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Monday, July 28, 2003
Antonio: Some opportunities distract managers
By KIKO ANTONIO
NIGHT MANAGER
JUMP IN. If you run a midsize business, you may be familiar with that anxious sense of being left behind. At every turn, someone is exhorting you to jump onto the latest strategic bandwagon before it’s too late.
“Create new market space,” you are told—if you haven’t already missed this “fleeting opportunity.” Don’t forget to “time-pace your initiatives” and, while you’re at it, ”map your strategy.”
Although these concepts have their place, it isn’t in numerous midsize companies. All too often, such novel approaches do nothing more than distract managers from the job at hand: getting the most out of their existing businesses. Even if it’s not the latest management fad, per se, that takes people’s eyes off the ball, it’s the bold moves that such strategic nostrums often imply: the pursuit of the big acquisition or the huge new market opportunity.
But midsize companies can create tremendous value—in fact, growth rates of 15 percent to 20 percent per year, over the short term—by focusing on the untapped potential of seemingly mature businesses.
Such an approach not only offers tremendous possible payback but also poses few of the risks associated with pursuing chancy acquisitions, untested ventures or radical new strategies.
It is important to establish a disciplined sequence of strategic priorities. Few managers are conscious of the right sequence.
First, protect your existing business. After that, penetrate further into existing market segments with existing products or upgrades.
Then extend the business by creating new products for existing segments or by entering new segments with existing products. Finally, diversify into new markets with new products.
This sequence of priorities is not new; it has its roots in turnaround management, where protecting the core business is a matter of survival.
First, you should focus on what’s going on in the business units. Corporate strategy can guide acquisitions, divestitures, and market and product development efforts outside the scope of individual business units. But the importance of corporate strategy is often overrated.
In fact, the important strategic work to be done at most companies is at the business-unit level. Certainly, it is here that you go about protecting your existing business. That’s because operational excellence at the business-unit level is fundamental for success.
While many companies may have improved their operational performance in certain areas—for example, product quality and reliability—most still have a long way to go. Continuing this improvement in other areas that contribute to customer satisfaction—such as customized design, improved lead-time and comprehensive technical support—can give them a tremendous competitive advantage.
If a company’s existing business doesn’t have a firm foundation of operational excellence, any initiatives to protect that business, to further penetrate existing markets, and to extend and diversify the business are likely to prove mediocre at best and disastrous at worst.
(Kiko welcomes comments at kiko_antonio@yahoo.com.)
(July 28, 2003 issue)
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