In the past quarter, we have worked with companies that are facing an increasing array of challenges, including evaluating non-strategic acquisition candidates, finding better ways in which to communicate, gaining consensus on and implementing internal business processes, and planning for management succession and organizational reorganization. Some of our clients have hit a critical growth point and do not know how to successfully expand. Others would like to proactively grow beyond their current market positions. Some have simply realized that, although business is profitable, a formal strategic planning initiative could help to align internal business functions and improve efficiencies.

The benefits provided by the thoughtful development and implementation of corporate strategy often go unrealized. In this issue of our newsletter, we discuss the impact of corporate strategy on business performance from three different perspectives:

1. The impact of corporate strategy on organizational and operational effectiveness,

2. The importance of scope in defining strategy, and

3. The relationship between corporate strategy and positioning.

We look forward to seeing you soon.

Best,
Danny, Eileen, and Marc

Businesses that maximize organizational and operational efficiencies are often able to do so as a result of a well-defined, well-articulated corporate strategy. Corporate missteps can take place at any time throughout the business lifecycle, and occur most often during start-up, while managing mergers and acquisitions, in adapting to change, or when coping with competitive pressures. Developing and communicating corporate strategy best prepares a company to deal with these, and other, business challenges.

Standing-Up Start-Ups

Every business can trace its history back to some, often very humble, beginning. Many of today’s largest, most successful businesses were founded by one or a handful of like-minded individuals in more modest circumstances that their current employees would tolerate. Owners and managers of new businesses too often rely on intuition and previous experience as opposed to proper process and planning. The development and execution of corporate strategy allows new enterprises to identify long-term goals and those objectives and tactics required to accomplish them. Further, the development of strategy at an early stage best prepares businesses to attract financing, identify competitors, understand market conditions, recognize risks, and mitigate threats.

Ignoring Permanent White Water

Any organization that has experienced growth has had to navigate difficult choices and rapidly moving waters. One of the most difficult aspects of growth is failing to properly manage change, choosing to ignore rather than deal with it. We often find that established and growing businesses that fail to address change today previously adapted to change quite well – resulting in their prior success. Consultants frequently speak about their clients’ “resistance to change.” It is our belief that people in organizations instead fear negative fantasies of life after change – which can have a crippling effect on a business. Proper development of corporate strategy embraces change, and proactively considers contingencies and their impacts on their people.

Managing Mergers

There seems no faster, easier way to destroy value than to carelessly enter into a merger or acquisition. Perhaps this is because nearly any example of business failure is illustrated in examples of mergers gone wrong. The stresses associated with acquiring and integrating a company routinely expose organizations’ weaknesses, and often contribute to new ones. Perhaps this is because of the process: internal communications with employees is muted during negotiations; word begins to leak out; employees fear for their jobs, being moved, or having to do things differently; integration post-merger encounters obstacles that were not previously considered; and external forces impact the new company in damaging, unforeseen ways at a time when it is most vulnerable. Too often, companies that do not embrace strategy attempt to make acquisitions and suffer substantially as a result. By considering acquisitions in strategic planning activities, organizations are better prepared to proactively handle mergers and can more easily identify acquisition candidates. More importantly, they can more quickly recognize candidates that are not a good fit.

Beating – or Being Beaten by – the Competition

Basic ideas of competitive positioning and rational decision making can break down during the heat of battle, resulting in irrational decisions and erratic behavior. Though a firm can have myriad strengths and weaknesses vis-à-vis its competitors, there are two basic types of competitive advantage that it can possess: low cost and differentiation. Quality, service, location, niche, adaptability, consumer orientation, reputation/image, personnel, and price are some levers that executives can use to develop an advantage. Differentiation requires being unique along some facet or dimension in a product or service that is valued by buyers. The best choices usually feel most comfortable and capture the essence of a particular business, and are clearly articulated in a strategic plan.

Danny Markstein

Marc Bromstad

Companies that are effective in delivering on their strategic intent are relentless in staying true to their business models.  Three factors play critical roles in enabling success.  First, these companies understand that the scopes of their respective strategies contain essential definitions about their customers, offerings, and markets.  Second, these companies have aligned their organizational structures, business models, and internal capabilities with their strategies.  Finally, strategically sound companies manage diligently to stay away from investments, fads, new products, and markets that deviate from their strategic goals.

