11 Oct Under New Management – Reviewing your Commercial Strategy

Your first 100 days in post are challenging. To set your stall out effectively you need to complete a number of set pieces of work. Each one requires clear headspace and thinking time whilst the day to day agenda will pile up around you and clamour for your attention. Fail to complete each of these assessments however and you risk failing in the role. As the Managing Director you are the senior leader with responsibility for strategy and direction. The company’s strategy is the central tenet of your leadership manifesto and the reference point for every other commercial decision you make.  You need to review it and satisfy yourself that it is well conceived, compelling and commercially viable; representing the best route by which the business can achieve its goals. There are strong reasons for making it priority numero uno as soon as you are appointed.

If you are an external appointee, you can take advantage of a brief window during which you see the business from the perspective of an outsider. There is a particular clarity which comes from this standpoint. You have no baggage or attachments to decisions which have been made by your predecessors.

If the industry is new to you, a review of the strategy is a great way of orientating yourself by assimilating information on the market and competitive context quickly, in a structured manner.

If the strategy does not stand up to scrutiny, now is the time to revise it before you find yourself having to back track some months down the line, by which point you risk having become associated with it.

If you find yourself having to alter the strategy you need to be in a position to do it within the first 60 days. You will need to discuss and enrol your stakeholders in your thinking and new direction. If they agree with your conclusions it will be easier to persuade them of the resources you will need to implement it. Stakeholders tend to be particularly receptive to new ideas and requests whilst you are in your honeymoon period (you walk on water, right?). So, strike whilst the iron is hot.

A clear strategy simplifies and speeds decision making. If a proposal is not consistent with the strategy, it is not the right proposal.

A new Managing Director is like a new Prime Minister. You have a mandate for change. This is your opportunity to act and in so doing, define your term of office. Carpe diem.

Most importantly, you must own the company strategy and be its strongest advocate. It is the standard around which you will rally and lead your colleagues. The greater your involvement in formulating and verifying the strategy, the greater will be your commitment to it and authority as a leader.

The more profoundly you understand the strategy and the insights on which it is built, the more able you will be to communicate it clearly and simply and so enrol your audience to help deliver it. (We will return to message simplification and communication in the third topic in this ‘100-day’ series.)

Assuming that McKinsey do not owe you a freebie, you are going to have to resource this exercise in-house. Whilst it needs to be rigorous you cannot afford for it to become all consuming, and you are not in a position to go out of radio contact for a month so that you can do all the work yourself. Remember, you are the Managing Director. You deliver through others.

Reviewing your commercial strategy has synergies with another of your key tasks, itself the subject of another article in this series, ‘Assessing your Senior Team’. It is a perfect opportunity to take stock of your Sales and Marketing/Sales/Commercial Director, however titled. Are they a clear thinker with a purposeful and well-informed plan based upon a thorough understanding of the market and competitive context or just being borne along by the current? As the MD you have to own your commercial strategy. You cannot delegate it to your ‘Sales Director,’ but you can and should expect your commercial functions (sales, marketing and finance) to gather much of the information you need from which to draw your own independent assessment and conclusions. The secret to a well-run exercise like this is that you ask the right questions, set them down in writing and brief your team clearly (face to face). Providing templates documents to populate can avoid ambiguity too.

People make livings out of writing books and articles on business strategy so there are plenty of models out there you can adopt and adapt for your own purposes. There tends to be a high degree of overlap one to the next and as far as the books go at least, many of them do not lend themselves to the time pressured professional practitioner, and take 300 plus pages to cover what could be succinctly expressed in a short pamphlet. In my experience, the questions listed below are the essential ones you need to explore as the incoming MD. Furnish yourself with answers to these and the path ahead will appear a lot clearer.

As ever with this kind of process, it pays to start with the big picture and progressively over-layer it with detail. If you maintain your information as a ‘live’ file you can add to it, refine it and augment it as information becomes available, even beyond the life of the initial exercise.

