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Creating breakthrough strategy - parts 4 and 5 (of 6)


strategic framework 4 and 5.png

In my first two blogs on creating breakthrough strategy (here and here), I discussed how to do a situation analysis and how to select and prioritize your initiatives. Overall, it is important to bear in mind that the purpose of any strategy is to win. In this blog, I cover investment categories and ways to measure the impact of the investments. Next time I will cover elements worth considering for your implementation plan and what the timeline could look like.

Investment categories

The main categories of investment to consider when working on growth initiatives are as follows:

  • Additional people: whether the people work for you or for subcontractors, the only way to get more work done (at any given level of efficiency) is to have more people to do it. In large matrixed companies, there can be a trap at budget time. Someone, for example the CEO or CFO, may have decided that it is a good idea to have no more than a certain number of people. Sometimes this is for a good reason, such as a desire not to have to move to a new building. Other times it is just arbitrary. The result of such decisions is “balloon-squeezing”, with work being moved to subcontractors (or back) depending on what the current constraint may be.
  • Training: improves the skill levels, efficiency and win rates of existing people. The challenge is to determine its effect in advance. It can be done.
  • Centers of Excellence or incubators: these are centralized teams of resources that can be used by decentralized entities to get work done in new areas. Let’s suppose one of your strategic initiatives is to grow your business selling things to companies that offer car insurance. At the start of the initiative, you don’t have anyone who understands car insurance. Rather than simultaneously hiring people in every geographic location you have, you can hire a relatively-expensive central team that travels extensively to make deals happen. As your strategy becomes successful, you add local teams.
  • Client engagement: in the words of former HP and current Oracle CEO Mark Hurd, “The first rule of selling is that you have to show up.” If you have decided that you will sell parachutes to the 100 largest hedge fund companies on the planet, you need to work out how many sales and pre-sales people it will take to do so, over-staffing for natural attrition. I remember when Mark started with HP and discovered that we had no sales leaders assigned to a substantial proportion of the Fortune Global 500. Of course we had partners selling to them, but that is another story.
  • Pursuit funding: can be a critical item where your strategy is dependent on large deals that will take a long time to close. Providing the technology needed to run the Olympic Games is an example of something with a long selling cycle. Outsourcing also has long sales cycles. Unless you explicitly fund what can be multi-year sales cycles, they will die off within your first financial year.
  • M&A: worth many blogs on its own. I have spent years of my life in this area and been formally trained. Surprisingly, many people who work on M&A have no training. Their biggest gap is usually in the correct method of valuing target companies. There is only one correct method, and that is Discounted Cash Flow. Once your “expert” talks mainly about valuing companies using pseudo-science like “earnings multiples”, you should just walk away. They do not know what they are talking about, even if they are a partner in an accounting firm, or indeed your own CFO. Most acquisitions are unsuccessful, and you should not do them unless you really have no other choice. Just remember to ask anyone who presents themselves as an expert where they did their specific M&A training. If the answer is "as part of my MBA", or similar, I suggest changing experts.

Measuring the impact of your investments

Since the purpose of any strategy is to win, measuring the impact of any investments needs to be about whether you are winning or not. Here are the three main things to look at:

  • How is your market share trending? This is not about growth on its own. If you are growing 10% in a market that is growing 20%, you are doing badly. Of course if you were only growing 2% and are now growing 10% in that same market, your investments are having an impact. The primary method of measuring the success of a growth strategy is whether you are growing compared to your competitors.
  • If your strategy is closely tied to a relatively small number of large customers, the measurement should be the “share of wallet” trend. Generally, large customers are willing to tell you how much they spend on something across all competitors, and you should monitor this one by one. For ICT, IDC and others provide market size data. Your teams will complain that it is all incorrect, but the numbers “at the bottom-right corner” of the spreadsheet are usually correct. If someone tells you that the number in France is too high, you should ask them to suggest what number is therefore too low. Tricky.
  • And of course your financial results matter, since your strategy (as explained in part 1) is to provide superior value to customers and returns to shareholders.

Beware of people coming up with the metrics after the event. By this I mean that the strategy document must state how success will be measured. If you can pick and choose metrics later, you will wind up trying to fool yourself.

More soon.

Maurice FitzGerald - Customer Experience and Strategy consultant
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About the Author


Maurice FitzGerald ecently retired from his position as VP of Customer Experience for HPE Software after a career in hardware, software and services at DEC, Compaq and HP.

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