Start-up, growth, hyper growth, maturity, decline, reinvention. These are different cycles that all businesses go through, influenced by factors such as competitive dynamics, economic trends (growth/stability/recessions) and market disruptions driven by new and innovative models. All of these can obviously pose a challenge to leadership; raising fundamental questions such as whether the extant strategy of the business remains relevant in the face of such rapid changes and disruptions in the operating environment. Surely, it cannot be that the same strategy will transcend all the different phases in the company’s trajectory.
The frenetic, fast-changing competitive marketplace sometimes creates intense pressure on companies to take reactive, simplistic and knee-jerk actions to be at pace with competition or at least be seen to be. This is especially true of companies managing short-term pressure from shareholders and markets expecting a good story every quarter. So you find companies in some industries literally doing the same things, with the same propositions and offerings in a cluttered market struggling for customer attention. It is sometimes difficult to identify what each company stands for and what differentiates it in the marketplace. This is essentially a mob approach.
While this mob approach may be prevalent, differentiation remains the hallmark of winning companies. Winning must be predicated on developing the best strategies that set the company apart taking all environmental, socio-economic, competitive, policy and regulatory factors into account. Strategy should not be reduced to power point slides consigned into the dustbins of history after the expected annual company review ritual, leaving the company to exist as a ‘free-thinking’ reactive organization to anything that happens in the marketplace.
To win in the marketplace, strategy should represent the very centre of what the company is.
Perhaps the problem begins with whether there is a clear understanding of what Strategy is and should be. A good starting point would be to begin with what Strategy is NOT. Strategy is not a goal or aspiration, an action or set of unrelated actions, a broad vision or mission or an experiment. Strategy is an integrative company position that delivers a unique sustainable advantage. Strategy cuts across the organization and is not merely restricted to specific actions of a specific department with no clear fit with the rest of the company.
Strategy is designed to deliver a unique position for the company in a sustainable manner. It will therefore require deliberate plans and actions over a period of time to deliver the expected results. It will therefore mean that trade-offs and choices will have to be made and followed through. Resources will have to be allocated in executing plans to actualize the strategy. Where priorities are changed routinely with resource allocation implications, this creates confusion within the organization and impairs the ability to execute the right actions in the market with sub-optimal results. It is literally like shooting further away from the sweet spot, the mark on a dart board.
At any point in time the company must be clear on how it wants to win in the market with all resources (people, processes, organisational structure, stakeholders) galvanized and managed to this clear objective with supporting systems and platforms. Another fundamental question arises here. ‘How agile is the company with galvanizing its resources on a continuous basis towards playing their specific part to deliver the winning formula for the company?’ Clarity of strategy provides a ready answer and is therefore particularly critical in the midst of the clutter and noise in the marketplace.
Evidently, economic downturns and upturns are realities in our modern day global interconnected world. What’s important is understanding the dimensions of such downturns or upturns. Procter & Gamble, the World’s leading consumer goods company, doubles its research and development spend during recessions in anticipation of the growth upside which will always come. Some companies may be so busy complaining about the recession or downturn that they may not even recognize when economic conditions change or improve which throw up growth opportunities. Improvement in economic conditions come with improved consumer purchasing power and confidence but then again this may also come with new consumer behaviour influenced by the recession period.
Economic downturns should sober leadership sufficiently to ask themselves the tough questions on strategy – ‘What does this company represent and how can we win in a unique and sustainable manner going forward?’ ‘What makes us different?’ ‘What has changed from our past?’ ‘What does our new reality today challenge us to do differently in a sustained manner to lead our Industry?’ ‘What are the one or two things we must focus on that will make our company win?’ These are deep questions that challenge discerning leadership minds. Questions that may not be asked this intently in times of business growth. When these questions are comprehensively answered and the organization galvanized around clear unique winning themes, you will be building an organization well positioned for growth through economic cycles of recession, stability and growth.
So maybe recessions can be good to the extent that they force companies to stop, think and rethink the fundamental question of how they intend to win in a sustainable manner. That’s strategy; whether ‘inspired’ by recession or otherwise.
Strategy is not an old-fashioned cliché, it remains as critical as ever for companies that want to lead and grow their businesses in a sustainable manner.
“A corporation without a strategy is like an airplane waving through stormy skies, hurling up and down, slammed by wind, and lost in the thunderheads. If lightning or crushing winds don’t destroy it, it will simply run out of gas. ”
Alvin Toffler, American lecturer and author.