The Need for Focus

[Editor's Note: Over the years, our firm, The Mead Consulting Group, has been asked to evaluate or "validate" a company's strategic plan and its planning process. What we have found is that the processes for companies in the lower middle market vary widely and some are counterproductive. There are some common issues that are listed in this article. Do you recognize any of them?   - dpm]

Too many strategies and initiatives

Often we see plans that have numerous strategies and initiatives. In one $60M revenue company, there were 17 major initiatives and strategies - so many that all of them couldn't be listed on an 11x14 sheet. When we asked the senior managers to list the top 3 priorities, we got a different answer from each of the managers. An organization can't tackle that many priorities at once. Not surprisingly, this organization had a history of not completing projects. 

Shiny Rocks - moving quickly from one idea to another                              

Sometimes the CEO has one great idea after another and overwhelms the team by abandoning one strategy or initiative to move to another. In these companies, strategies are never fully executed. There becomes a tendency for employees to just duck their heads down and wait for the current "new project" to blow over. There is little commitment to the "strategy du jour." These companies have flurries of activity, yet few accomplishments.  

No "what we are not going to do now" list

As important to narrow the focus of a company's strategic priorities, it is important to develop of list of things that the organization won't do. This is the most difficult task for companies. No one wants to move worthy projects or initiatives to this list. However, if an organization is to accomplish the top priorities, the others must be tabled - at least for the current cycle.  

No agreement on the priorities  

In some organizations, the plans are developed but there is no agreement among key functions and managers about the priorities. These organizations fail to mobilize to necessary resources to execute well.

Developing strategies that the organization cannot execute well

Many organizations develop strategies that either the market won't accept, or that the company does not have - nor can get - the resources or talent required to execute. I tell a story (somewhat tongue in cheek) about a mythical meeting at Kmart where some manager recommends a strategy to emulate the Nordstrom model. No matter how much money is spent, there is no way the market will accept Kmart adopting a Nordstrom model.

The Power of three.  

We believe that for lower middle market companies, there should be no more than three major strategies undertaken in a planning cycle. We find that when companies execute two of these strategies well, they will be very successful.

The Mead Consulting Group has been helping clients develop and execute Strategic Growth& Execution plans for many years. Check out our website for descriptions of some client success stories.

Determining the best strategy for each product or line of business

[Editor's Note: Several of you have asked me to discuss the Portfolio Management Matrix approach to product lines or businesses. Hope you find it useful.             -DPM]

As organizations grow, and markets, businesses, and products become mature, new products are launched, new lines of business are introduced. The complexion of the competitive landscape changes.

Consider a few questions before you embark on strategic planning:

1. Should you treat all of your business lines or product lines the same?

2. Should you have the same expectations for growth of revenue, profit, and cash flow?

3. Should investment be the same? Staffing? Marketing?

4. Should measurements and objectives be the same?

Manage your business units and product lines like a portfolio - they are all at different stages of maturity, different competitive positions in the market, have different needs, and require different approaches. We advocate a "portfolio management matrix" approach to planning.  

After completing an evaluation of each product or business line's position in the market, position it on the matrix In Figure 1 (Below). The matrix denotes economic attractiveness on one axis and competitive strength on the other. How attractive economically is the market to the Company relative to its strategic objectives. What is the strength of the Company's position relative to the market and the performance of competitors. Be honest. We have encountered some management teams that resist the recognition that a product line or division is mature or aging and or that it no longer has competitive superiority.

Business A (in red on the below matrix) - this business is in a very strong competitive position (able to take some actions without fear of competitive response) with high economic attractiveness. In this position, the company should maximize its investment, protect and enhance its competitive position, grow with the market, maintain technology, and seek to dominate the market, but be careful to not cash in too soon.

Business B, on the other hand has a weak competitive position with weak economics. This business should be harvested rapidly (exit or divest) with an emphasis on maximizing cash flow by reducing costs and assets.

Each position of the matrix has its own strategic implications with specific options.

Figure 1. Portfolio Management Matrix

  

High Economic Attractiveness	Selective Growth  & Profits      ___________           Selective Investment	Growth & Market Position                        _____________ Selective Investment in Advance of Market	Growth     __________                                                     Invest at  market rates Business A
Medium Economic Attractiveness	Profits & Cash Flow   ___________ Selective Harvest	Profits _____________  Maintain Investment	Growth & Profits  ____________   Selective Investment
Low Economic Attractiveness	Cash Flow ___________ Fast Harvest Business B	Cash Flow ___________ Slow Harvest	Profits & Cash Flow      ___________ Invest at Maintenance Levels
	Low Strength	Medium Strength	High Strength

                                              Competitive Strength

 

Some rules of the road for using the Portfolio Management Matrix

 

• Keep positions on the matrix generic. Some organizations and models have names for the various positions on the matrix. Keep them generic. Don't label them with "cute" or descriptive phrases such as "high flyer", "dog" or "loser." Your management team will treat them accordingly. After all, who wants to be associated with a "loser."

• Be Disciplined - Don't over or under invest with businesses or products. Companies in mature industries tend to smother "newbies" and demand profitability too soon. Likewise, growth companies can be impatient with slow-growth businesses or products.

• Develop Role players
  Cash generators fund growth opportunities. Embryonic and growth businesses or products are the future of the overall company. Every business/product has a role to play in the healthy ecosystem of the portfolio.

Many of our clients are starting now on the strategic planning process for 2018 and beyond. The key to success today is develop flexible approaches to strategic planning and update quarterly with market events as the year progresses. If you would like to discuss how Mead Consulting might help your company begin the process of adding value and moving your company to the next level of performance, please contact us.   

Best regards,

Dave Mead