Strategic Thinking

A Keynote Address on Strategic Thinking

Manuel A. Escalante G., DBA

Remember if you will a well-known Italian by the name of Christopher Columbus. With a good selling proposal he was able to convince his financial backers to provide money for his journeys. When he left, he didn't really know which way he was headed; when he arrived, he didn't know where he was; when he returned, he didn't know where he had been. In spite of this lack of vision he was able to make the trip three times in seven years.

Chris was, in simple terms, operationally competent but strategically deficient. He was able to keep his company afloat, literally and in a business sense, supporting the men and families of three ships, trading goods, bringing presents to his financial backers - all this without really knowing where he was or where he stood at any given moment. Lord knows what he may have accomplished had he had a clear vision. Perhaps he may have never gone to jail. Perhaps he would not have died broke and broken.

Most companies suffer from this condition - they are operationally competent but strategically deficient. When the focus of your business is strictly limited to keeping up with an ever-increasing demand for your products, operational skills alone are enough to breed success.

Company owners and/or administrators have been working, and continue to work, the wrist - a quantitative exercise, and not the brain - a qualitative exercise. Strategic thinking is where we stop exercising the wrist and begin exercising the brain. It is really an exercise in picture painting.

We are burdened with too many numbers and not enough pictures. If I were to ask most businesspeople questions such as, "where are you taking this company?" or, "what do you want this company to become?" the answers will always be something like "we will have the largest share of the market," or "we will become a million or a multi-million dollar company," or "we will be the most profitable company in our line of business." But, you see, these replies are the result of wrist action, not brain action. They do not indicate a vision, but rather the results of a vision.

A vision determines the "look" or composition of a company sometime in the future, and this cannot be accomplished with statistics, or financial ratios, or P&L statements, or competitive analysis, or with the myriad organizational and business fads that crop up every so often. These miracle recipes, ivory tower analyses, and business fads have rarely worked and rarely will.

If business is flat or you are losing ground, chances are someone is outthinking you. It's clear that the owner of a micro-enterprise must wear many hats, from manager, accountant, and salesperson, to floor sweeper and dishwasher. But in most cases the processes involve wrist,

not brain action. We look at prices, and last week's sales, and potential

customers, etc. as issues to be tweaked and twisted based on formulas or

methods we heard or read somewhere. This turns you into beasts of burden

and slaves unto the daily ups and downs of your business, and takes you away

from becoming leaders and strategists, which is what will ultimately give you

optimal success and not just a living.

The subject of Strategic Thinking is much too broad to cover in a short keynote or in a couple of written pages; I will, therefore, limit this to a general view of the issue.

To start, if you've done things right from the perspective of sound business practices, you have formulated some type of plan that encompasses the products or services that you are to provide, the needs and satisfactions that these products or services are meant to fulfill, the prospective customers or clients you will be targeting, the methods through which you will target and reach these potential buyers, the geographical markets you will serve, the competition you will have to face, the turn-around times between the sale and your delivery, your customer service policies, your policy for returned merchandise, your pricing strategy, your method of delivery, and so on. And if you have such a plan, hopefully you are using it as a daily guide to your activities and decisions.

Many organizations have plans such as these (unfortunately, many do not. You know the name: "seat of the pants," "let's get on with it and hope for the best.") They are very elaborate - accountant-designed - systems. And you've all heard what these plans are called: Strategic Planning. In most cases, however, this is strategic planning without strategic thinking. In most cases these planning systems are nothing more than systems that force people to make extrapolations of historical numbers. They oblige owners and managers to look back at history and make projections for the next one, two, or five years by adjusting for costs, inflation, market share and so on. This type of planning is "straight-ahead" planning; it does nothing to change the direction or composition of the company.

Strategic planning is good. Indeed, it's crucial, but strategic thinking must precede it. Strategic thinking determines the direction of an organization. It is a process that enables you and your team to sit together and think through the qualitative aspects of your business and the environment it faces. The team can then decide on a common and shared vision and a strategy for the future of the company.

At this point I can hear many of you thinking, "What team? I'm a one-person operation!" If you expect to reach any meaningful and respectful success, you must have a team. God is the only One with all the answers. You alone cannot possibly hold all the required expertise and skill to run a truly successful operation. In an educational institution one teacher cannot teach all subjects; in a one-person band the music will never be as sweet as a symphony. You don't need employees to have such a team (if you do, though, please, please, use them. If you feel they are not worthy of your use, then get rid of them. If they cannot/do not contribute to your decisions and actions, they are either not worth your time and money, or you believe you and/or some cohorts hold the key to the only truth there is about your business). You can gather a team from among friends and colleagues, and hold regular meetings to discuss vision, ideas, plans, problems and solutions. Your cost for these exercises might be some coffee and cookies, and the benefits, guaranteed, will astound you.

