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|Plotting a Business Management Strategy
Harvy Simkovits, CMC - Published in Mass High Tech 9/6/99
Smaller companies generally know their customers well. Thats because small business owners and entrepreneurs work to keep close tabs on their customers in order to survive in business. However, smaller companies sometimes lose sight of their overall business strategy and end up wasting time, energy and money chasing after the wrong business. They may also miss seeing the signs of change and stick to a strategy that is no longer viable in the marketplace. Here is a simple and effective method for defining your companys strategy and ensuring that your company is pursuing the most profitable business.
Defining Your Company's Strategy
Your business strategy is determining your companys scope or reach across the following dimensions within your companys marketplace:
Strategy is figuring out the best formula or mix across these four dimensions for generating the most profitable and potentially profitable business. Your strategy also positions your company in relation to its marketplace allies/partners and rivals/competitors. It makes little sense to work with customers, products, services, distribution channels, or in territories where there is little hope for current or future profit, thus company sustainability.
Developing Your Companys Strategy
To develop part your companys strategy, you can categorize your businesss market segments and product/service offerings and then create a "product/market matrix" (with market segments on the horizontal-axis, and product/service categories on the vertical-axis).
For example, one swimming-pool maintenance company created their matrix by segmenting its marketplace into A) brand new pool owners (those having pools less than one year), and B) existing pool owners (everyone else with a pool). They then differentiated their product/service offerings into 1) first-time pool startup, 2) ongoing pool maintenance services, 3) providing pool consumables, and 4) pool refurbishing or decommissioning.
It is important to identify the specific cells in your companys product/market matrix where there is greatest potential for business profit and where your business has, or can quickly develop sufficient work capabilities and delivery performance. The mentioned Pool Company was very capable and successful at pool maintenance service for both new and existing pool owners. (This was their so-called "cash cow" business.) They then built upon that success to bridge into offering other products and services in their matrix to those customers, like selling pool consumables and providing pool refurbishing or decommissioning. (That became their new "rising star" businesses.)
Another important aspect of strategy is for a company to generate marketing, sales and service efforts for improving their penetration into profitable cells in their product/market matrix. The Pool Company used its reputation and word of mouth marketing to generate referral business with existing pool owners. However, for new pool owners, it chose to target them through cultivating relationships with pool retail and construction outlets.
Also, synergies (connections) among the cells in a companys matrix can be sought and pursued for increased company growth. The pool company used its reputation in pool maintenance to add new services of pool refurbishing or pool decommissioning for appropriate existing pool owners, yet made sure it did not compete head-to-head with pool construction companies. Last, obvious synergy came from continuing to service new pool owners as they crossed the imaginary line to become existing pool owners.
Utilizing Your Companys Strategy
Other ways to develop and utilize your companys business strategy:
By thinking through and following the above formulas you can develop a clear and consistent business strategy that can give you a step up on your competition. Also remember that your strategy does not need to be perfect. Popular business author, Tom Peters, has demonstrated that a reasonable strategy supported by peoples passion and energy has a much better chance for success than a perfect strategy with little enthusiasm and drive behind it.