An effective strategic management while linked to the way the business is run should create an absolute competitive advantage. Research has shown that there are many approaches to strategic planning. The underlying 4 principles characterize the best practices that a company should employ. We should start with the customer, the capital available should also be in line with the set strategy, there should be also a basis for the sharing of ideas and finally, the process should be kept ever green.
Looking at the customer issue, the management needs not only to be keen with the inside issues but should also cultivate a thorough understanding of the customers and also their changing priorities. Most market research undertaking has been useful in traditional marketing strategies, however today these are termed as inappropriate and misleading for strategic development. Solutions that are usually sought are actually the write answers to the wrong questions. The traditional market research usually targets the current customers who have questions about marketing and other statistical issues. This research is usually aimed for incremental improvements.
The strategic customer research goes beyond the prevailing customers needs which could be useful for incremental improvement. It focuses more on the unstated priorities which the customers remotely have but could not be fully articulated. In so doing there are questions raised about the market structures and the future customers who may be found in obscure places.
As there are well developed methods of market research, the strategic research has also a discipline to anticipate the shifts in customer priorities without guessing or depending on sheer luck. The customer science technique assists the executive to understand how the customers make their decisions even for the products that are revolutionary.
The set strategies is not necessarily what you say, it is what you fund and what you do. Lou Gerstener a former CEO of IBM said that making sure the resources are applied to their most important element of the strategy is perhaps the hardest thing for the companies to do.
One effective way of clearing such a mess is the combination of strategy development and capital allocation. The companies which do employ best practices have developed strategies to ensure that strategies are converted into strategic campaigns. The campaigns do keep everyone focused to the most important goals do encourage every employee to participate in the success of the set strategies. This also builds institutions to help the people to learn from their mistakes.
It is also to the best interest of the companies to table their questions, complains, grievances or even assumptions before the companies committee meeting. It is to the best interest of the business entities to allow employees to have the feeling of safety even when they table tough issues, seek out the bad news and also in the skeptical assessment of the strategic plans. Creating such a culture that embraces positive debates and tolerates mistakes will not happen all over sudden. There are companies which have executive directors that are quite resistant to change. Such a group would not allow a public challenge since they may deem it as disrespectful. This means that the cultural change requires a lot of commitment especially from the top management and would even call for change in personnel.
The need to have continuity in the setting up of strategies and their implementation without taking the whole issue as something seasonal creates a center to be carefully addressed. There has been the notion or the common idea amongst the working personnel that this process of strategic planning is a seasonal issue that fades immediately after workers go back to their normal duties. Successful companies such as GE and IBM have been successful in management of strategies. They have however realized that the need to encourage thought contribution rather than implementing a static structure, the whole process should be made simple and also an annual undertaking for everyone.
At given points in time during the year, there should be a review of the strategies that have been developed with an aim of making minor mid course corrections. For the long-term strategic plan there should be breakups done to deliberately update the strategies with new information. The other set of companies which have realized their set goals for the period of time should reinvent themselves to set up new strategies for future growth. This life cycle distinctions are usually realized by the management teams which carryout research, set goals and initiate conversations so as to get the appropriate dimension with time. This is quite useful for companies that operate across multiple products, in value chains and also geographies.
Lessons from the Ford Company
The value drawn from strategic planning will not bear fruits if the process of execution will not be given priority. If we look at the history of ford, there was a time when Jacques Nasser was its CEO. During his leadership, he together with his management got into a three year spiral process after their ignorance. They ignored the principles of strategic management leading to shakeups that were disastrous for the company.
During the year 1990 the profits of ford were growing exponentially, the F-150 was the best selling truck and also the explorer the best selling SUV. Despite this clean record the same company was struggling with its finances by 2001. This made Nasser to be fired after his devastating performance.
The poorly conceived Taurus design caused a 5% drop in the car market share from the year 1993 to 2002. At this time also, the Japanese automotive, industry through their established economy begun to manufacture market winning light trucks. Their uninformed decision to lend individuals with credit balances damaged their credit balance sheet.
This long can be widely accredited to the poor strategies that were put forth during the time of Nasser as the CEO as well as the strategic planning process that did not put into consideration some of the fundamental processes. There was sufficient customer research done by Ford; however the company failed to uncover the customers’ unstated priorities leading to the string of poor designs.
Before doing their redesign, they listened to the focus groups’ desires for more features and comfort. They however failed to ascertain what new design options that the customers would pay for. Despite the urgency of the need to get closer to the customers ford instead funded investments on the remaking of their brand and diversifying channels. There was a conflict of interest between the senior management of ford and the customers. The management was out for growth and expansion while customers were looking for further quality and design improvement. Ford went out to partner with Microsoft and yahoo. This to them was a good initiative to participate in e-commerce which was aimed at reaching more and more customers through the web. What ford forgot was that most American customers preferred to buy their cars from dealers.
Ford went ahead and conducted a research aimed at reducing emissions and also to build a stock pile of metals which were highly valued. The metals were used for the scrubbing exhausts. Another technology came up to solve this same problem. The expensive metals hence lost usability. The price of the metals dropped in the year 2001, this lead to a $1 billion worth of loses. The company acquired the Volvo and jaguar in an effort to remake the ford image. However this only served to further the company from a core customer base of the f-series owners. To worsen their situation, ford went ahead to invest in a different business such as junkyards and the European auto repair. These investments served only to draw them further from the primary role.
If only ford encouraged the culture of an open and honest debate, the managers would have managed to challenge these initiatives and to regain their focus on quality and better productivity. The Ford CEO (Nasser) lost focus on the short-term, middle term and long-term strategies that would have shaped the resource allocation. He also did not consider retrying the designs and core products that had brought the company success. He chose to lay his focus in the rear not researching well on the underlying facts.
The Ford customers wanted quality improvement and new quality designs. However there was no outstanding competition which would have perhaps lead Nasser to making more informed decisions. He however was ignorant of what the future held for him. He made uninformed decisions with no reasonable basis to invest in unrelated businesses. This action could be viewed as an undertaking to reframe the business rather than to reform it.
Since these occurrences occurred, ford has since embarked on the efforts to reform itself from this mess. Some of the things that ford did was to withdraw the Kwik-Fit service and at the same time adopt the back to basics strategy focused on quality. The aftermath of the three years of strain left most of the customers with the doubt of ford’s ability to deliver quality. Since then Ford has not been able to reconstitute itself in its operations or even the operations from other companies like Toyota and Honda. The prevailing costs to the company in the market share, customer goodwill and resources serves as a lesson of how the poor strategic planning can ruin a good performing firm.
The Honda Company is one big company that will remain at the race of development. The car engines still have a long way to go. Improvements will be needed to the engines to make sure they remain as a competitive entity. The founder of this company Soichiro Honda began with the making of bicycles, he then went to motorcycles, then to lawn mowers. He eventually began to manufacture generators and cars. Today Honda is the world’s top engine maker. It produces more than 20 million Engines in a year.
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