Even in the best of times, your business plan relies on a sound strategy to gain – and keep – your competitive advantage. Success is generally a function of a winning combination of factors – good knowledge of the business environment, a keen understanding of your competitors, a laser focus on the size of the market and trends, technological development, and the overall state of the economy.
Today, with a once-in-a-lifetime pandemic inflicting its global pain on businesses of all sizes and types, it’s never been more important to remember the table stakes that got you to where you were prior to the shutdown.
As companies emerge from the COVID-19 lockdown into a new business reality, the winners will be those who remain attuned to sound strategies. As you conduct your analysis this time, you’ll be looking to play to your core strengths, pivot to exploit competitor weaknesses, and taking advantage of new white spaces in the market.
Of course, strategy development can be a huge effort, involving many people and efforts over several weeks or months. With resources naturally being lean, and the pandemic necessitating quick action, you’ll need some shortcuts to shave time off the process.
In order to help you jump start this process now, I’ve assembled a game plan for you, featuring three steps you can take to fuel your post-pandemic strategy. It is my hope that your management team can work through these steps and questions as a means of pressure testing your strategy. An effective way of approaching this is to set aside a couple of days – virtually, or as regulations permit, in a conference room -- and gather those who should have a say in the process. As the CEO, you should be there, of course; and your heads of Sales, Marketing, Operations/Supply Chain, R&D and Finance should be along as well.
You might consider using an external facilitator, like a Chief Outsiders CMO, to challenge the thinking, keep the meeting on track, and bring in new thinking in ideation and brainstorming.
Let’s get started!
With the facilitator keeping notes on whiteboard or flip charts, your team will work through a set of questions that will form the foundation of your strategy. It is important that the answers be candid and honest, and critical that frictions like groupthink, answers that are too high level, or whitewashing are avoided.
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Question |
Tip for best result |
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How big is the market, and how fast is it growing? What are the drivers and competitive factors? How do we segment it? |
Use specific numbers and spell out assumptions. Make sure segmentation is based on customer needs, not on existing product lines or geography. |
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What does the competitive environment look like? Who/ what is the biggest threat? Who is the fastest growing competitor? Why? |
Name the main competitors and substitute products or other ways of solving the same problem. List pros and cons for each. |
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What are the technology trends? What will be the performance requirements for the next several generations of products and services? Are there pending disruptions or technology breakthroughs? |
Consider putting in place a systematic and ongoing approach for technology scanning. |
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How is the businesses differentiating itself in target segments? How does this support your competitive advantage? How sustainable is the advantage? |
This is the core of strategy formulation, and much more difficult than it seems. Differentiation needs to be crystal clear. |
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Are growth targets too conservative? Are they overly optimistic or unrealistic? |
Stretch goals are helpful to get management out of a rut. Pie in the sky goals, however, cause stress and will lead to informal goals being set instead. |
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Is the right organization in place for implementing the plan? Do people need to be replaced or reallocated? |
Form should follow function. Resources should be allocated to meet the different strategic goals and nothing more. |
Working through these questions naturally will foster a healthy discussion. It is ok to disagree, but at the end, there needs to be consensus across the team. If not, go back and make sure everyone buys in to analysis and conclusions. The answers to these questions will be fuel for a SWOT analysis that comes next.
The SWOT tool has been around for a while, and its wide use is well founded. An analysis of a company’s internal Strengths and Weaknesses, contrasted against Opportunities in the market and ways to mitigate Threats in the environment can be very effective.
The facilitator makes sure the identified factors are important and specific, and are attributed to the correct quadrant of the SWOT.
Lets look at some typical factors that can come up.
Internal Strengths
Internal strengths can be derived from many sources. A company can be a market leader, have core competences in key areas, access to economies of scale, or have good functional strategies, financial resources, maybe a cost advantage. An organization can have proprietary technology, superior technological and innovation skills, better manufacturing capability, or be ahead on the experience curve. It can have better management, better marketing campaigns or have a good reputation among customers. In rare cases, companies can even be insulated from strong competitive pressures.
Internal Weaknesses
Common weaknesses I have seen include a lack of clear strategic direction, problems implementing the strategy, missing key competencies, or a lack of managerial depth. Obsolete facilities, internal operating problems or weak distribution can create operational inefficiencies and decrease overall profitability. A tough financial situation might make it difficult to fund strategic initiatives, to update the product range, or to develop new products. Below-average marketing skills can lead to a weak corporate image among prospects.
External Opportunities
Examples of external opportunities can be things like access to additional customers, entry to new markets or segments, expansion or extension of the product range, or diversification into related products. Nimble companies are able to exploit complacency among rival firms or changes in trade barriers at home or in emerging markets. There may be markets enjoying faster growth that would be attractive to go after. There is also the opportunity of vertical integration, either forward or backward.
External Threats
External threats are everywhere. Not even counting “black swan” events like the 2020 pandemic, there are many sources for these threats. Lower price competitors can enter the market, or customers can negotiate lower prices from legacy competitors. Amid the waxing and waning of the global economy, there can be slower market growth, recessions or cyclical downturns; manufacturing can shift to low cost countries; or foreign exchange rates change. There was always a risk for mindless trade policies from foreign governments – now, we also experience them from our own Federal government! In several emerging economies, new companies are appearing that can be a threat in other places -- think Huawei, for example.
The customer base can change needs, get more globalized, or consolidate and gain increased bargaining power. The same can happen with suppliers. Regulatory compliance can be costly, and weather and climate change can drive behavior or have a direct impact on raw materials.
Once we’ve worked through all four quadrants, we need to operationalize the findings -- in other words, activate the SWOT.
It is important to weigh or prioritize the factors under each heading in the SWOT, as the team may come up with many items of different impact. Not every threat is as serious, nor is every opportunity equally valuable. Also, look for factors that can be used as Key Performance Indicators (KPIs).
Once the analysis is done, if it is determined that the company is in a good position, there should be a match between strengths and opportunities. If, on the other hand, weaknesses have strong matches to threats, the new strategic initiatives need to focus on addressing these weaknesses.
Activate the SWOT by formulating action items. Give each action a champion, resources, and a timeline. Tabulate and track milestones and progress to goals.
A qualitative strategy review, as outlined here, yields excellent results -- as long as actions are assigned and tracked. For quality control, revisit the analysis after one month, and again at the three month mark. If there are a lot of deviations, the original analysis may have been too tactical and not strategic enough!
The table below shows a set of common factors found in industrial companies. It can be used as a thought starter, but should be modified for the unique circumstances of each company.
Table: Examples of factors for SWOT analysis
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Internal Strengths
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Internal Weaknesses
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External Opportunities
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External Threats
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How have you prepared to face the changed marketplace during the post-pandemic recovery?