By Andrew Chesley and Linda Watson
Jan. 7, 2010
The economic climate is unprecedented, and there appears to be no significant dramatic improvement in the horizon. Money continues to be scarce, markets volatile, and morale low. Yet, there are companies that will be winners and losers in this marketplace, regardless of the economy. The goal of this article is to make your company a winner through these tough times, focusing on strategies and tactics that address a good offense, defense and putting an overall game plan into place.
An aggressive, well-planned offense is critical in this economic environment. Hunkering down and focusing on defense is shortsighted and will prove to put your company further behind the curve should it manage to steer itself through this economy. Peter Drucker in the Harvard Business Review said back in 1961, and it still holds true today, “Taking a defensive position can, at best, only limit losses. And we need gains.” An offense focuses on new products and/or services, new talent, new distributions channels and new customers, among other things.
Every company needs to begin its offense with an assessment of its strengths and weaknesses, as well as that of its competitors, related to the following components: cost structure, financial position, product/service niche, sourcing, customer focus, human capital, marketing and contracts. Once a company has this data, it will know its strength internally. It will also have an idea of its strength within its competitive market. Only then will your company be able to take the next steps on analyzing and planning. Your plan must play to these strengths in this market and in the future market.
Taking these strengths, a company must then make strategic decisions related to growth in existing markets and new markets with both current and new products and service developments. Growth, even in this market, can be found in market share, product usage and new applications or products and services. Growth, with new and current products, services or markets, can be accomplished through joint ventures, acquisitions, mergers and restructuring.
A good defense is a mandate at all times and involves managing financial risk, improving efficiencies and reducing costs. Principles for managing financial risk include: reducing debt and restructuring, securing bank relationships and managing top line results and margin enhancements. Other principles include knowing your daily cash position (cash on hand and credit availability), being strategic about your payables and receivables so that you pay cash later and receive it sooner, and managing your workforce more effectively and efficiently.
In addition, your company needs to ensure that it maintains its existing customer base. This may mean not cutting your business expenses so your services suffer. It may also mean that now is the time to remind your clients why they chose you; whether it is price, value, service or a premier product. In other words, it is time to double down on your best customers, particularly in light of the fact that new customers, in this economy, are hard to get.
Finally, when it comes to reducing costs, companies need to reconfigure their inventory, they need to shed unprofitable assets and they need to maximize on their profitable assets. Reducing costs may also mean divesting non-core business products and services, and rethinking pricing strategies, as well as reviewing and renegotiating existing contracts.
Putting A Game Plan Together
Once you determine your offensive and defensive strategies, you need to create one game plan or playbook which will insure not only execution of the plan, but will eliminate conflicts between your offense and defense. The plan will also provide you with a tool to measure your performance. Contents of the game plan or play book should include identifying the following: overall objectives, specific goals, champion for each goal, tactics to execute for each goal, the timeframe to achieve goals, challenges for each goal and means to overcome such strategies.
In this challenging economic environment, many companies are at a critical crossroad. First, you must stabilize by reversing declining performance, then rebuild by strengthening “core” capabilities, and finally begin rebuilding through creating “niche” market positions.
Of course, every game plan includes a plan on communications. A new game plan requires that it be communicated with honesty and from the company leadership. It is critical to involve your team in the creation of the plan. Furthermore, while the plan must be firm, it must also allow for modifications and adjustments based on market conditions and unforeseeable events. In addition, you must always be open for new opportunities that surface, even if it is not part of the plan.
Andrew Chesley is with the Peppertree Consulting Group and can be reached at [email protected]. Linda Watson, Esq. is with Clark Hill, PLC and may be reached at [email protected]. This article is based on a webinar series presented by Clark Hill, PLC and Peppertree Consulting Group.