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Archive for June, 2007

Duking it out with your competitors

Monday, June 25th, 2007

The rivalry or intensity at which you compete against your competition can move and change over time as the dynamics of the industry change. Competitive rivalry is an opportunity or a threat depending on how you handle it.

Do you recognize the intensity of the competition and are positioning yourself accordingly? Or are you feeling the pressures, but don’t know where they’re coming from? The following aspects have an effect on whether you feel the pressure of your industry more or less:

  • The structure of the competition: Rivalry is greater when there are many small companies and less when there’s a clear market leader.
  • Growth objectives: Rivalry is greater when everyone is focused on growth (like biotech) and less when the industry is mature (like publishing).
  • Exit barriers: If leave an industry is expensive or difficult, rivalries tend to be higher.
  • Degree of differentiation: This factor is present in industries where products are commodities. Commodities are product and services that have no obvious differences and companies compete on price (like computers, steel, and so on). Rivalry is higher than when competitors can differentiate their products.
  • The structure of the industry costs: In industries that have high fixed costs (like manufacturing), competitors tend to cut prices to fill unused manufacturing capacity, which leads to higher rivalry.

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Getting Ready for Implementation

Friday, June 22nd, 2007

With the recent debut of the execution module of our award-winning strategic planning software, MyStrategicPlan, much of our focus around the office has been on plan implementation and execution. Both topics are also especially relevant this time of year as many business leaders and organizations start preparing for a new fiscal year start in July or modifying their existing plans mid-year.

A strategic plan provides a business with the roadmap it needs to pursue a specific strategic direction and set of performance goals, deliver customer value, and be successful. However, this is just a plan; it doesn’t guarantee that the desired performance is reached any more than having a roadmap guarantees the traveler arrives at the desired destination. Remarkably, the majority of companies who have strategic plans fail to implement them. In fact, according to a Fortune cover story in 1999, nine out of ten organizations fail to implement their strategic plan.

We believe the new execution module helps you plan more effectively and use your time more efficiently to make more informed decisions with features like at-a-glance tracking that identifies goals and action items as completed, pending or overdue. But we encourage you not to overlook the components necessary for supporting a successful implementation. Consider these five key elements:

  1. People – Make sure you surround yourself with the right people on board with the right competencies and skills to support your plan.
  2. Resources – You’ll need sufficient funds and enough time to support implementation. True costs can include a realistic time commitment from your staff  to achieve a goal, a clear identification of expenses associated, or unexpected cost overruns by a vendor. Be prepared as well that employees will need enough time to implement what may be additional activities that they aren’t currently performing.
  3. Structure – Be sure to set your structure of management, appropriate lines of authority, and clear lines of communication with your employees. A plan administrator and regular strategy meetings are two of the easiest ways to put a structure in place.
  4. Systems – Both management and technology systems help track the progress of the plan and make it faster to adapt to changes. Be sure to include milestones with achievements and specified time frames as part of you plan.
  5. Culture – Create an environment that connects your employees to the organization’s mission and that makes them feel comfortable. You can reinforce the importance of focusing on strategy and vision by rewarding success. There should be some creative positive and negative consequences for achieving or not achieving the strategy so people make it a priority.

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Kicking your value up a notch

Monday, June 18th, 2007

Take out your big-strategy guns and kick it up a notch. To increase your value, you need to create something that is better or different than your competitors. By construction your value chain, you now know what you can do in specific areas to improve. In this section, you find out how to have a company- or department-wide approach to providing a unique mix of products and/or services to your customers. By having an organization-wide strategy or value-creating strategies, you can consistently provide a product or service that is better than your competition.

Below are three generally accepted organization-wide strategies.

  • Providing the lowest cost through operational excellence
  • Providing the best products or services through continued innovation
  • Providing complete customer solutions through intimately knowing their needs and wants

In case you’re tempted to execute all three, think again. That’s called being stuck in the middle or riding the fence. Executing a stuck in the middle strategy is like being in the middle seat of a five-seat row on a 747. You don’t know whether to crawl over the mom with he sleeping baby to the right or over the guy with his laptop on the left. It’s not a good place to be! Companies that find themselves in this position usually end up in a financial crisis or reorganization. That said, this doesn’t mean you don’t do the other activities well. You just don’t focus on them as much as the one that are central to creating value for your customers.

A value-creating strategy should be selected for each target customer group that you serve. For smaller organizations or departments, select one strategy for your whole company. Managing multiple value propositions can be nearly impossible.

Selection your organization-wide strategy really comes down to determining what your customers value the most about what you’re providing them. The low prices? Your cutting-edge products? Your ability to deliver a service that fits their needs exactly? Take a look at each option to see which strategy is the best fit for your company.

