April 22nd, 2014

“Why do business owners, who have grown their companies successfully, then go ahead and do silly things?”

Far too often the answer is “Well it seemed like a good idea at the time…….”Don't tinker with a strategy that works

To be fair, we get to look at the outcome with the gift of perfect hindsight. But it happens often.

Why? Let’s take a look at 2 companies.

Company A

In only 5 years, three friends built a retail business to $50 million in annual sales.

Then they hired an experienced executive to be their President. He thought they should start selling a product which complimented their core offering. The founders agreed and the company charged ahead.

They had to change the format of their retail outlets but that was just a tweak to the original strategy, right?

Unfortunately, they underpriced the new product and sold it on credit. Their original business was cash only and many traditional customers turned out to be poor credit risks.

In less than a year the new venture had tanked. Because the founders had been absorbed in saving it, the core business took a massive dive too. And it was expensive to get out of those new leases.

It took several years to recover.

Company B

An established supplier of skin-care products, it sells via independent sales ‘consultants’.

To continue growing, the owners had to make a choice. Use temporary, short-term bonuses to motivate average performers. Or analyze the top performers and train everyone on their techniques.

They tested both alternatives.

Performance dropped immediately the short-term bonuses stopped. But sales, in a tough market, grew when they trained everyone on the top sellers’ techniques.

So they gradually rolled the training out throughout the company.

The mistakes (or lessons)

  1. If you survive the first few years and have strong year over year growth – your strategy is working.
  2. You may still have to adjust it if there’s new competition, changing customer demand, technological innovation or all three.
  3. But you’re no longer a start up, so you can’t bet the farm tinkering with alternatives while neglecting the strategy that works.
  4. However, you’re not a big corporation (yet) with enough resources to experiment with several new strategies at once.
  5. So, continuing to run and build the core business has to be #1 priority. Innovations and changes have to be tested on a small scale to mitigate risk

Company B did it. Can you?

 

If you enjoyed this post you’ll also enjoy 3 Ways To Test Your Strategy

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

 

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The Three Cs of Strategy Execution

Tuesday, April 15th, 2014

This week’s guest is Dick Albu, the founder and president of Albu Consulting, a strategy management consulting firm focused on engaging and energizing leadership teams of middle market private and family business to formulate robust business strategies and follow through on execution of key strategic initiatives.

 

 

 

What is one of the most common missing links when it comes to successful strategic planning? Most CEOs we speak to will agree its strategy execution. You can have developed a mediocre plan, and an exceptional execution process will lift that average plan to new heights. Without a solid execution process in place, strategic plans are useless documents that sit on shelves collecting dust. More importantly, without a formal strategy execution process, organizations fail to achieve their goals.

At Albu Consulting, we believe that strategy development and strategy execution work hand-in-hand. They are partners in a dynamic, continuous and collaborative process. Strategy development does not end after a two or three day offsite and execution is not just project management. Rather, joined together strategy development and execution act as a strategy management system of continuous improvement to achieve the results you want.

How can you provide the leadership to make strategy happen? Consider these three Cs of strategy execution that can help you achieve your long term strategic goals.

Communicate – All too often strategy is kept a secret by the CEO only to be shared with a few members of the leadership team. Often it is implicit, lacking a written document that articulates the specifics of the strategy. Unfortunately, if people down through the organization don’t know about the strategy, it is hard for them to connect with it. Strategy needs to be the fabric of how everyone in the organization makes decisions. It should be a part of everyone’s day-to-day responsibility. Strategy is the link that defines “what” needs to be done, “why” it is important, “how” it will be executed.

Commitment – We are always amazed at how engaged managers and employees become once they are brought into the strategy management process. When employees participate in the development of the strategy and better understand how they can contribute to its success, their level of commitment increases. Collaboration within departments and across functions improves, and the result is both top-down and bottom-up cooperation and feedback. Once you have made the case to everyone in the organization, and included them in the strategy management process, translating strategy to action becomes much easier.

Change – Business is dynamic and unpredictable. It is difficult to imagine it any other way. Flexibility in business is absolutely necessary, but it needs to have purpose. Without purpose, organizations tend to “chase” opportunities that are off strategy. Your strategic plan should define and guide business decisions and help your organization stay focused and on task. By managing change through one-on-one coaching, team meetings and leadership reviews, you will embrace change with confidence. Change is necessary and organizations become better for it, but it needs to be on strategy.

Strategy execution is an integral part of the strategy management equation. The pace and complexity of business isn’t getting any easier. Effective strategy execution should not be viewed as additive work, but rather the centerpiece of what the organization needs to accomplish to achieve and exceed its long term goals.