Ten essential considerations

1. Which market are you in?
   Once you have thought of your immediate answer, write it down and set it aside for a moment. Then think about what your company’s key areas of expertise are (core competencies in the jargon). Live with the question for a couple of days and push yourself to think deeply about it. Discuss it with colleagues. Do your core competencies lend themselves to developing new products or services for an entirely new customer segment?
2. New products or new customers?
   Can you expand the range of products and services for existing customers or find new customers for the same products and services?
3. Macroeconomic factors, government policy and social demographics
   Which factors or trends define the context in which your business operates? How could these trends change the shape of the industry you operate in? Can you act now to position yourself advantageously?
4. Substitutional products
   What other products can your customers use for the same purpose?. They are your competition too.
5. Routes to market
   Different customer segments are often served through separate routes to market (or channels). Each route will have different product, specification, and service or certification requirements and some channels may be in growth whilst others are in decline. Each route will require a different strategy and executional plan tailored to the needs of customers in that channel.
   For your commercial strategy to be successful you need to understand the process by which your product is specified and purchased in each route. Who are the decision makers, what are their selection criteria and who else has an influence on the process? What information or support do you need to provide at each point in the process to facilitate the choice of your product over your competitors’?
   You may face different competitors in different channels. Each competitor will operate in the channels in which they feel most able to compete successfully.
6. What strategies are your competitors following?

At the most stripped down level, every business can choose from one of three generic strategies  (ref. Porter) of lowest cost competitor (exactly what it says on the tin), focus (on a particular customer segment) or differentiated (brand value added).  Can you match each of your competitors to one of these strategies? Which strategy is your business best matched to?

7. Who owns your competitors?

The type of ownership each of your competitors is under may give you strong clues as to their priorities and appetite for risk. The age of shareholders might provide a clue to how receptive they may be to an acquisition proposal or suggest a change of ownership or management (and possibly strategy) is not too far off.

8. War gaming
   War gaming is the name given to playing out the sequence of moves each of your competitors may take in response to an action or actions on your part. It is a useful exercise to run when forming your strategy so that you do not blunder into a situation you could have foreseen. The way your competitors have reacted in other markets to competitive threats may be a good indicator of their likely response in yours.
9. If they ’zig’, you ‘zag’
   One of the standard plays in marketing is to position your brand or business as the antithesis of the market leader; to be the Pepsi to their Coke. If you’re looking to enter a new market it is a useful exercise to describe the defining characteristics of each of the competitors and identify the vacant market positioning which you could occupy. eg. Slow fashion versus fast fashion. High volume uniformity versus artisan bespoke etc. Is there a market in the gap?
10. Who is your Uber?

Over the last decade we have all seen the powerful effect of ‘disruptors’ in blindsiding competitors in established markets or accelerating underlying trends. Who or what forces could do an Uber on you? Remember that today’s left-field dreamer may be your core competitor tomorrow.  What are the implications for your strategy? We all have a subconscious bias to information which confirms our prejudices rather than challenges them. The real threat may not even be on your radar.

Having worked through these points you should be well on the way to forming your strategy. That will lead on to considerations of the order of priorities, timescales, your resource needs, financial modelling and the detailed executional planning which forms your business plan.

Footnote.

The higher the quality of information you have available to you on your market, customers and competitors, the better for developing your strategy. Some companies are lucky enough to have deep pockets for funding research and operate in markets which are served with an abundance of data, accurate to three decimal places. Many however are not. If that is the case, resourcefulness and practicality is the way forward. The following list may prove helpful as a starting point.

• Filed accounts
• Director’s (Exec and Non-exec) backgrounds and other positions held
• Ownership structures
• The background of recent senior appointees
• Company websites
• Trade press coverage
• Interviews given
• All media communication across all channels including social
• Former employees
• Customer interviews and surveys
• IP registrations
• Test purchases of competitive product
• Testing and deconstruction of competitive product
• Competitive merchandising
• Trade and consumer marketing
• Academic papers
• Syndicated market data