The Hard Management approach to strategy
The diagram above is a broad outline of the strategy
development process. Click on the the boxes to jump to
the relevant section.
What is the company attempting to achieve?
What does you believe to be important?
The danger in this part of the process is that one emerges
with a woolly statement consisting of platitudes that
could apply to any company "To be number one in our
chosen markets". Hardly inspiring! At the beginning
of the process we should be painting a picture (a vision)
of what the future will be like for our company - a vision
that is inspiring and
that will provide direction for the rest of the strategic
process. We need to be clear of our values - how are these
reflected in the vision?
Although we are explaining this approach as if it is
a linear process, each step logically following from the
previous, this is not how it works in practice. It is
an iterative process
- we may find out information later that leads us to change
our vision.
In this stage we consider the position of the firm. A
large part of the activity here is data collection and
research - but of course, one needs to know what
to look for!
- macro-environment - PESTLE
analysis
- markets, competitors, products, suppliers
- finance - cashflow, ratios etc
- processes, systems
- staff - culture, skills
In particular we need to gain a clearer understanding
of the key performance drivers
in our business, often intangibles such as brand, relationships,
R&D knowledge, skills ....
Strategy is about the long-term. In the long-term the
company can do almost anything and at this stage we should
be exploring all possibilities, shattering our current
paradigms. In the previous stages we should have been
examining many sectors other than our own - firstly, because
potential threats could come from almost any direction
and secondly, because of the opportunities to enter new
markets or adopt new procedures.
A fundamental part of our approach is helping managers
to create "differentiation"
- and to explain the difference between being differentiated
and merely different. Differentiation is the foundation
of sustainable competitive advantage.
Often at this point we realise that we are severely short
of information and we need to gather new data. We are
also likely to revisit our vision.
Strategy is as much about deciding what not to do as
what to do; in fact for many firms, their strategy would
be better understood by their staff if it was in the form
"we will not seek to sell to this type of customer."
Why? Because strategy is about focus.
Strategy defines how you will channel all your resources
and energy - any energy expended elsewhere harms your
business.
Strategy requires the selection of target customers
- and with these come competitors. We need to decide about
products and services, pricing, channels, branding - thus
much of "strategy" is in large part "marketing
strategy".
If we return to why a firm exists: "to make money".
Then it is clearly necessary that managers understand
the financial implications of
their strategic choices. More important than the balance
sheets and profit and loss accounts of conventional accounting
is "value management" - a profitable firm could
in fact be declining in value. We have to ensure that
we are generating an adequate return.
For more information on value management, click
here.
So many strategies fail not because they were bad strategies
but because of poor implementation.
Critical performance drivers should be identified and
action plans and measurements developed around them. The
Balanced Scorecard has done much to remove the
emphasis on purely financial measures and to shift attention
to those elements that drive financial performance. Managers
need to be aware of what and how to measure - from brand
through to relationships with suppliers.
What gets measured gets done!
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