Newsletters & Blogs


2010-04-12
The TESTS of a ROBUST STRATEGY:


 The TESTS of a ROBUST STRATEGY:

When designing a Corporate Strategy the following outlines some underlying Principles to keep in mind at all times;

The Overarching GOAL is to succeed by creating economic value through the design and implementation of PROFITABLE products and services. Profitability is the primary goal that brings together the opposing ownership goals of Growth and Dividend Income.

The Tests for a Good/Robust Strategy include;

1. Unique Value Proposition

Every business needs to identify and implement whatever is necessary to create its own unique value;

There is no ONE best answer, solution, product - there are a whole range of solutions, the uniqueness of each business lies in what it is really good at;

The key question to answer is NOT what is the BEST we can be BUT what is the kind of company we would like to be and that we are good at being (based on what we are good at doing);

Being the BEST in an area can never be THE goal or objective, it is an outcome and is seldom measurable in broad terms.

 

2. Unique Value Chain

Create the unique value you want to create (based on the unique need you want to meet, in the most profitable way (keep the right goal, the right goal!!);

This value is created through the unique collection and arrangement of the skills, expertise, experience and knowledge within the business.


3. Clear Trade-offs

To be unique each business needs to choose not to do certain things, features that are not included incorporate, clients that are not serviced, markets you are not targeted or supplied supply;

To be good at one thing you must decide what you cannot/will not be;

Trade-offs exist in product, production process, etc;

By trying to be good at everything then you end up not being really good at anything.


4. Fit across activities

Operational effectiveness is about taking each operation in the value chain and finding the best way to do that activity – look at each activity separately;

Strategy is about integrating the activities in the value chain… the way you do each affects the way you do all the others, the way you get them to interrelate is where the opportunity lies for unique value, the choices related to each activity are interdependent;

Strategy works based on the way you do everything together – creates uniqueness, the whole structure is very difficult to copy;

Strategy is a system of interdependent choices leading to a unique value proposition in terms of what you are trying to deliver to your customer

5. Continuity over time

A business doesn’t have a strategy unless it pursues its value proposition over time, a business cannot keep changing its strategy because then it will never really be good at anything and customers will not understand what it is on about.

 

(Much of this material is based on a talk given by Michael Porter – available through ITunesU)

 

For more information on Corporate Strategy, Corporate Governance and Risk Management in your business contact roger@sinkorswim.co.za