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Find the sinkholes in your strategy

No strategy is ever perfect, says Ken Favaro, writing for Strategy+Business. But it takes great leadership and confidence to recognise this.

The author poses two questions to help you work out just where your company’s weaknesses lie:

Question one – your company’s capabilities: “What distinctive capabilities make your company better than any other at how it adds value to its individual businesses, and how those businesses meet their promises to customers?”

To answer this first question, you will need a solid understanding of your company’s defining value propositions.

Truly comprehending what your company does best will help you make better decisions about everything – such as buying and selling businesses, prioritising product development, and choosing which customers to target or which markets you should be in or out of.

But all too often, warns Favaro, this first question reveals where a company’s weaknesses lie. Some leaders are unable to pinpoint their value proposition or define their target customers, for instance.

These leaders are unsure about what strategy really means, confusing it with the company’s mission statement or goals, explains the author.

Question two – your company’s world: “Are there any changes happening in your company’s world that could render its distinctive capabilities obsolete or insufficient?”

Countless companies have been killed off by industry changes that rendered them obsolete before they could reinvent themselves.

Examples include Pan Am and TWA, victims of deregulation; Kodak, one of many companies killed off by digital technology; and Blockbuster Video, which failed to reinvent itself when e-commerce burst onto the scene.

But the successful reinventions of companies like IBM, Intel and Nike prove that it is possible to manage capabilities that are teetering on the brink of obsolescence.

“Few companies in any sector can afford to ignore the second question,” warns Favaro.

To survive the ever-changing digital landscape, companies will need to continue developing new capabilities and new business models.

“Most strategies have sinkholes”, concludes the author. The obvious ones are easy to spot and therefore easy to avoid. More pernicious are the sinkholes that “develop more slowly, becoming apparent only when it’s too late”.

Keeping up with your company’s changing world is the only way to survive these.

Source
Ken Favaro