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Updating your vision statement and vivid description

Monday, June 11th, 2007

Updating or creating a new vision statement can be one of the most exciting parts of strategic planning. Creating your vision statement can be achieved in a fashion similar to that of creating your mission and values statements.

Follow these steps to create your vision:

  1. Gather your senior staff and key employees together for a one- to two-hour meeting. Visioning is best done in a group setting. If your group is bigger than five people, break up into small groups of three to five to allow everyone to have a voice in the process.
  2. Generate a list of ideas and phrases based on the responses to these three questions:
    • What will our organization look like five to ten years from now?
    • What does success look like?
    • What are we aspiring to achieve?

    Allow the group to brainstorm, even if some of the ideas are totally wacky.

  3. Ask the group to pair up ideas that have similar themes. Identify the ideas that most closely resemble the vision for the organization.
  4. Ask one or two people to develop a draft vision statement based on the condensed list of ideas. The vision statement should be short and use verb phrases that are forward-looking such as to be.
  5. Ask another one or two people to generate the vivid description based on all of the themes identified. When developing the vivid description, use th future tense, such as “We will…”
  6. Bring the vision statement and vision description back to the group. Revise until you have something everyone agrees on.
  7. Evaluate the vision statement against the mission and values statements. Make sure they all connect.

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How Does Your Game Plan Stack Up?

Friday, June 8th, 2007

When the top “most used” business management tools globally were announced in Bain’s Management Tools & Trends 2007 study earlier this year, the results were no surprise to us.

  1. Strategic planning
  2. Customer relationship management
  3. Customer segmentation
  4. Benchmarking
  5. Core competencies, mission & vision statements (tied).

In fact, when asked to consider both usage and satisfaction with management tools, the 1200 international executives participating overall gave strategic planning “above average” rankings.

Another finding that caught our eye was that 9 of 10 executives believed that “corporate culture is as important as strategy for business success.” Darrell Rigby, senior Bain & Company partner and author of the study stated, “Organizational culture and so-called softer issues are now top of mind. Executives are clearly looking beyond cost-cutting for success.”

Now in its 11th edition, the Management Tools & Trends study examines executive attitudes toward management and industry trends, and it evaluates the use and satisfaction with management tools. We like to use it with clients to determine how their organizations compare. Have you considered where these best practices rank in your organization?

Our Business Report Card is a guide through each part of the development process on the way to creating a strategic plan and includes strategic activity benchmarks for comparison. Benchmarking improves performance by identifying and applying best practices and can serve as an essential starting point for creating a strategic plan. The foundational piece of the report is the Balanced Scorecard (another Bain Top Management Tool) that focuses on the key areas of any organization and is used by companies worldwide. In addition to linking strategic objectives to long-term targets, a Balanced Scorecard can also increase companywide understanding of the corporate vision and strategy. You see, we’re also advocates of including a focus on people and culture in your strategic planning in order to engage your staff and give them ownership in participating and driving success.

Business owners, CEOs, directors, and department managers can all benefit from using the Business Report Card. The assessment is intended to help them better understand activities that will help their businesses grow and better determine on which of those activities they should focus. The full Business Report Card is bundled with our online strategic planning software, but we also offer a complimentary Summary Report Card. Please click here for more information.

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Outsourcing your outsourcing

Monday, June 4th, 2007

Outsourcing is here to stay because of the numerous environmental pressures companies are dealing with. Basically, why keep non-core functions in-house when you can get them cheaper overseas? The problems arise when companies have tried to put this into practice. It’s not as easy as it sounds, so outsourcing brokers and consultants should be used. This new crop of companies is helping organizations of all types locate, contract, and manage their outsourced projects.

For example, Business Health Services needed to either cut costs or cut jobs. One area for cost cutting was reducing its costs to transcribe doctor’s notes and other medical documents. At the time, the company was paying 16 cents a word, but through the help of an outsourcing broker, it was able to locate a vendor in India who would do it for 11 cents. Add on the 25 percent premium that the broker gets, and the company now only pays 11.5 cents a word – a $7,000 per month savings.

Is outsourcing in your future? Here are some guidelines to determine whether outsourcing is the right move for your company:

  • You need a higher level of expertise than you currently have, or you only need that expertise periodically.
  • You have a set of activities or functions that need rapid change.
  • Departments or functions are performing subpar when compared to others in your company.
  • Outsourcing is cheaper without a decrease in quality.
  • You need better performance but lack the resources to do it yourself.
  • You have a non-core area that’s giving you a headache.

Check out the National Association of Software and Service Companies (www.nasscom.org), India’s trade group, for help with outsourcing.

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