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Plotting Strategy? Get Your Hands Dirty

“Plotting Strategy? Get Your Hands Dirty”

Bypass lofty theory for experimentation.

The idea of stepping away from workaday pressures to ponder big-picture issues such as market trends or competitive threats excites many entrepreneurs. They may imagine themselves orchestrating innovative product launches, growing existing businesses and penetrating lucrative markets.

It sounds so cerebral, so stimulating, so fun.

Yet the hunt for higher revenues and profits rarely unfolds as part of a master plan. Sure, you’ve drafted a business model, and you try to stick to it. But after getting pelted by daily crises, you may wind up operating out of desperation, impulsiveness and a will to survive. It’s hard to strategize when panic swirls around you.

Nevertheless, business strategy is hot. Many executives, consultants and business-school professors now emphasize the need for strategic planning, benchmarking and finding your competitive advantage. To make the most of your strategic planning, you must tie thought to action. While some business owners read books, hire "growth consultants" or immerse themselves in academic principles in their attempt to strategize, savvy entrepreneurs often skip such preliminaries. Instead, they weave strategy into their daily decisions. They analyze how their business stacks up against the competition and how employees can maximize their contribution.

The most visionary leaders turn lofty plans into nitty-gritty experiments. They learn lessons on the ground, every day, in the trenches with their employees. Armed with empirical data or critical business ratios, they modify their strategy as circumstances change. They learn by doing.

Turn worker bees into thinkers

You’re not the only one who can plot business strategy. While you set the direction and communicate priorities, throw open your company’s race for profitable growth to all your managers and staff.

Effective strategy often flows from the day-to-day challenges that your employees face. It’s an outgrowth of their experience filling orders, satisfying customers and managing systems.

To transform your employees into strategic thinkers, ask them two deceptively simple questions:

  1. Who’s our customer?
  2. What can we offer our customer that our competition does not?

As companies rush to keep pace with booming demand for their products, they may skip these crucial questions. But business that pours in now can dry up later if you do not anticipate changes in your customer base and find innovative ways to differentiate yourself.

Both fast-growth companies and huge corporations can get stung when employees — from senior managers to support staff — take customers for granted.

Example: Sears, Roebuck & Co. has lost market share in recent years as discount chains such as Wal-Mart and Target won over fickle shoppers. Its former CEO, Arthur Martinez, admitted, "We didn’t know who we wanted to serve. That was a huge hole in our strategy. It was also not clear on what basis we thought we could win against the competition."

Sears hired a new chief executive officer, Alan Lacy, in late 2000. Lacy told The Wall Street Journal that he wants to "get people to think beyond what is." He holds frequent roundtables with employees and encourages them to approach the business strategically.

Send in the revolutionaries

When you invite employees to help plot strategy, be sure to include:

  1. Newly hired individuals.
  2. Workers who operate far from your corporate office (such as telecommuters or field reps).
  3. Youthful thinkers who can take a bold, unbiased view when analyzing your business.

When to say no

Learn how to regulate the flow of potential customers. If you take all comers, it’s hard to maintain your focus. Certain clients may pull you in a different direction, making costly demands that lead you to compromise your company’s ability to deliver quality or maintain margins.

You can’t — and shouldn’t — do it all. Turning away business has to be a strategic imperative for a growing business. Consider the advantages of regulating the tide of incoming customers:

  • Maintain quality control. If you accept too much business, you may overextend yourself and alienate new customers for good. Owners of fast-growing businesses often struggle to ramp up hiring to satisfy surging customer demand; as a result, they may recruit poorly qualified workers who lack the skills or attitude to manage customer relationships.

    "We say no to business all the time because we don’t want to diminish the quality of our product," says Tom Ward, president and CEO of Barton Protective Services Inc., a security firm in Atlanta that has climbed from $44 million to $250 million in annual sales over the past eight years. "We want every one of our security guards to be great, and we’re not going to hire just anyone in order to take on new customers."

  • Allocate resources effectively. In many businesses, 80% of profits come from 20% of buyers. By choosing your customers with care, you can woo and retain the most profitable accounts.