Ok, back to thinking. If you are to become a truly successful operation you

must be a leader who has a "vision" in your head as to what you want your

company to "look" like at some point in the future. If you have employees,

that vision becomes the magnet of everyone's activities and efforts. If you

don't have employees, you will at least be very clear on where you stand and

where you are headed.

Allow me now to give you some steps in the right direction. Before you set off on painting your vision for the future, you need to clearly determine where you stand today. If your vision, whatever it may be, is to become reality you must know your point of departure. The basic steps:

1.

Clarification of the current profile.

At this point you establish where you and your company are currently. Basically, you take a "snapshot" of you and your company in the current condition.

2.

Analysis of strategic variables.

This is an analysis of the strategic variables that will be working for or against you in the future. This is your view (and hopefully you will by now have a team, so it will also be their view) of what may or may not occur inside and outside of your organization. If you do have a team, keep in mind that these variables are usually highly subjective in nature and correspond to each person's views. They must be thought out and discussed in a rational manner (please, none of "think as I do or get out" - this is the lowest level of very poor management/direction) in order for everyone involved to agree on the most important factors that your business will have to face. You need to discuss issues such as,

· Products

· Geographic markets

· User segments

· Company beliefs

· Strengths

· Weaknesses

· Internal opportunities

· Competition

· Opportunities and threats

· Strategic vulnerability areas, such as capital, raw material, labor, and so on.

3.

Exploration of different driving forces and possible strategic profiles.

Once your team has agreed to the variables that will work for or against the company in the future, they can explore which components of the business can best be leveraged in the company's favor and around which a successful strategy can be developed. Most people/companies have, over time, built up capabilities in two or three

areas that can serve as the root of a future strategy for the business. It is

now important for you to understand what these two or three areas are

and then to draw profiles as to where each one would lead the company

and what the company would look like if that avenue were pursued. Each

area requires emphasis or de-emphasis on different products, customers,

market segments, and geographic areas so that each picture will turn out

to be different. At this point, you can make a choice as to which pictures

you like better and wish to take up.

Once agreement has been reached (a very difficult task) on what is currently driving your business, you need to consider the following questions:

· What should drive the business in the future?

· Should the business continue to be driven as it has been, or should it explore another driving force?

· What implications will a change have on the nature of products, customers, and markets you currently offer or do not offer?

· What will the company end-up looking like if you change your driving force?

You can then identify which component of the business is strategically more important to your survival and is the key determinant of your company's products, markets, and customers.

All this is followed by the development of a statement of strategy. This statement needs to be articulated in precise and concise terms; you and your people must remember it every day.

Then, you translate the strategy into a strategic profile and vision. The vision will be what your company will look like sometime in the future. It will be a description of the products, customers, market segments, and geographic markets that your company will emphasize and de-emphasize in the future. This vision or profile then serves as a benchmark for the allocation of resources and the types of opportunities that are to be pursued in the future.

There are eight items within the strategic profile that need to be clearly articulated:

Time frame. A time period for strategic thinking needs to be identified and set aside.

Driving force and business concept. The description of the driving force is the description of the singular business concept or purpose of the organization. A business concept is what is commonly known as a mission statement.

Areas of excellence. These are the two or three activities within your company that require excellence to a greater degree than any competitor has achieved, or to a greater degree than anything else the company does. For a mission or strategy to maintain its strength, these areas of excellence need to be identified and cultivated.

current and future products that are suited to this business concept and

Market/user scope. This is an identification of the geographic markets and user groups your company will pursue, and those it won't.

Size/growth guidelines. This point clarifies the size and growth guidelines that you should achieve during the strategic time frame. These are guidelines, not issues set in stone. Usually these are numbers in areas such as sales, revenue, growth, and turnover.

Return/profit guidelines. These should be representative of the financial performance required to provide the necessary cash flow to enable you to achieve your strategic profile.

Company beliefs. These are the moral guidelines that you will set for your company in dealing with the environment. The values, beliefs, and principles of the company's leader go a long way toward setting the tone of behavior within your company and molding the scope of your products and markets.

4.

Development of competitive profiles.

The actions of a competitor in the marketplace will indicate their driving force. By understanding their driving force, you will be able to anticipate future activity. At this point you need to construct future profiles for the company's three or four major competitors.

5.

Anticipation of the implications of the strategy.

You cannot react to changes; these must be anticipated and planned for. If the strategy is to succeed, you must devote time and thought to identifying issues that stand in the way of making the strategy work. Once these issues are identified, you must resolve them.

In closing, please allow me a few quotes.

"If one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet with success unexpected in common hours." -Henry David Thoreau

"Actually, I'm an overnight success. But it took twenty years." -Monty Hall

"Success is simply a matter of luck. Ask any failure.” -Earl Wilson

"The only place where success comes before work is in the dictionary." -Unknown (by me!)