CONTRIBUTION TO SURVIVAL
Does Strategic Management Make a Difference?
Lack of well-directed strategic management, may send all businesses – irrespective of their size and strength – into oblivion or beyond a point, force them to restructure themselves just to survive
Issue Date - 15/12/2011
Businesses, large and small, for profit and nonprofit alike have encountered stress as a result of the downturn of the worldwide economy. Business owners and managers confront lower demand for their products and services. Nonprofit organisations face reductions in contributions and support from foundations and government entities. Whereas it is easier in “good times” to be profitable, and, at times, perceive success, our business fundamentals are tested when the economy changes.
Michael Porter addressed a similar issue at the time that the Internet bubble burst. Many believed that the Internet was a strategy and not a tool. Companies built web-based businesses based on the internet as a strategy with little thought about the customer. The objective of many of these start-up companies was to build a presence based on selling advertising and then selling their company or pursuing an IPO. What did they forget? As Peter Drucker said, “Who’s your customer?” The days are past when your business model did not require you to have revenues in excess of your expenses.
The real need today is to have the ability to choose and focus. Many companies today are like a ship without a rudder. It is important to answer three basic questions:
(1) Where are you now? (You should examine your current market position, your financial position, your human resource position and your other resources.)
(2) Where do you want to go? (Are you simply trying to make a profit or do you have a direction you wish to pursue, businesses in which you wish to operate, and outcomes you wish to achieve?)
(3) How will you get there? (This is fundamental to your ability to succeed. Simply having an idea is not sufficient if you haven’t determined how you will achieve your
When you consider your strategy, you need to be specific about your market position, how you will attract and please customers, how you will compete successfully, how you will conduct your operations and how you will achieve your organisational objectives. Strategy is not magic. It requires moves to strengthen your long-term competitive position as well as your financial performance. As is the case with sports, both offense and defense are required. Strategy deals with a company’s competitive initiatives and business opportunities, whereas your business model concerns whether revenues and costs flowing from your strategy demonstrate that the business can be amply profitable and viable.
Crafting your vision is an exciting activity. Many businesses fail to do this, to create a vision that is electrifying and provides energy to the organisation. Employees at all levels want to be part of an organisation that has a clear direction to their future. Companies without a clear vision do not inspire employees. As I work with executive students and fully-employed students, I find that a large number of them are disenchanted with their companies because they are not inspired by the direction of their companies. When I ask them to find out what the vision of their company is, I generally meet blank stares. If your employees are only working for a paycheck, you have not captured their hearts and minds; you only have their hands and brains for the time they are “on the clock.”
As I examined nonprofit, social service organisations, I discovered that people with great capacity spend their time volunteering at a nonprofit organisation because they believe in the mission of the organisation. These same employees work somewhere else for their paycheck but focus their energy on their nonprofit organisation. The interesting question is “how do we engage employees with the same level of commitment in our organisation that they have when volunteering?” Without an inspiring vision and mission, I suggest this will not happen. So what is the mission? Your mission must be specific and idiosyncratic to your organisation. It needs to capture “who you are and what you do.” It needs to be something that captures the essence of the organisation in a very short statement – something that employees easily remember.
Consider my idea – if you and your employees have an exciting vision of where you are going and a clear vision of the mission that you have, then you engage the entire organisation on a different level. Why would anyone miss you or your business if you are not able to articulate who you are and what you do?
There is important analysis that needs to be part of every organisation’s planning process. This involves examining the external as well as internal forces that impact your company. Earlier, I mentioned understanding your internal resources. As to the external environment, you need to consider the economy, legislation, your industry trends, market changes, et al. Again, this takes time and effort. However, if you don’t understand your external environment and internal resources, it is impossible to craft a direction for your company. Many organisations employ a SWOT analysis to assist them (Internal Resource Strengths and Weaknesses and External Opportunities and Threats). Your Resource Strengths allow you to take advantage of External Opportunities and defend your organisation against External Threats. Conversely, your Internal Weaknesses prevent you from taking advantage of Opportunities and make you vulnerable to Threats.
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