In our work, we have met owners and management teams at hundreds of privately held middle market companies. Most all of these firms have directional business objectives, for example, grow revenue or expand via acquisition, but rarely have they taken the time to define and execute the changes needed to realize those objectives. In many cases, they lack a clear strategy that describes how they plan to realize their goals; one that defines where they will focus the business, what capabilities are required to remain competitive, and what new investments, skills and talent are required.
Too often, the concept of ‘strategy development’ is associated with a months-long, time consuming, disruptive effort that results in thick binders that gather dust. And there is often a fear that strategy planning is a “soft” concept that will not help move the business forward, so the default is to “continue doing next year more of what has made us successful in the past.”
Unfortunately, the business graveyard is littered with the remains of once successful companies, because doing more of what helped grow the firm in the past does not account for two critical drivers of profit and sustainability: (i) it ignores the need to understand and adapt to a rapidly changing industry environment, and (ii) it ignores the need to first identify, and then focus the firms efforts on growing and targeting the most profitable customers.
Strategy is about owners and leaders making choices regarding what the company will do, where it will invest and focus, and how it will create market differentiation. It is also includes choices about what it will not do. Without a clear strategy that incorporates these decisions, firms usually continue down their familiar path, or risk of chasing the latest trend without a clear business outcome in mind.
There is a low cost, high value alternative for private business that can be conducted in a few days and with limited disruption. The FortéOne process of ‘strategy development’ is an agile, repeatable process that, in a matter of days, provides the leadership team of an organization with a ‘north star’ that becomes the litmus test for making everyday decisions that, together, direct the entire company toward achieving important objectives.
In the FortéOne version of Strategy planning, the firm’s leadership teams think through five areas of the business in rapid fashion:
External Assessment: With the vast and rapid digitization of most everything, you will need an ‘outside-in’ view of the market and industry. Some of the question/issues to be answered include:
- Where are potential disruptors?
- How have customer expectations shifted?
- What new capabilities are competitors building?
Growth Strategy: A growth strategy defines exactly how the company will achieve its’ goals. What business sectors, go-to-market channels and customer segments present the richest opportunities for growth? Is the focus on organic or in-organic growth? If so, what are the characteristics of a target acquisition? Do we need to consider new channels, partners to fuel growth?
Functional Strategy: Every area of the firm needs to understand how they contribute to success, and in many cases how they will need to change, to support the growth strategy. What new product or service innovations are required, how will marketing drive demand, on which industries, channels and customer segments will sales concentrate their efforts? How will IT, HR and Finance support the effort? The fastest growing companies focus on a “customer centric” model and we find a ‘customer experience road map’ can help every part of a firm deliver the desired customer experience.
Emerging Capabilities Strategy: Given the pace of change in the B2B and B2C purchase journey, companies need to determine if there are new capabilities that should be targets for immediate investment and where a ‘wait and see’ approach is warranted. With growth in cloud services, data availability and analytics and AI horsepower, it has become easier and more affordable to adopt a ‘test and learn’ approach to building experience with these new capabilities.
Balanced Scorecard: A critical element of a company’s strategy is a Balanced Scorecard that measures progress. In addition to the typical internal process and business outcome metrics, external metrics such as customer experience/Net Promoter Score are useful to keep the organization on track to reach its goals.
Strategy is essential to all firms, but especially to privately held companies where resources, particularly leadership time, are at a premium. The secret to developing impactful strategies in middle market companies is to focus on the ‘essential and actionable product’ version of a strategy which can be developed in a few days. Then test, learn, and enhance the strategy over time as a process, not an event. Publicly posting the “True North” vision and the Balanced Scorecard will make it real and actionable for the broader organization, linking each individual’s role to the strategy.
Effective strategy is within reach of every middle market company, and results from a process, owned by senior leadership, which can be completed in a matter of days without disrupting the organization. We have helped many of our clients build strategy planning into their business leadership process, and we can do the same for your business.
Give us a call at 847-291-9944 to learn more about how FortéOne’s OnePath Strategy Development services can help your company today.
Contributor: Johan Sauer