Strategic Management: Critical Steps for Developing Competitive Edge and Innovative Strategies

[ad_1]

Introduction Many intelligent people have extremely innovative ideas. Most ideas never make it outside of the brain. A few find their way to the development table. These people develop plans and grand schemes concerning how they are going to sweep the globe with their new, “totally unique and never before thought of” product or service, making millions of dollars in a few short years. Most of these projects never see the day of light. Those that are based in solid business fundamentals have a tough enough time succeeding for any period that makes an impact on the market. Of those plans that become profitable businesses, the good majority will fail in three to five years. What sets the long-term successes apart from the “one hit wonders”? The answer lies in the business plan and how it is developed.

Developing and exploiting a competitive edge in the market is the key to success. Without this edge, the chances of success are slim. Venture capitalists know this and therefore look long and hard for the things that set the “want to bes” apart from the “could very well bes”. Most start-up businesses that want to make a difference in the market need outside capital to get the operations running. In order to be successful in the fund raising venture, CEOs need to understand the fundamentals of developing and exploiting this edge.

Develop a Vision and Mission Statement The founders must have an image in their mind regarding what they want to achieve, where they want to go and how they want to get there. This vision gives future employees direction, determines future decisions and helps motivate staff in difficult times. When this vision is written on paper, in the form that answers the question, “What business are we really in?” in such a way that it becomes tangible, it becomes an expression of how the company distinguishes itself from others in the market, and shows in no uncertain terms what the mission of the business really is. This becomes the Mission Statement.

Determine Core Competencies, Target Market and Desired Market Position Companies must determine what they are good at, where they want to be and at what position in the market they desire to achieve. If they can do this, and do it better than their rivals then they will have an edge by understanding the consumer better and thus be able to meet the customers’ needs in ways that the competition cannot. These core competencies consist of unique products, services, and capabilities that they do better than everyone else. They can then take these competencies and utilize them to specialize in a certain portion of the market. When they define their position they are able to determine the target and develop the specific strategies needed to succeed.

Perform a S.W.O.T. Analysis of theCurrent and Future Business Situation All organizations need to learn about their own Strengths and Weaknesses within the company that can affect their actions in the market. What are they good at, and what are they not so good at. By understanding the strengths, they can develop plans to capitalize on those points while at the same time diminishing the weaknesses, or trying to find ways to turn the weaknesses to advantages through research, development, and or other means. It is important to understand the strengths because in the future those advantages may disappear, or be nullified through changing market circumstances.

External circumstances occurring outside the organization will influence the success of the organization. By finding out the potential opportunities to “get ahead” and then capitalizing on them, it may give the organization the edge that it needs to skate past the rivals who are struggling in the same market. A good example of this is the implications that the Kyoto Accord has on automobile makers developing hybrid vehicles. As Japan is lagging behind on their agreement, the government will start to impose stricter regulations, forcing consumers to utilize less gasoline-powered vehicles. The companies that have been working on hybrid, or electric, or use a bio fuel will be able to attract these consumers to their segment.

Looking at it from the other side of the coin, there are threats like the Kyoto Accord which can severely damage the way a business profits. For those organizations relying upon diesel transport fleets, such as large transport companies, the costof fines due to not getting rid of the dieselcould have serious ramifications on their operating profit margins, thus affecting how the investors see the health of the organization. The largest external threat to an organization is the ever-changing, constantly mutating demographic spread. This can make successful companies obsolete if they are unprepared for the change.

By putting these Strengths, Weaknesses, Opportunities, and Threats together in a chart for the managers to see, this S.W.O.T can help to predict the future necessary actions a company may be required to take in order to stay in the market.

Identify Key Success Factors Critical factors to success are relationships between the business variables that companies have control over and the factors that influence their ability to actually compete in the market. By knowing what these factors are, and exploiting them in such a way as to bring events to the desired conclusion, businesses have a greater chance of succeeding in their business plans.