Dick can be reached at 203-321-2147 or RAlbu@albuconsulting.com. For more information on Albu Consulting visit www.albuconsulting.com.

Stick To The Knitting – Or Diversify?

Tuesday, April 8th, 2014

I’ve followed software developer 37signals for a few years. I read CEO and founder Jason Fried’s column in Inc. magazine.Should companies stay focused on their core strengths or diversify?

I use their products. Some of our clients like Basecamp, their project management software, to manage strategy execution. We use Highrise for ProfitPATH’s CRM system.

I have a pretty high regard for the company and was intrigued, therefore, by an announcement they made in February.

Moving forward, they are going to focus on a single product – Basecamp. To make the point they even changed the company’s name from 37signals to Basecamp.

According to Fried, the product accounts for over 80% of the firm’s revenue¹. So some would argue that they must diversify, put resources and effort into growing other products to spread the risk. Otherwise they are making a big mistake, putting all of their eggs in one basket.

But are they?

Keeping a company focused on its core strengths is not a new idea. In the 1950’s Peter Drucker spoke of the need to make choices about what not to do. Peters and Waterman became famous for the phrase “stick to the knitting” when “In Search Of Excellence” was published in 1982.

What if, instead of focusing on the fact that Basecamp is 80% of the company’s current revenue, we ask 3 completely different questions?

  • What share do they have of the market for project management software?
  • What features do users want that Basecamp doesn’t currently offer?
  • Can the company grow market share, and add those new features, without increasing their payroll or overhead?

There are companies who focus tightly on a limited product offering and whose profitability is well above the average for their industry – e.g. Trader Joe’s, the U.S. retail chain².

On the other hand, there are companies who have diversified too much and who have failed. A recent example is Google’s acquisition of Motorola Mobility (which they later sold to Lenovo).

There is no one answer that can be applied universally. There are a number of factors which affect decisions like this. So I will continue to watch 37signals/Basecamp with great interest.

By the way, can anyone think of a Canadian company that has also changed its name to the name of its leading product…………..?

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¹ “When Staying Small Is The Bigger Bet”, Jason Fried, Inc. Magazine, March 2014, page 108
² “Basecamp’s Strategy Offers A Useful Reminder: Less Is More” Ron Ashkenas’ HBR Blog, 10 Feb 14

 

If you enjoyed this post you’ll also enjoy Don’t Fool Yourself……

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

 

 

Successful? Your Company Still Has To Change

Tuesday, April 1st, 2014

Two statements that we often hear are:Change your attitude to the future for successful growth

• “Why change? We’re successful and what we’ve been doing has got us to here.”

• “What got us here won’t get us to where we want to go.”

Business owners who make them have two things in common. Their companies have been profitable and throwing off cash for a number of years. And they’re successful – in their own, and everyone else’s, eyes.

But their attitude to the future is completely different.

Who is right and who is wrong?

Getting an answer means either waiting for several years to see how things turn out, or trying to make an informed guess about what will happen.

Let’s start with the fact that a company doesn’t exist in a vacuum.

Are there things that affect results that a company can’t control? Yes, and a couple of easy examples are the economy and the firm’s competitors.

What are the odds – the probability – that those things will behave differently in the future than they did in the past?

Will, for example, the recession continue to ease or get worse again; or a competitor introduce a new technology, change their pricing, promotion or distribution strategies?

Does it really seem likely that these external influences will behave in exactly the same way in the next 5 years as they did in the past?

What about things the company can influence? For example:

  1. Will the people who held key positions during the growth continue to be as effective as the company gets bigger?
  2. Will the company’s existing processes and technology be able to handle increased volume? Can either be changed without disrupting operations?
  3. Does the company have the financial resources to fund continued growth? Or will it need to take on debt or find an investor?

Here’s my point.

Growth is the result of the complex interaction of many factors. Most of them are constantly changing, some at a faster pace than ever before. The timing and extent of the change is often beyond the control of owners and managers.

Is it reasonable to assume that by holding constant the factors which can be influenced – even if that’s possible – the net outcome will be the same?

I don’t think so. I’m firmly in the “what got us here won’t get us to where we want to go” camp.

 

If you enjoyed this post you’ll also enjoy 5 Tips for Fast Growth in a Slow Economy

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Jim Stewart is the founding Partner at ProfitPATH. He has been working with business owners for over 16 years to increase profits and improve the value of their companies. LinkedIn

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