STRATEGY ONLINE

SEIZING THE MOMENT: IS NOW THE TIME?

Timing is critical. Successful business strategies can often be marked by the ability to sense just the right time for bold, even against-the-grain moves, and the willingness to forge ahead despite imperfect information. But does such a basic principle of opportunistic strategic management apply even now; with the magnitude of unpredictability and uncertainty…even fear, seemingly so far beyond what’s “normal?” Just recently, Sheila Bair, Chairwoman of the FDIC, warned that the ailing banking industry had not yet, in her view, found bottom. This same theme had underscored July’s Annual Meeting of the Southeast Section of the American Bankruptcy Institute, where the buzz pervading the conference was all about persistent gloom among real estate developers, condominium owners, furniture manufacturers, retailers, automotive and building materials suppliers, contractors and the like.

A natural tendency during such difficult times is to hunker-down, cancel or delay proactive initiatives and simply wait for better times to arrive; and there are situations in which that may be a business’s best, perhaps only option. However, it can equally be true that difficult times can present moments to be seized…opportunities for bold action to widen the longer term competitive advantage for an enterprise while others are sttalled, just running in place. It just takes the mental and analytical alertness to perceive such moments in combination with the courage to act in the face of very unsettling times.

Possible elements of such an approach are these:

  • Upgrading the business’s talent.

Selecting, attracting, developing and keeping outstanding talent can no longer be considered just a routine goal for a company. If one takes seriously numerous warnings coming from economists and business observers alike, a global war for talent has been waging for at least the past two and a half years. As projected, demand for superior talent will continue to exceed supply. The forward-looking company would insist that “having exceptional people” is a strategic imperative, and initiate a comprehensive talent assessment and upgrade process. This could be especially important to a company looking to change its fundamental business model as it prepares to execute a forward leap.

Defining Success…Recognizing Talent

Truly talented people impact a company such that the business performs at a level it otherwise wouldn’t. The highest level of “impact talent” are “Leadership Stars,” an easily recognizable group. They not only set high expectations for all (starting with themselves), they tend to “raise the bar” as interim goals are accomplished. Surrounding themselves with excellence in others, they bring out everyone’s best. The most differentiating trait of all is that these people equate performance with results and impact, not effort and good intentions. Leadership Stars seek out accountability, discourage excusitis, and tend to instill the same values in others.

The second category which must pervade a company looking for a big step forward would be “Functional Experts.” These individuals are exceptionally smart and outstanding at what they do, the conduits through which outside knowledge and advances come into the business and work very hard. While often perfectionists (with resultant downsides!), these folks are essential to sustainable greatness over time.

A Changing Mix of Skills

Others have commented that in a relentlessly commoditized world, future business successes in part will be driven by increasing attention to creativity, product design, innovation and brand-building. Author Daniel Pink summed it up: “right-brain” talents must rise to equal status with “left-brain” attributes for tomorrow’s businesses to prosper. Design, creativity, big picture vision and the ability to articulate “significance” instead of “utility” must be on equal footing with traditional quantitative, analytical and sequential thinking skills (1).

  • Update an objective assessment of current competitive position.

A company pondering a proactive move in the face of economic softness must realistically consider its starting point so as to identify the right strategies for its situation. And preparing an accurate, unbiased assessment of its true relative market position can be a challenge for a company. But, being right in this assessment is critical to controlling financial risk and improving the probability of successful execution. This theme will return shortly.

  • Pursue operational improvements with strategic impact.

Improving relative quality of a business’s products and/or services is universally a winning strategy. (And, in my experience, the reverse is sadly true. A strategy to “save money” by intentionally allowing quality to erode relative to competition is always bad.) A business should identify what it would take to advance its quality position relative to competition, and then use the downturn to execute needed enhancements. (This strategy can be especially critical to “market followers” as they prepare for improved performance as conditions brighten.)

A powerful and often under analyzed and overlooked improvement is to take a more strategic view regarding inventory and supply chain management. A fellow Board member serving a mid market global supply chain company in the automotive aftermarket industry has noted a crucial correlation between effective supply chain management to financial performance and sales increases. His experience strongly suggests that many companies overspend on inventory by up to 12% a year, severely straining operating cash flow while depressing return on investment. A well-thought-through, SKU-by-SKU inventory assessment when combined with actual customer sales trends can help a company free up significant cash, improve customer service, increase available capacity for growth it didn’t know existed and even neutralize an ABL that is tightening advance rates. All it takes is a willingness to slay a few long-held sacred cows.

  • Enhance differentiation appropriate for the business.

Many successful companies during otherwise stressful times are intellectually curious, constantly challenging assumptions while committing resources and energy thus setting the stage for lasting successes later. Rather than cutting, retrenching and postponing (by default becoming an increasing victim to the relentless forces of global commoditization), better companies, whether market leaders or niche players, look to improve their value propositions to better position themselves for improving conditions.

Combining the factors of quality, pricing, cost, new product strategies, and capacity “planning,” Table 1 below juxtaposes an innovation strategy appropriate for a powerful market leader against that for a niche player/follower.

Table 1:

GROWTH STRATEGY COMPONENTS

 

INDUSTRY LEADER

 

NICHE PLAYER/FOLLOWER

 

MANUFACTUER OF CONSTRUCTION VALVES AND FLOW SYSTEMS

BUILDING SUPPLIES DISTRIBUTOR

Relative Quality

· maintain high level

· significant improvement from modest base

New Products

· grow faster than sales, expand market boundaries

· maintain absolute level

R&D, Marketing Spending

· grow slightly in absolute terms

· avoid spending “wars” with larger competitors

Gross Margins

· maintain relative relationship

· improve through COGS reduction rather than price increases

Capacity Management

· prepare to grow faster than market

 

 

  • Institutionalized innovation

It isn’t enough to just establish innovation and differentiation goals. A company taking stock of itself will understand the critical importance of elevating innovation from an easy-to-say objective to a true organizational strategy.

The example below represents a position description for a new position of “Vice President for Global Innovation” in an international company recently embarking upon a strategic initiative to accelerate internal growth. Note these “Impact and Outcomes Expected” which formed the cornerstone of the position description.

  • A steady stream of new products and product enhancements, perceived as differentiated, with attractive margins; ultimately achieving 30% annual sales from products less than three years old;
  • An effective, well-coordinated process for monitoring and communicating status of all new product and technology development programs;
  • Up-to-date knowledge and awareness of external events and developments in technologies important to the company’s global mission; and
  • The removal of barriers to innovation across the company worldwide.
  • Embrace the constancy of change and the need for continual transformation.

Enduring organizations transform themselves repeatedly over decades of change through numerous ups and downs. They inherently understand that time does not stop because of a downturn, that events are always to some degree irreversible and the resultant risks of standing still can be substantial. Being bold despite stressful times does not need to translate into being foolhardy or irresponsible. It does mean being nimble and smart, possessing the wisdom to initiate intentional actions to create new sustainable advantages during that narrow window of unusual opportunity during which others are holding back.

 

 

 

 

 

Ron Norelli is President and CEO of Norelli & Company, a strategy development and interim management firm with its principal office in Charlotte, NC, and Norelli Group office in Beijing, China. He is a Certified Turnaround Professional and has recently completed all requirements for the Family Firm Institute’s Certificate in Family Business Advising.

(1) Pink, Daniel. “A Whole New Mind” New York; Riverhead Books, 2005.




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