    Ideal customers seek a partnership relationship, not a vendor relationship. They may set high expectations, but if you fulfill or exceed them, these grade-A clients will be yours for life.

    For Ward, customers who act like partners care about the security guards that his company assigns. "But a customer who calls and says, ‘We need some guards. We don’t care what you pay them. We just need someone who shows up,’ isn’t the kind of customer we want," he says.

  • Build mystique. If your customers perceive themselves as part of an exclusive club, then others will clamor to join.

    Some of Ward’s regional managers keep a waiting list rather than shut the door entirely when new customers inquire about the company’s security services. The prospective client might be told to wait four months before they can do business.

    "We get customers calling and asking us, ‘Can we be your customer now?’ or ‘Are you ready for us now?’ " says Ward. "We make it so that we’re worth waiting for."

Is your big picture too big?

Mapping your company’s strategic intent means plotting its future direction. This involves questions about what you want to accomplish with your business and whom you want to serve. It requires that you to take a sweeping, panoramic view of your enterprise as it relates to your industry and the larger economy.

Yet running day-to-day operations demands a hands-on attentiveness to detail. Thinking in big-picture terms may prove an elusive luxury if you’re always racing to put out fires.

To balance the need to "think big" with your daily management duties, try integrating strategy and tactics. Strategy consists of the long-range plans and priorities that drive annual growth. Tactics, by contrast, are the short-term steps you take to attain strategic goals.

To strategize properly, you must address three issues:

  1. The effect of the national (or international) economy on your business. Determine what the future course of the economy means to your business today. If a recession is looming, for instance, you may scale down capital outlays or prepare for retrenchment. Analyzing economic volatility takes guesswork, but devising a strategy for various outcomes prevents being caught off guard.
  2. The evolution of your customers. Assess how buyers’ needs, goals and concerns might change over one-, three- and five-year periods. By predicting shifts in their budgets, buying habits or preferences, you can plan product launches or modifications with tomorrow’s shoppers in mind.
  3. The evolution of your competitors. Strategy never exists in a vacuum. Look at your company as part of a broader business that’s fraught with change. Knowing how rivals might nab market share or beat you to new opportunities can help you anticipate and disarm competitive threats.

Plot your strategy’s chance for success

Use this matrix to determine if you should move forward with your strategy. On the vertical axis, weigh the strategy’s probability of success based on how much you can control the outcome, or the allocation of resources to support the strategy. On the horizontal axis, weigh the ultimate business value of the strategy — the payoff in growth, profits, customer retention or another key objective of the strategy.

Focus on what counts most

Many entrepreneurs assume that thinking strategically revolves around what their business does to earn a profit. That’s a mistake.

True strategy involves harnessing what your company knows — its core competencies. These include the brainpower of your employees and the institutional wisdom that has spread within your organization.

If your company manufactures sports equipment, for instance, then your business strategy might flow from your employees’ knowledge of how, say, Little Leaguers swing a bat or field a ground ball. If your firm designs foreign-language educational materials, then base your strategy on your knowledge of how adults best understand verb conjugations or learn to speak in the proper accent.

Identify your core competencies by holding frequent brainstorming sessions with your staff. Pinpoint specific products or services and discuss ways to improve them to meet customer needs. Also take advantage of exit interviews with outgoing employees who leave on good terms. Solicit their ideas about how your company can gain market share, expand its product lines or apply lessons from past marketing campaigns more effectively.

Another key to smart planning is extracting the maximum value from your strategic assets. For fast-growth businesses, this often boils down to carving out a distinct niche based on a patent, trademark or other inventive approach to serving customers. As your company matures, your brand might represent your primary strategic asset — a recognized name that shoppers associate with credibility, expertise and reliability.

Start redefining your company in terms of what it knows and what it owns rather than what it does.

Writer: Morey Stettner is a management writer and trainer in Portsmouth, N.H. He is the author of "Skills for New Managers" (McGraw-Hill, 2000) and "The Art of Winning Conversation" (Prentice-Hall, 1995).