Strategic Position
Methods of Advanced Management
Season 1 Episode 2
7-22-24
From The Top: Planning and Focus
What is the primary focus of your organization? Whatever it is, your decision-making priorities show it to the world, regardless of your claims.
You have to choose: Do you want to be known as a company providing the most reliable service, the most features, the lowest cost, the most technically advanced??
What drives your organization??
Only one factor can serve as the primary driving force. Your strategy must focus on that factor. All others are subservient.
The claims that you make don’t matter in the long run. The business news has daily examples of strategy gone awry. A recent case is Boeing. Their strategy for twenty years has been to maximize profits and share price. It has not been to be the leader in technology, to build the most reliable aircraft, to provide the best service, the best value, etc. The secondary strategic goal, in support of the first, was to develop a near monopoly position, to dominate the marketplace. They achieved this and may lose it.
Car service companies have developed similar strategies. Their service is declining, the prices are up, they have developed a near monopoly position in many markets, etc.
Any senior manager, owner, management team and board of directors need to look carefully at this series of factors. Tesla’s board is thrilled at their profitability and stock price. These are their primary drivers of strategy. Now they can watch as competitors pass them by in the fast lane with more advanced technology, equal reliability, better service, and more affordable products.
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I once had a client, a major global design-engineering-manufacturing company, that decided its new strategic thrust to lead the market would be to increase sales by ‘giving the customer what they want.’ That sounded good until the sales team signed contracts to deliver machines with capabilities that violated two of the laws of thermodynamics. The design-engineering VP was not consulted. He was? not happy. The discussion of the various team leaders involved [sales, marketing, engineering, manufacturing, service] degenerated into shouting and chair throwing.
Another client, this one I decided not to work with, decided that to save costs and boost profitability they would utilize the promise of new automated design and computerized simulated tests of their manufactured goods. Gone were the days of Failure Mode and Effects Analysis and other standard quality and productivity engineering tools. Naturally, 100% of all new production had to be reworked manually because of fit and performance issues. Many angry customers resulted.
So: each of the strategic choices above has to come with a caveat.
Here are some examples:
The business in which I grew up outlasted 100% of its competition by charging the highest prices, providing the highest level of service and the widest range of inventory. That was a strong strategic position until the industry consolidated, and the government approved monopolies.?
In fact, the strategic goal of companies like Lyft and Uber could be stated as:
“Achieve market dominance through unregulated monopoly positions, allowing progressively higher rates and lower levels of service.”
I was once asked to explain to a group of investors why a particular company wasn't providing the level of return expected. The company said that the problem had to do with the cost of benefits embedded in a union contract. However, an analysis showed that the company was tanking because of very high warranty costs resulting from poor quality production and quality control methods.
On the other hand, a client in the medical research and analysis field has stated that they will maintain a strategy of scientific leadership first, supported by high levels of service. They are profitable enough. They are able to attract top people even though they don't pay the most, but they are competitive. Their strategy is clear. They meet it.
You can't plan without a clear strategic focus.