It’s strategic planning season. If your company is not planning to formally evaluate its competitiveness in the marketplace, then you’re at risk.
Strategic planning is that important. Strategic planning is all about making sure your business strategy distinguishes your company from the competition. Business strategy is a result of strategic decision making that comes out of the strategic planning process. A sound business strategy enables your organization to identify, develop and then leverage certain qualities and characteristics that set your business apart from other businesses within the same industry.
I recently had lunch with Kelley Star, president of Thin Air Software, a Milwaukee-based software development company experienced with technology-based business strategies. We were discussing the topic of driving and maximizing company value through the use of technology. As a result of that and other conversations, I asked Kelley to share his insights regarding driving corporate value through the use of technology.
According to Kelley:
Technology can be an accelerator of momentum
Business owners often ask about technology’s strategic role in a business. Most companies would say that technology is not core to their business, but would say technology is “strategic” to their business. In Jim Collins’ seminal book, “Good to Great,” he addresses the role of technology in great companies by saying great companies adopt technology differently. “In great companies, technology is an accelerator, not a creator, of momentum.”
Technology is an enabler for business, so much so that it can be at the core of disruptive business models that emerge when technology is innovatively applied. Here are some examples.
Technologies can impact business models
Consider the movie rental business. Remember your independent video rental stores in the 80s? They’re gone because Blockbuster took over with well-lit, well-stocked video stores blanketing every community. They are now being challenged by Netflix, which uses an online business model executed with technology and complex logistics. Netflix, for a flat monthly fee, allows you to have three rentals outstanding with no late fees, a much larger inventory than a local store and next day turnaround via mail.
Sensing a threat, which was both disruptive and technology-centered, Blockbuster responded with Blockbuster Online, which combines the NetFlix model, and four free local rentals per month at retail stores – something that is important if you are looking for the latest movie or want a spur-of-the-moment rental. Blockbuster’s strategy of tying the program back to local store visits can’t be matched by Netflix, assuming Blockbuster can execute the online program.
Think about digital photography’s impact on Kodak’s film business, the neighborhood film processor and Walgreens. Digital photograph technology has been causing massive disruption for more than a decade. With digital photography, you no longer create bad prints, you don’t buy film and it’s easy to share pictures with friends and family by posting them online. You can print at home or purchase prints online.
Kodak participates in this new model by creating and distributing EasyShare, an online picture portal that’s almost as inexpensive as printing at home. There’s no charge for using the software – they make money printing pictures on their paper.
And what about Walgreens (a “Good to Great” company, by the way)? How do they compete in digital photography? Walgreens created a software system similar to Kodak’s. And like Blockbuster, Walgreens leverages the value and same-day convenience of the local store. You don’t wait for the mail, you can pick up your high-quality prints (on Kodak paper) in one hour.
Guidelines for assessing technology opportunities
Kelley offers some guidelines for assessing technology opportunities.
Don’t be complacent. Study leaders and new entrants in your market space. Are new business models emerging that leverage technology? Are they a threat? Can you respond with your own solution?
Treat technology investments like any other capital expenditure and conduct an assessment of the return on investment. The best opportunities pay for themselves in less than 12 months
Seek expert advice. Selecting a technology partner is no different than the process of selecting other trusted advisors like an attorney, accountant or performance improvement coach.
Make sure your technology partner is as conversant in discussing business strategy as he or she is in discussing technology strategy. After all, they will need to know how technology adoption will impact the top and bottom line. The last thing you want is for someone to build a technical monument to themselves that doesn’t provide business value.
Be aware of changes in habit and expectations of your customers. Not long ago, having a Web site was unique. Now everyone has one. Do your customers expect to check inventory and shipping status online? Can they research products or order products via your Web site?
The objective is to accelerate earnings performance
Remember, the goal behind strategic planning is to accelerate earnings performance while creating competitive barriers. And as Kelley illustrates above, technology is an enabler for business and can be at the core of disruptive business models that emerge when technology is innovatively applied.
Keep in mind, strategic planning is not a one-time event. The best companies realize this and are continually revisiting and reinventing aspects of their business strategy, ensuring they stay ahead of the pack. Going through a formalized, well-structured strategic planning process is important, because as an industry matures, this maturity is typically followed by margin and earnings compression, and once that happens, it frequently cripples an organization’s ability to compete. Stay ahead of the pack.
Phil Mydlach is the owner of Mydlach Management Advisors (mydlachmanage ment.com), a corporate planning and performance improvement practice in Waukesha. He can be reached at (262) 662-4646 or pmydlach@mydlachmanagement.com.
