Posts Tagged ‘adaptable strategy’

Change strategy by all means, but maintain direction at all costs

Jul 11th, 09 / 0 Comments

The economic downturn is testing many business plans and strategies.  There is evidence that the reduction in capital investment from the private sector declines faster than the economy, which can be a severe test of many businesses.  (The good news is, for the businesses that survive at least, that there is a balancing acceleration in spending once the recovery starts.)

How do you respond to the economic roller coaster?

How do you respond to the economic roller coaster?

So, is it possible to adapt to changing economic conditions without compromising the essence of your business?

The answer appears to be yes providing you make a clear distinction between adapting your strategy to deal with short term threats and keeping  a clear sense of purpose underpinned by strong values with a clear sense of direction. Using a journey as a metaphor, you can change your route to avoid problems and hazards without changing your ultimate destination.

How does this work in a business context?

To begin with you must have a deeply held sense of purpose with values that are meaningful.  Any tendency to dilute these in favour of a short-term focus on cash or profit will create problems.  Once you have compromised the core business to seek purely financial goals, it is hard to regain the same sense of mission in future.  Also, when the business environment is tough is exactly when and why you need a clear direction, maybe expressed as a vision.  This provides the guidance for all operational decisions.

How can this be achieved?

The key seems to be to make any change to your strategy or business plan both conscious and considered.  That doesn’t mean it has to be slow, it simply means that any short-term change should be consistent with the long-term purpose, vision and values.  So, if an opportunity arises to make cash from an unrelated activity, it might be the wrong decision, despite being superficially attractive.  If, however, there is an opportunity for related diversification, this could be the right answer.  For example, taking a product from the private sector to government, or from a domestic market overseas.

So, in these tough economic times, it is important to look at business plans and strategies to see how they can change.  It is also important to look at purpose, values and vision to see how the short term changes can strengthen these aspects rather than weaken them.

Strategy, economy

Strategy formulation: economic signs mixed but, on balance, no green shoots

Jun 29th, 09 / 0 Comments

Strategic analysis should include an evaluation of the external business environment.  This post could be used as input for the Economy section of a PESTEL analysis.

Continuing the theme of conflicting evidence about the state of economic recovery, today again sees apparently contradictory signs:

The Guardian reports that UK mortgage lending has reached a 13 month high, which reflects growing consumer optimism – which is a key component of the economy independent of data, but net lending figures were at their lowest level in at least 16 years.  The increased house purchase activity supports other, albeit weak, signs of recovery in the housing market since the start of this year.

They also cover a reoprt from the Basle-based Bank of International Settlements which claims that “Overall, governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks”, which further underlines the need for government action to curb the enthusiasm in the banking sector to return to unjustified remuneration for the very managers who allowed these toxic assets to cause so many banks to fail.

The FT reports that the International Energy Agency has reduced oil demand forecasts with global oil demand now forecsat to grow at 0.6% over the next 6 years.  In an extract from the report, the IEA say: ”The recent resurgence in economic activity could…simply reflect the rebuilding of depleted inventories across several industries, making it arguably premature to predict an imminent and strong economic rebound, not least because the elimination of spare capacity, the deleveraging of the private sector in several highly indebted countries and the rebalancing of global demand are still at an early stage.”

The balance of data and analysis suggests that the economic recovery still has a long way to go.  Business strategy, as we have said in previous posts, should assume further setbacks before the economy recovers and the focus should be on agile approaches to strategy that have contingencies rather than trying to formulate definite medium and long-term plans.

Formulation, Strategy, economy

Canute Strategy

May 12th, 09 / 0 Comments

A survey we are running is starting to show that organisations of all sizes are turning their attention to strategy in response to the global recession.  So far, so good.  What is surprising however, is the approach.  The initial indications are that there is an attempt to control events through top-down, prescriptive planning.  This approach works when the world is stable and extendable, i.e. trends can be extrapolated with a reasonable degree of certainty.

The situation we are in now is far from stable, and I defy anyone to predict where employment, inflation, interest rates, currencies etc. are heading in the short term.  Long term we can rely on regression to the mean, but it is difficult to know how long that will take.

The situation we are in now calls for adaptable, emergent approaches to business strategy – by all means use a plan to set a framework or general direction, but please don’t try to manage to a detailed strategic plan.

It may be mythology (at least to an extent), but the story of King Canute is relevant here – he was wise enough to understand that he did not have dominion over the environment and sought to prove this to a credulous people by commanding the sea to recede while the tide was coming in.

Adaptable approaches to strategy are not easy to implement.  They require clarity of purpose, values, vision, objectives and, yes, strategy.  They also require well-defined management processes and a discipline in execution that is far more demanding than just following a plan.  This is what we are doing with our clients and it is the only sensible answer to these turbulent conditions.

Formulation, Implementation, Strategy