Analyze the Competition (Due Diligence) Whenever a company takes on a new venture, be it an M&A, entering a new market, developing a new product, it is essential to the future success of the business to perform a comprehensive occupational due diligence program. This kind of research will provide information about everything a company needs to know concerning the rivals in the business. It should prevent being caught off guard by “surprises” that might have been predicted and neutralized in advance. Performing this extensive market research can also identify new market opportunities, changing segments, as well as unexpected market competition that arises like a phoenix out of nothing to “storm the castle”. Reaction time to market changes can be improved by constantly looking at the market and predicting advance occurrences.

These days information transfer is so rapid that the advantage of “time” no longer seems like an option. Once when Sony had three years of time from launch of new product, they now have apparently three months. The old saying “You snooze, you lose” has never been more true than now. If you don’t anticipate your rival’s strategies, then your strategies will be anticipated and beaten by your rivals. There no longer is time for a “long slow think”.

Create Goals and Objectives By creating goals and objectives the management team begins turning ideas and dreams into real, concrete places to go and things to do once there. Goals are the long-range things that a company wants to get done and the objectives are the detailed specific, measurable, attainable, realistic and timely steps on what you set out to do. It is important to get S.M.A.R.T.

Formulate Strategies to Accomplish the Goals Once goals and objectives have been written out and solidified hard-core strategies on how to actually reach the objectives and goals must be planned in great detail. These strategies are a company’s roadmap that will show them where they want to go, how to get there, and what to do if they get off track. Strategies fulfill the mission, the goals and the objectives. It is important not to be a “me too” because then the company is too late and can only pick up the leftovers which hardly make for delicious meals.

Translate Strategies into Action When a company has gotten to this stage, it is time to take action and “run the programs” that have been designed to succeed in the market while returning the best possible ROI available. Projects are defined by determining purpose, scope, contribution to market, available resources, requirements to succeed in market, and the timing of entry. I would suggest that at this time it is also essential to determine future exit strategies, as well as the costs to overcome the barriers to exit. Companies that have come this far will most likely have an excellent plan for short, medium and long term in a format that can be understood and acted upon by the employees.

Establish Accurate Controls Once the plan has been activated, it is necessary to see how well it is working in the market. In order to do this the organization must determine the standards against which performance is actually measured. There are many ways to do this, and new ways are being developed every year that seem to be the “answer to the deficiencies of the past”. It used to be sufficient for a company to look solely at their financial measures such as ROI, ROE, ROM and Operating Profits, and so forth. But as time progressed and business shifted from a product-oriented market to a knowledge-oriented market, the important factors changed. One of the recent tools that organizations attempt to utilize (though actually quite difficult and extremely time intensive to employ) is the Balanced Scorecard. This is a set of four measures that an organization collects data about, and then reviews to see how well they are performing.

The four perspectives of the balanced scorecard are:

  • 1. Customer Perspective – How does the customer see us in the market? Are we successful? Are we meeting their needs? Are we lacking in something?
  • 2. Internal Perspective – What do we do in the company that we can modify and adjust in order to improve our operations?
  • 3. Innovation and Learning Perspectives – How can we improve our investment in knowledge, developing it in such a way as to have a new competitive advantage over our clients? How can we increase our knowledge?
  • 4. Financial Perspective – The “traditional” way of looking at the company from an investor point of view in order to determine how healthy we are “financially”, which translates into “how profitable are we”?

Conclusion Companies that take these steps seriously when developing their business plans stand a much better chance of succeeding in their venture. With the success ratio climbing, investors will be more interested in looking to funding start-ups more readily. Of course there are still a huge number of variables that venture capitalists look to in addition to a sound business plan but to take the original idea this far, and be this serious about it, the entrepreneur is performing a comprehensive due diligence program that will surely improve chances of longer term success in the market. If after performing all of these activities, the business is still having trouble, it may be that the original plans and goals of the CEO were “off the mark”. In many cases the operators take the blame for not being able to achieve the expected objectives. But more often than not the CEOs plans are the cause of friction and potential failure. In this situation it is crucial that the CEO be willing and able to realign the goals and objectives they originally developed for the company’s future. This is the realm of Second Generation Knowledge Management and “Double-Loop Learning”.

[ad_2]

Leave a Reply

Your email address will not be published. Required fields are marked *