Are You Prepared to Succeed in Business?
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In today’s competitive market, small businesses must deal with new competitors, ever changing markets, price sensitivity, and cash flow issues — flying by the seat of your pants just doesn’t work anymore. Do you desire to lead your business to growth and expansion? Rapidly changing technologies, instantaneous worldwide communications, and strong customer preferences require rethinking of how we manage a business. Technologies that lead to product life cycles of 18 to 36 months, and the necessity to focus on true customer desires affect most businesses either directly or indirectly. In order to meet dynamic changes in business conditions and customer needs, an organization must be agile and responsive to these changes. The long-term success of a business is dependent on its long-term strategies. It has been said that a company can overcome inefficient use of internal resources if its basic strategy is brilliant, but not likely to get by with the wrong strategies even with excellent production and distribution capabilities. Past success formulas might not work in the future. Therefore, a company must periodically reexamine its situation as objectively as possible and determine the best course of action for the future in order to meet its goals and objectives. Many companies get stalled on a flat growth plateau. Strategic planning methods can be used to realistically develop and evaluate growth options. Management needs to address the issues that affect long term growth, and position the company for outstanding performance. In order to be effective, planning should become an integral part of the business’ culture and needs to be a continuous process. I AM AN ENTREPRENEUR, NOT A PLANNER! Many entrepreneurs bemoan planning as an unproductive activity for which they have neither the time nor skills. The shelves are stacked with books decrying planning as a constraining exercise that keeps entrepreneurs from doing what they do best — take the initiative, create products, open new markets, manage “on the fly.” If most small businesses succeeded managing “on the fly,” debating over the necessity of strategic planning would not be an issue. Unfortunately though, 75 percent of small businesses fail within the first five years, and research has shown that many failures are attributed to a lack of direction and limited knowledge of the market, competitors, and the industry. Strategic planning brings these factors to the forefront prior to implementation, allowing the business owner to evaluate possible roadblocks, seize opportunities, and track industry and market trends. Michael Wert, CEO of DiMark, Inc., a Forbes 200 database marketing company based in Langhorne, Pa., realized early on the importance of articulating goals and strategic planning. “Initially, we did not use strategic planning as a tool to build the business. After four to five years, when the company had grown to 20 people and approximately $5 million in revenues, it became a core aspect of DiMark … We applied a highly formalized process. We now interview clients and employees, and employ a visualization structure one to five years ahead, and use an outside facilitator … Most prominently, we employ GAP Analysis (analyze the “gaps” in the marketplace) to better understand the driving forces in our business … We have highly articulated goals from financial and strategic perspectives … Our mission statement is always under scrutiny … (In addition), visualizing the organizational structure beforehand is critical, from now to five years from today.” BUSINESS PLANNING VS. STRATEGIC PLANNING How should you plan strategically? First of all, a distinction must be made. Business planning and strategic planning are not one and the same. A good strategic plan will cover all areas of business, focusing on:
- Why a particular market, product, or service makes sense.
- How a business might unfold and how its industry will react to it.
- What the business will do.
- How and when the business will deploy resources to generate revenues and profits.
- Keep it short. A mission should not be a treatise, but a few key thoughts for employees to embrace and remember you by.
- Don’t be vague. “A leader in the automotive parts business” isn’t clear enough.Rather “the most consistent top quality manufacturer of automotive parts to the luxury car market” focuses on specific attributes (consistency, top quality) and target or niche markets (automotive parts for luxury cars).
- It’s accessible, it’s everywhere. Put the mission statement in your literature, on your packaging, on the conference room wall. Insert it into conversation. It’s just as important for young and emerging growth companies to do this as it is corporate behemoths.
- Measurable. Whether it’s sales growth, return on investment or something else, measures should be used that reflect the company’s goals. For example, Company X’s objective is to increase revenues in 1996 by 10 percent over 1995 revenues.
- Quantifiable. The company should be able to quantify its progress according to the above measures on a regular basis. For example, Company X’s objective is to increase revenues in 1996 by obtaining five new Fortune 100 clients at a sale of $100,000 per client. Obtaining this goal will ensure a 10 percent revenue increase for 1996.
- Consistent. Objectives should not conflict. For instance, an early stage consumer products company probably cannot team sales growth with high profit margin as objectives because a large investment in equipment and advertising and costs of differentiation might preclude high profits as sales increase. Conflicting goals cause frustration and loss of focus.
- What are the strengths of my product or service?
- Can we differentiate ourselves from the competition in the minds of our customers?
- Do we have the internal resources, personnel, capital, technology, and outside support to pull our strategy off?
- What special attributes does the management team bring to the table?
- What new regulations are in Congress?
- What economic factors affect demand for your product?
- What social trends are changing tastes and consumption trends?
- Will technology render your product obsolete or more appealing? (e.g., human-operated response systems.)
- They don’t realize they are attracting attention from competitors, often larger ones.
- They grow beyond their personal capabilities.
- They become bored as the initial challenge is conquered.
- Superior quality (e.g., Mercedes, Intel).
- Superior customer service (e.g., Wal-Mart).
- More rapid delivery (e.g., FedEx).
- More reliable delivery (e.g., AT&T).
- Consistent quality (e.g., McDonald’s, Xerox).
- Branding and brand advertising (e.g., Nike, Polo).
- Special product attributes (e.g., Prince tennis rackets, Calloway and Ping golf clubs).
- Operations (hours, accessibility, location)
- Customer Service
- Market Segmentation/Target Market
- Packaging
- Technology
- Value Added Services (newsletters, seminars, tip sheets)
- Pricing (terms, first time incentives, repeat incentives, discounts, giveaways)
- Special Promotions
- Strategic Alliances ( e.g., American Express and Avis cross promotional campaign, Compaq and Novell cross promotional campaign)
All rights reserved. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. This article originally appeared in the Spring 1996 issue ofEntrepreneurial Edge.
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