A simple yet powerful audit of your strategy.
By simplifying schemes and anchoring on key fundamentals, most successful sports coaches organize and structure training sessions to develop the instincts of their athletes. The logic? During competition, athletes perform best when they react quickly, instinctively, and decisively to competitive threats or game changing plays. The same can be said for operating room doctors, pilots, military personnel and modern business professionals. Sure it would be nice if, during critical transactions, we could make comprehensive accounts of all relevant information, then think carefully and methodically about the most effective strategy to satisfy a customer or offset a threat. Unfortunately, whether in sports, medicine, military, or business, rarely is there time for such consideration. Thus, we need to train our strategic instincts to be effective in a hypercompetitive world.
We are fortunate to live in one of the country’s most vibrant economic communities. Four Central Florida cities (Maitland, Longwood, Lake Mary, Orange City) were recently named among the best places to start a business. Tampa is one of the nation’s top cities for young entrepreneurs, and Florida is one of the Top 10 states for innovation and entrepreneurship. And we continue to grow! Florida is now the third most populous state in the country, fueled in large part by population booms in Orlando, Tampa and their surrounding counties.
New Market Requires New Nimbleness
The I-4 corridor is growing and has emerged as a great place for innovation and entrepreneurship. That’s the good news. With this growth, however, comes volatility in business performance, increased competition (often from non-traditional sources) and a quickening in the pace of business. In 1960, only 2 percent of “Top 3” companies in an industry fell from that ranking. In 2008, 14 percent of top companies fell. Since 1980, volatility in operating margins has doubled in nearly every industry. The probability that an industry’s market share leader was also the profitability leader declined from 34 percent in 1950 to just 7 percent in 2007.
Clearly, being a leader in a particular market segment is no guarantee that revenues, margins, or market share will be stable. In today’s environment, we often find ourselves having to react quickly (sometimes instantly) to competitive threats, new technologies, and evolving customer demands. To thrive, we have to rely on our instincts.
Let’s simplify a scheme to develop your strategic instincts. Doing so might enable you to make snap assessments of a competitive situation, and guide your reaction to both short and long-term threats. Here are four questions for a simple, yet powerful audit of your strategy. Although the questions are simple, the answers are infinitely complex. (You can decide how extensive a review is needed.) Nevertheless, developing an instinct for this kind of assessment will enhance your ability to react at game speed.
- Where are we now? Try to make an objective assessment of how well your organization is performing (e.g., market share, profit, efficiency) relative to the market, industry, competition, customer expectations, company history and goals – or how well your current products and services match customer demands. This evaluation can take many forms depending on how you define success, but knowing where you stand determines whether you are competing from a position of strength, weakness, or parity.
- What is the nature of our environment? In other words, what trends or contextual factors are driving demand in your business? Answers to this question identify those things that shape customer choice, competitive dynamics, and profitability.
- What unique value is created by our product or service? Good strategy rests on understanding customer choice, which is influenced by the emotional and psychological sources of value that customers place on your product or service. Value, as perceived by customers, does not rest solely on product attributes (e.g., faster processor, bigger screen, aluminum case) but on the emotional or psychological value that customers place on those features (e.g., speed allows me to respond more quickly adding to my perceived responsiveness.) Know this: why do customers choose your product or service? Better yet, why not?
- Are we aligned to support that value? Given that competitive advantages tend to be short-lived, execution and alignment of resources are the primary sources of sustainable performance. Knowing what drives choice, ask yourself, “Are we organized to effectively and efficiently deliver?”
In sum, our population and economies continue to grow – and so does the competition. To be successful in modern business, we need to be able to quickly assess a situation and react decisively, instinctively. Allow this analytical scheme to become an instinct, and you’re ready to compete at game speed.
Ronald F. Piccolo, Ph.D., is the Cornell Professor of Management and Academic Advisor for the Center for Leadership Development and Management & Executive Education at the Rollins College Crummer Graduate School of Business.