The strategic imperative is dead! Long live the strategic imperative!
Companies find that their best-laid plans are disrupted by a flurry of dramatic macroeconomic disruptions. From problems in the supply chain i turbulent effects of climate change, pandemics and war higher costs of goods, energy and labor i the coming recession – most business leaders have never experienced a time as uncertain as this.
They have a lot to consider. Strategic imperatives or long-term plans that many companies carefully laid out just a year (or less) ago may now be outdated or steer companies in the wrong direction.
But there is opportunity amid the breakneck speed of change. Right now, smart companies are not only developing new strategies; fundamentally changing their planning processes — making them faster, more agile and more predictable. And they revise those plans quarterly, or even monthly, instead of once a year. These practices will enable leading companies to manage in the short term and build resilience in the long term.
To embrace this new way of doing business, companies must do three things:
- Praxis ruthless prioritization. For many companies, product rationalization is one of the keys to prosperity and even survival. Look at FMCG companies — their products often have very long tails, which are too difficult to manage in an era of supply chain disruption. These companies need to rationalize their product mix to make economic sense. Do they really need eight different sizes of a particular product or will four be enough?
Similarly, companies are seeing benefits from streamlining corporate projects and initiatives. Instead of putting energy and effort behind 10 projects, does it make sense to prioritize five and completely ignore the other five? Will the company be able to complete — and monetize — the five selected projects faster?
Every aspect of the business can be prioritized. Does your talent acquisition strategy prioritize the right skills in the right geographies? Is your sales strategy prioritizing the right set of customers? What about manufacturing — do you need all those facilities?
Bringing an outside perspective or a different perspective into the mix can help rethink existing strategic priorities.
- Learn to sense, understand and amplify weak signals, extracting meaningful insights from the noise. Insights lurk in the oceans of information companies collect every day — often without realizing the underlying value. When analyzed properly, weak signals can emerge from this mass of information.
fortunately, machine learning and artificial intelligence systems, the cloud and data science can help companies master detecting weak signals and turning them into amplifying strengths in their organizations. Accurate prediction models can enable companies to move from a reactionary paradigm of detection and response to a proactive model of prediction and prevention. Companies can, for example, analyze internal and external data to provide short-, medium- and long-term pricing insights that enable them to make better decisions.
For example, technology companies transitioning from an asset-based business model to a consumption-based business model often face challenges due to customer churn and revenue leakage in licensing revenue. Analytical models that combine internal data such as customer bookings and license usage with external data such as competitive products and share of wallet can be used to create customized offers and pricing.
- Build radical agility into everything you do. I know, “agility” has become a buzzword – probably because it’s easier said than done! Anyone who has worked in a non-agile company knows that planning is often arduous, requiring the input of many teams moving at a deliberate pace. It’s a style more suited to a bygone era than today’s fast-paced environment that rewards the ability to act quickly in ambiguous situations.
Consider supply chains that must become agile if companies are to avoid situations where they have supply but no demand or vice versa. This requires learning how to forecast demand with much greater accuracy and sourcing materials on the fly.
Teams must also be agile — action-oriented, yet reflective and resilient, willing to take risks and unafraid of failure.
These three imperatives do not stand alone. They influence each other in ways that increase the benefits of each. It is easier for a company to understand weak signals if it has prioritized its business. It is easier to be agile if the company understands weak signals.
Companies that embrace all three will realize new opportunities that directly impact business performance. Perhaps most importantly, they will be able to more accurately assess their own requirements. Equipped with new insights, they may find they have holes in their portfolios or opportunities they no longer need. Or both. These companies will be in a good position to make significant moves — either acquisitions or divestments in preparation for the next period of growth.
Furthermore, with deeper insight into all aspects of their business, they will be more in tune with the consumer and provide an excellent user experience. And they will be better equipped to operate ethically, making social responsibility a central part of their corporate mission.
It would be nice to think that we will soon return to a period of fewer, more modest disruptions – it is unlikely to happen. Companies that do not adapt to the new reality now will have to do so later. If they are still around.
The views expressed above are the author’s.
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