Stuck in a rut? 6 steps to strategically reset and revitalize your company
REUTERS/Chip EastApple's launch of the iPod and, more importantly, iTunes helped turn around the fortunes of tech company teetering on the brink. Many organizations today, including Live Nation, the Wall Street Journal and Blackberry are experiencing similar scenarios today. Getting out of their ruts will require a strategically planned, timed and executed "reset", writes Mitchell Osak.
For the last five years, companies have been struggling to cope with stagnant growth, shrinking margins and reduced product differentiation. The next five may be downright dangerous, especially given today’s powerful headwinds. For some organizations like Volvo, Canada Post, Barnes & Noble and Olympus, their very reason for being is increasingly in doubt. To prosper, all companies need to soberly assess whether its time for a strategic reset — before it’s too late.
A strategic reset is a deliberate (but not rash) pivot away from a stagnant market towards new growth market(s), often driven with a revitalized business model and management practices. Resets are often needed for mature brands, divisions and even entire companies. Many firms like IBM, Cisco, Apple and Xerox have adroitly managed these pivots while others like Blackberry, The Wall Street Journal, and Live Nation are currently struggling to pull them off.
Symptoms of decline usually include deteriorating financial returns, limited pricing and channel power and high levels of customer dissatisfaction. According to our experience and research, firms should start worrying if they find themselves facing:
Falling market attractiveness: The size of the market by revenue and volume is flat or declining. At the same time, your costs continue to grow leading to shrinking margins.
Minimal brand differentiation: Customers perceive little, meaningful difference between products and tend to switch often.
Looming external threats: Large markets are appealing for disruptors when barriers to entry are falling and incumbents appear complacent. New players (think Apple’s iTunes circa 2003) unencumbered by legacy assets or culture can exploit new technologies and channels to leapfrog incumbents and reorder markets to their advantage.
An underperforming business model: In many cases, your business model is not delivering a sustainable competitive advantage. For example, your patents have expired or have been bypassed; it is difficult to maintain cost competitiveness or deliver meaningful product innovation; and, finally, the way you create value has become obsolete due to industry developments like the emergence of open-source software.
The strategic danger is further magnified by the economic realities of the day such as globalized competition, increasing regulation and the rapid dissemination of new ideas. Declining internal performance combined with this dynamic environment can create a perilous situation where adverse changes in a firm’s competitive position can come quickly and out of the blue.
To strategically reset their business, we recommend CEOs follow these six steps:
Acknowledge the strategic challenge: All executives need the facts and courage to face reality, as well as the alignment and perseverance of the organization to move forward.
Know your core competencies: Pivots are easier and faster to execute when you leverage your core capabilities. It is vital to understand what these are in terms of skills, assets and market relationships.
Find a winning value proposition for an appealing market: Recognizing your future is not an easy process and should be undertaken as an iterative strategic and innovation process, not a static exercise. Not surprisingly, successful pivots will target your existing customers in existing or new segments. You will need to deeply understand their current and unmet needs to fashion a powerful, new value proposition.
Redesign your model: Winning in your target market will often require a re-tuned business model to profitably deliver your new value proposition. To move forward smoothly, it may be necessary to cast aside traditional management practices such as how you determine ROI, organize your staff and measure results.
Move boldly but prudently: A reset involves a balancing act between safeguarding current revenue and investing and re-organizing around a new business. Furthermore, it will not always be clear where the next home run will be. Savvy managers will test a lot of promising innovations before making any big bets. Given the risks and urgency, firms will need to foster world-class execution efforts.
Nothing breeds complacency like success. The CEO and board cannot let this happen. It is better to manage your destiny than wait for events to overtake you. A strategic reset, however, will take guts and guile. Most managers will find it easier to ignore realities and resist change than to embrace it. A healthy first step is to recognize that renewal is about building a bridge to the future without burning the bridges from the past.
Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of strategy and organizational transformation consulting and educational solutions to global Fortune 1,000 organizations. Mitchell can be reached at mosak@quantaconsulting.com
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