Time to Revise Strategies?

Is it time to re-visit your current strategic plan? If your organization already has a comprehensive, well-defined set of strategies in place, there should be no need to completely re-define your strategies every year. On the other hand, it makes good sense to regularly re-examine strategies in the context of recent results and changing internal and external environments. This need not cause a major upheaval, but it does require some time and careful thought.

We recommend an annual strategic review and update. Depending on your specific situation, this could be as simple as a brief summary highlighting key environmental changes and their impact upon your strategies and underlying assumptions; or, it could require an overhaul of your strategic plan.

Change Indicators

What are some possible indicators that it’s time to consider altering your strategies? Here’s a listing of a few questions for you to consider:

Internal Issues

• What significant changes in your internal environment have occurred since you originally developed your strategies? Ask this question in terms of your corporate mission, internal strengths and weaknesses, product viability, access to distribution channels, and organizational structure.
• Have you altered, for any reasons, your key objectives?
• Have you gained or lost expertise, capacity, or resources?

External Issues

• Are there significant differences in competitive product offerings, behavior, or positioning?
• Have your primary customers changed their activity or behavior toward your firm, or your products?
• Do you see new threats on the horizon such as new regulations, new competitors; or have you noticed any unexpected opportunities?

Performance Gaps

• Are sales and profits on target?
• Do your long term growth goals still seem achievable?
• Is there a strategy that simply isn’t working?

Strategy Review Checklist

To start your annual strategic update, use the questions provided above as an initial checklist. Apply each question to each of your strategies, to get you thinking about some of your critical issues. If you can’t answer the questions, it may be a sign that you need to initiate some research to develop more information.

List any strategy where recent changes cause concern about its continuing validity. This will give you a quick indication which strategies may require more serious re-evaluation.

Achieve More Results with Less Resources

A common problem when you’re revising strategies or adding new ones is that of finding adequate resources to accomplish your objectives. In today’s environment, when it seems that resource budgets are always being tightened while goals are expected to grow, how do you find the people or dollars to go after new opportunities? Obviously, part of strategy development or enhancement must include finding ways to achieve the greatest results with the least use of resources.

A Simple Tool

From this perspective, a simple, but powerful, tool that should be applied to strategic thinking is the "80/20 Rule," also known as the "Pareto Principle." While most readers will recognize this concept, in practice it is often ignored. Otherwise, why do so many companies spread average efforts across too many activities instead of concentrating on the few important things that really matter?

Based on a long history of empirical evidence, this "Rule" merely reminds us of something we have all experienced, even though it may seem counter-intuitive: in most endeavors and business activities, there's usually a lack of balance between efforts applied and results obtained. Thus, we may find, for example, that 80% of profits come from 20% of the customers; 80% of sales come through 20% of intermediaries; or that 80% of revenues derive from 20% of the product line. (Of course, the imbalance does not always show up exactly as an 80/20 ratio. The important point is that a significant imbalance between resources applied and results generated do frequently occur, and it is possible to capitalize on this fact.)

It’s simple to validate this concept for yourself. Consider any set of results that are important to your business: revenues, profits, sales productivity, customer service, market penetration, etc., and then examine their causes or sources. Invariably, there will be an imbalance between input and output.

You are likely to find that:

• a limited number of products account for the lion’s share of your revenues;
• small segments of customers are much more profitable for your firm than others;
• certain employees produce and create results disproportionate to their numbers; and,
• some salespeople far outshine their peers, in terms of sales productivity.

Recognizing these imbalances is one thing; more important is taking advantage of them. Wherever there is imbalance, there is likely an opportunity to create leverage, to your advantage.

Optimizing the Use of Resources

Using the 80/20 Rule as a guide, you will have a pragmatic approach for thinking about strategies that can provide real value. Whenever your firm is considering strategy, include an 80/20 analysis as part of your situation assessment. This will add a more practical element to your strategic thinking. There are two approaches you can follow, and both can be very helpful:

• Quantitative Approach: use actual data from your firm’s experience to examine and quantify relationships between results and activities/ inputs, and to identify the key areas of imbalance.
• Qualitative Approach: when data (or time) is not sufficient, make use of your (and selected experts') "mental estimates" of the imbalanced relationships between input and output. Although not as precise as the quantitative approach, it will help guide your thinking and decision-making.

Contrarian Implications

Application of the 80/20 Rule often suggests certain behaviors that may run counter to what you're doing today, but if implemented, may substantially improve the results you're striving for. Some likely behaviors to consider:

• Selectively focus on that which leverages your performance, rather than providing as broad a range of products and services as possible;
• Outsource activities to specialists who can magnify the results obtained for the same or less budget;
• Develop your "high performers" (and find more of the same), rather than expending resources to raise average efforts across the board;
• Profile your "best performing" customers — then target them and build strategies and tactics to lock them in forever; and,
• Look for anomalies in your business; if something is working unexpectedly well, evaluate the potential for applying more resources to that effort.

Conclusion

The concept of using the imbalance factor may seem simple, but the fact is that many companies are not applying it in practice. It can provide a powerful tool for thinking about your business, that will have immediate effects as well as longterm impact. As you re-think your strategy this year, analyze to determine imbalances; then direct your firm's efforts and attention where you're able to generate the greatest results for the least application of resources. These modest adjustments to your strategic thinking will enhance your strategy and help your firm or business unit to achieve more with less — and sooner. DSG

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