At the core, the scope of a company’s strategy should contain a finite definition of the target customer.  While this sounds simple, many companies have become more scientific in identifying the demographics associated with the customers buying their products and services.  Questions to consider include:

• Is the company pursuing individual consumers or businesses?
• Which demographic of consumer is most important?
• Is the company selling products to high net worth individuals or mass market consumers? 
• Does the company cater to men or women?
• Is the customer base old or young? 

Once defined, the sales team should do everything in its power to understand this class of consumer, including its wants, needs, and spending habits.  By understanding the demographic, and effectively prospecting these consumers, the sales team will be more effective in selling the company’s products. 

Next, the scope should consider the markets in which the company competes.  Questions to consider include:

• Does the company require a retail presence?
• Where does our target customer live and conduct business?
• In which cities should the company have an office?
• In which neighborhoods of each city should the company have an office?
• Who are the competitors in those neighborhoods and cities?
• Are they national players with deep marketing budgets or established mom and pops with loyal customers? 

In understanding the customer and market, the company can invest in the locations that will deliver the greatest returns. 

The company must align its product and service offerings with the customer.  Imagine a company that has identified 25 – 50 year old married mothers living in urban cities as its target demographic.  A few questions to consider would include:

• What does this type of consumer deem necessary in our product?
• Is the company’s product a necessity or luxury item?
• Is the customer willing to pay a premium for the company’s product? 
• Are the company’s product and business development teams aligned with this customer?
• What extension opportunities exist?

A company that appropriately defines the scope of its strategy makes interpretation of the business model very easy on its employees.  By broadly communicating the company’s strategic scope, employees gain a concise understanding of where they should focus their efforts.  As important, employees who have a clear grasp of the company’s strategy understand where not to waste their effort.

While the target customer is not the only component of a company’s strategy, it often serves as a critical element in defining what the company does and how it operates.  When properly written and communicated, a company’s strategic scope is a powerful way to begin to align its activities and strategic intent.  While this seems simple, the rubber hits the road in the company’s management routines and performance tracking.

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All of the verbal and visual channels a company uses to position itself will collectively influence corporate and product perceptions among external audiences. Thus, when managed proactively and communicated effectively, positioning can be used as a highly effective tool with which to achieve corporate goals.

As soon as a company’s corporate strategy is defined, its marketing strategy should immediately follow. Marketing’s role is to influence external audiences’ behavior so that the company’s strategy is realized.  A company must communicate with external audiences using a language that will resonate, producing a response that supports its corporate strategy. This is where the art of positioning comes into play.

As corporate strategy is developed, the most important question to ask is, “Where are we now in relation to where we want to be, and how are we going to get there.” From a positioning perspective, this question translates into “What is the current perception of our company and its products in relation to our desired external perception, and how are we going to proactively develop that perception?” Without a clearly defined corporate strategy, a company cannot effectively state its desired perception, or the goals it is striving to achieve. This is the root problem behind multi-million dollar marketing budgets that produce minimal returns. An effective marketing program begins with a clear positioning platform, which cannot exist without a defined corporate strategy.  

Positioning strategies, which are derived from corporate strategy, are the foundations of any strong marketing program. Many companies often skip over this step and move straight to tactical execution. This usually happens as a result of time constraints, impatience, or a lack of understanding or acknowledgement of the power of a strategic marketing program. Marketing programs that do not define and consider positioning are not strategic, and often do not align with the company’s corporate strategy. Too often, the marketing function operates in its own organizational silo, executing ad-hoc activities and failing to achieve the desired results. Lexus is an example of a company that has benefited from a thoughtful positioning strategy that is clearly aligned with the company’s corporate strategy. The company’s "relentless pursuit of perfection" can be easily identified in its design, engineering, sales, service, and delivery on the customer experience.

There is proven value in taking the time to develop a positioning strategy. As a result, the answer to the question “How are we going to proactively develop our desired perception?” is determined.  To give you an idea of what a positioning strategy entails, let’s consider messaging. One important component of a positioning strategy is an established messaging platform – one voice that is used internally, throughout the company, to communicate externally about the company and its products and services.

Think about how powerful this can be in supporting corporate strategy. Establishing three key messages that everyone in the company knows and communicates, that ensure consistency in language verbally, visually, and in all marketing collateral, which, when executed strategically, will proactively and effectively influence consumer perception and behavior. There are many powerful components to an effective positioning strategy; messaging is just one of them.

In the end, a clearly defined corporate strategy is critical to a successful business. Developing and maximizing an aligned positioning strategy is a critical component to making sure that success is sustainable over time.

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Eileen Markstein