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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. That’s 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 company’s strategy and ensuring that your company is pursuing the most profitable business.

Defining Your Company's Strategy

Your business strategy is determining your company’s scope or reach across the following dimensions within your company’s marketplace:

  • the market segments or niches your company can and does serve;
  • the customer needs your company can and does fulfill (or products and services you company can and does offer);
  • the distribution methods that your company can and does utilize to get your products/service to the marketplace (e.g., direct to end users, via intermediary retailers or wholesalers, etc.);
  • the geographic territories where your business can and does exist (e.g., local, regional, national or international).

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 Company’s Strategy

To develop part your company’s strategy, you can categorize your business’s 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 company’s 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 company’s 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 Company’s Strategy

Other ways to develop and utilize your company’s business strategy:

  • Create an "industry and marketing intelligence system" in order to systematically obtain information from your industry, customers, competitors. This will help you in segmenting your marketplace, and in understanding your best and worst product/service capabilities with respect to your competition.
  • Categorize your marketplace (customers) by industry, customer size or other significant demographic distinctions and then list those categories in order of greatest current and/or potential profitability to your business. Then ask yourself how to a) best pursue buyers within the categories at the top of your list, and b) harvest or divest your business of customer categories at the bottom end of your list.
  • Follow the same thinking as above with your company’s products/services and distribution channels.
  • Don’t bite off more cells in your product/market matrix than your organization can chew, for you will spread your organizational resources too thin and be more likely to fail. Chasing after too many "rising stars" can diffuse your organization’s energy. You need to figure out your highest potential marketplace "stars" and pursue those product/market segments first.
  • Don’t try to be all things to all customers. Pick whether your company can best pursue: 1) product or service leadership (being the best in a product/service category), 2) customer intimacy (focusing on serving a broad array of needs in a particular customer segment), or 3) operational excellence (providing best overall efficiency or lowest cost).
  • Align your company’s marketing and sales efforts with your strategy. You may choose to set up separate marketing and sales goals, tactics and materials for different sets of viable cells in your product/market matrix.
  • Make sure that your organization’s policies, processes and people are fully aligned with your chosen business strategy. If they are not, then you may be sending a mixed message not only to your marketplace, but also to your company’s people.
  • Review your company’s strategy regularly. Business author, Gary Hamel has researched that organizations need to reconfigure themselves (their products, services and target markets) every few years just to keep pace in today’s fast-shifting marketplace.

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 people’s passion and energy has a much better chance for success than a perfect strategy with little enthusiasm and drive behind it.

Harvy Simkovits, CMC, President of Business Wisdom, works with owner managed companies to help them grow, prosper and continue on by offering innovative approaches to business development, company management, organization leadership and learning, and management education. He can be reached at 781-862-3983 or .

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