San Francisco, CA (PRWEB) February 25, 2013
Newport Board Group is a partnership of board directors and senior executive leaders. We assist growth, middle market and private equity portfolio companies to navigate transitions and improve performance.
Most public companies engage in a strategic planning exercise at least every three years. Private companies often skip strategy development, considering it to be theoretical, even bureaucratic. Private companies tend to move quickly to “GOT” (Goals, Objectives and Tactics) due to time constraints and the fact that in most companies, the CEO serves in effect as the part-time chief strategy officer in addition to many other roles. A typical Goal might be to be the leading producer in the industry. An Objective might be to grow 10% in 2013 while a Tactic might be an action to achieve the Objective such as increasing the number of sales professionals. Where’s the Strategy?
While these are all important, Strategy should be on the agenda first. It is the indispensable first step where a company identifies potential growth markets and opportunities for the organization’s limited resources while aligning working capital investments to support the execution of that strategy. In essence, Strategy is the journey towards the Goals and Objectives destination.
Companies without an effective strategy often end up in “No Man’s Land,” the place where growth has slowed or stopped for a variety of reasons:
- Market – the management team struggles to do for customers what the founder had successfully done when the company was small.
- Management – the company has been unable to develop a high-capability management team that can take the company to the next level.
- Model – the company does not have a profitable economic model at a higher scale, and it has not created an infrastructure to support growth and to compete successfully with larger companies.
- Money – the company does not have capital to fund the anticipated level of growth.
Companies can often move out of “No Man’s Land” or avoid stagnation by adopting clear and precise growth strategies.
Seven Growth Strategies
1. Core Strategy – a basic strategy could be an expansion of your core product offering--geographically or to new customers and markets. Many companies achieve growth by sustaining leadership in their own product line. They often fail when they try to expand into new products or services. According to a study by Bain, 78% of successful companies have only one core business.
2. Adjacency Strategy – are there “adjacent” areas around the company’s core products or services that are natural extensions of the core? Examples might include a daily car rental company adding an hourly “Zip Car” offering to its product line.
3. Extension Strategy – extensions involve the concept of the “extended enterprise.” Consider reaching beyond natural adjacencies to product or service extensions that might position the company for growth beyond the core business. A classic example would be American Airlines and the creation of the SABRE reservation system.
4. New Channel Strategy – consider entering new markets through alliances, partnerships, mergers or acquisitions or even franchising your product. Alliances and partnerships might be a less capital-intensive way of growing the company without having to make an investment in new production facilities or inventory.
5. Reinvention Strategy – products go through a natural life cycle, but often come back in vogue due to innovation or consumer tastes. Consider the auto industry and its reintroduction of the “muscle” car. Private companies may need to reposition or innovate to rejuvenate their products or services to begin a new life cycle.
6. Recovery Strategy – A “reset” strategy may be called for when a product or market decision did not work as expected. Reflection is needed to understand what went wrong and how to correct it. Consider the example of how RIM (Blackberry) has recently reset to reposition itself in the PDA market.
7. Redefinition Strategy – consider redefining the core of your business. The classic example is a printer manufacturer who virtually gives the printer away for the future revenue stream of ink cartridge sales. What are the sources of recurring profitable income and how can the company redefine its product or services to capture growth? Is your company’s position in alignment with customers’ needs and customers’ perceptions of your business?
By taking a close look at the company’s products and strategic alignment, companies can take the first step in moving beyond “No Man’s Land” and position itself for growth.
Michael Evans ((415) 990-1844) is Managing Director of the Northern California practice of the Newport Board Group.
Mark Rosenman ((917) 549-4064) is Newport’s Chief Knowledge Officer.