So when should a company review its business strategy or the way it is executed – or both; and what makes subsequent adaptation or revision necessary?
Successfully implementing your business strategy starts with a very clear vision of what winning looks like for the business, and continues with a relentless, daily focus on the destination.
Over time, this vision can become blurred and companies often regarded as star performers, fade without realising the need to re-assess their strategy until they are already in decline.
There are no fast rules
A well thought-out and well-crafted strategy that has been in place for few years already or one that is not producing results yet might perhaps not need to change, while multiple years of double-digit growth and record revenues and profits might hide a performance based on historical successes, instead of the anticipated future state.
However, there are clear symptoms of decline that may indicate that now is a good time to begin thinking about what’s next:-
- The company has outgrown its strategy e.g. its revenues are plateauing; its revenues are still growing but at, or under industry pace; forecasts are routinely missed or built on assumptions that growth will continue without specific substantiation; the customer mix is changing, or the sales cycle is getting longer. Its strategy cannot support more growth as it can no longer beat the market and emphasise its difference-versus direct competitors, versus potential substitutes, and versus potential entrants.
- The company’s existing strategy has become obsolete as a result of changes in the external environment and/or no longer taps a true source of advantage e.g. new competitors appeared and doing things differently; margins are shrinking, competitors buy up smaller players who introduce game-changing technology or process improvements; major transitions have appeared in the market (i.e. innovation, technology or regulation) or the company is no longer very clear on what differentiates it from competitors, and how it will create value for its customers in the future.
- The company is operating at a tactical level and has lost its strategic clarity e.g. the company is stretched thin across too many strategic initiatives, trying to do too much, and doing nothing well; few new initiatives are generating value; there is more pressure to make decisions more quickly; the company is struggling to determine the most viable course of action; it no longer understands the types of uncertainty it is facing and how these impact its strategic initiatives, or it no longer decides the critical few moves that will lead to future success.
- The company is undergoing significant internal changes e.g. it develops a game-changing way of doing its existing business or new service giving a new competitive edge over its competitors. To reap maximum benefit from this new competitive advantage, the owners must adapt or change the existing strategy.
The world is changing and monitoring the symptoms of potential strategy obsolescence has become a primer for businesses.
Those that take a ‘business as usual’ approach instead of resetting their compass and rethinking their current approach to business growth will not succeed.