Stress test your strategy


Thousands of managers have just completed or are in the process of delivering their yearly strategic plan.  Unfortunately, many of these plans will fail to meet management expectations resulting in missed opportunities, wasted capital and reduced competitiveness not to mention senior executive career risk.  The business plans will miss the mark for many good reasons such as unforeseen competitive actions or supply chain disruptions.  Yet many plans will also fail as a result of fundamental strategic errors due to flawed assumptions, management bias and poor analytics.   

To reduce their downside and maximize the upside, prudent CEOs and Boards would be well advised to “stress test” their plans by asking a variety of probing questions, three of which include:

Do we really know and target the right customers?

One important strategic consideration is the decision of who is the primary customer.  Many companies fail to identify and focus on the largest and most profitable customer segments for their value proposition and business model.  In reality, many firms resist choosing just one customer type either because their value could appeal to many segments (i.e. “Who doesn’t want lower prices?”) or because they just can not properly identify and segment their high potential customers.  Poor choices around customer selection typically results in strategic confusion and missed opportunities.  

As well, numerous companies assume their customer’s needs are relatively static on a yearly basis.  In reality, customer needs, perceptions and habits shift over time, due to changes in demography, fashion, social-economic profile and general economic conditiions. Recognizing and addressing these changes can make the difference between plan success and failure. 

Do key business drivers get enough attention?

Countless managers embrace metrics and scorecards, following the old adage that “you can’t manage what you can’t measure”. All too often, strategists utilize so many metrics (e.g., customer satisfaction, loyalty, trial, Net Promoter Score etc)  that they can not manage the forest through the trees.  The result is often conflicting priorities and strategic confusion.  Having too many metrics also compromises one of management’s scarcest resources, attention, and will stifle innovation by reinforcing incremental thinking.

In other cases, organizations will focus on metrics that are not linked directly to what drives the business. Poor metrics will also illuminate symptoms of a problem while masking the root causes.  As a result, managers will often adopt the wrong strategies and tactics.

Is scare capital and focus optimally allocated?

Devising the right business strategy does not guarantee plan success.  Organizations need to make sure that their scare capital, attention and capabilities are deployed in the most effective and efficient manner.  Too often, sufficient investment is not directed at the strategies that address the highest potential opportunities. Instead, managers are often unable to prioritize strategies or feel internal pressure to spread the investment around. To ensure congruence between goals and means, senior managers must ensure that key priorities cascade down and across the organization and that major initiatives and strategies have formalized capital commitments. 

No panacea that can minimize all the risks associated with a strategic plan.  However, firms can improve their odds of success by asking some important questions about the accuracy of the data, the practicality of the plans and the validity of the assumptions. 

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

Advertisements

1 comment so far

  1. Amourbaro on

    Sweet site, I hadn’t noticed mitchellosak.wordpress.com before in my searches!
    Keep up the great work!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: