The phrase “I’m working in the business, not on the business” is a common refrain we hear from business leaders. The challenge in overcoming this is two-fold — the first is making the time to work on their business strategy and the second is overcoming the challenge of staring at that blank wall and knowing where to start. I always found July was a great time to invest in reviewing your business strategy. You’ve finished two quarters and have a sense of what is occurring in the market, and you are still a few months from diving headlong into your annual budgeting exercises.
Step 1: Where’s the money?
Without going deep into the various strategic exercises or some of the great strategy books (Playing to Win, A.G. Lafley, Roger L. Martin), we’ll keep it simple here and give you a path you can start to follow. The first place we always start with our clients is understanding where do they make money? This goes so much farther than what they sell or what they do, it’s a review of not only where they make their profit but also the intersection of what the market needs. What if you make an incredible margin plowing snow in New England? That’s a tremendous seasonal opportunity. But, what if it’s a light winter, and how do you survive the rest of the year?
Focusing on how you make money starts to take you to your “JUICE” — that value you provide that you want to squeeze from the market. Apple makes money by entangling our lives in our phones, so we can’t be without them. It’s not the product or the technology or accessories; they’ve become entangled with how we live our lives (music, photos, communications, payments, etc.). If you are a manufacturer and provide superior performance coatings for a range of products, the way you make money may be enhancing the useful life of commodity products to gain pricing premiums.
Step 2: What about your market?
The second stage you will want to look at is what is going on with your market and environment? Has the Pandemic changed buying or operation habits? If you are an outdoors manufacturer, has the 12 months cooped up created a new appreciation for the outdoors? Or have your customers changed? If you sold to the education markets, what impacts have Covid created that will last into the next few years? If you were an event/catering provider, your customer base may have flipped on its head from Office & Property Managers to restaurants needing outdoor dining options.
As you bring these market and economic factors on your whiteboard, you’ll want to evaluate whether these are 1-year impacts or could last for 3 or more years. Anything likely to continue into 2023, should be a part of your strategic planning for certain. Be sure you also look at both your external and internal customers. Do you have to be aware of any future changes to your employee base?
Step 3: How to win!
The third and final summary step is to determine how you can win in the expected market environments, and what you need to do so. Start by evaluating where you make your money and what the markets are starting to value. For instance, if I’m a restaurant owner and make money by optimizing my kitchen output and increasing my levels of alcohol sales that gives me a starting point. If the predominant trends continue to be quick service take home with a smaller, devoted crowd that wants a longer yet safer meal experience, I need to develop a dual-track strategy. A strategic approach would be to determine what percentage of your dining area could be focused on higher-end seated tickets while moving food-only orders to an online takeout focus. Can you begin to offer services such as bourbon tastings or wine tastings to encourage the in-person clientele? Or maybe now is the time to consider a special table in the wine cellar for higher-end events.
Ultimately, this final step needs to include where you should be playing in the market and what you need to do effectively. Many businesses say they want to offer certain high-end services but fail to invest in what’s needed. For example, that restaurant owner may want to encourage a high-end wine dinner in a cellar but can only set up a table of 8 due to the current configuration. If the market for this type of experience often requires 12-16 seats, this level of investment may not gain the return desired.
Hopefully, you can see this exercise is quite different from determining budgets and making annual marketing or advertising plan. The only real expense plan that should come out of this exercise is a CapEx plan for investments in people or other resources. From here, you can then take this strategic point of view and begin to integrate it into your annual plans and budgeting. If you would like more thoughts and insights into how we can help you with your strategic process, please reach out to me at tjobe@randinc.cc
