Strategic Relationships- Creating a Strategy

When is the last time you gave serious consideration to your business strategy? If you are like many business people, attention to strategy doesn’t happen in a natural or unplanned manner. Usually as a reaction to a major crisis or transition will thoughts of one’s strategy occur. You may be fortunate to have a board of directors or board of advisors who hold your feet to the fire. But if your business is not experiencing all the growth it can handle, you may want to answer some of these questions to help determine your current strategy:

• Who should I target as my customers?
• What products or services should I offer?
• How can I best deliver these services to these customers?

No position remains unique forever. Success stems from the exploitation of a strategic position. Think about the reason you chose your current course of action. There was probably some compelling need in the marketplace and you seized the opportunity. There was attractive gross margin available at that time. These factors may have then encouraged competition, the margins dropped and the cycle continued. This process occurs in most industries unless you are lucky enough to have a monopoly. To remain profitable and growing, companies must continually search for new positions.

Revisiting the three questions above may assist in that search. We must be vigilant to watch for changes in industry conditions, customer needs or preferences, and technology. Any one of these factors can readily change the strategy necessary. How can you make yourself different?

• Look to benchmarking with other industries
• Focus on your existing strategic position and try to improve that position
• Engage in practices of restructuring your organization to meet changing needs
• Refocus on quality programs, reengineering and employee training
• Play the game differently- identify new customer segments or needs that no competitor is serving very well
• Identify new ways of producing, delivering, selling or distributing your products

How can you start to do this? Decide what business you are in. As an example, the old railroads that saw themselves in the transportation business developed capabilities or alliances with ship and truck lines. They were oriented to give service to their customers and not just use their current assets. Thinking outside the box first takes some awareness of what your box looks like. Test all assumptions. You may be surprised at the answers.

An entrepreneur without the benefit objective, informed feedback, can have their business devolve. No past practice should be sacred. Only the principles don’t change. Giving customers honest and reliable service with quality products is still the key to success. The question about how that service is defined may change according to current conditions.

If you are a small business manager without the benefit of an active board of directors, form a board of advisors. They can provide valuable feedback to your leadership and give guidance for the growth ahead. Getting unbiased advice from employees is not likely. You need to experiment with new ideas or new methods of doing business to satisfy the demands of your customers and the marketplace.

Greco Apparel, founded in 1951, transitioned from a sub-contractor to a general contractor for our clients. In the 1950s, 60s and 70s, there were loads of capable, successful manufacturers who were our customers. They provided us with all components of production including markers, trim, specifications and freight logistics. All we needed to do was to supply, cut, make and thread. But then changes occurred. It was my customers who first changed their strategy when they asked themselves the question of “what business are we in?” Their answer was that they served their customers by maintaining an inventory of appropriate styles and sizes of desired merchandise.

These “traditional manufacturers” realized that the new definition didn’t necessarily include owning manufacturing facilities. As long as they could rely upon the contractor for dependable delivery of quality garments at competitive prices, the best use of their efforts and assets were in sales and merchandising. With the closing of their factories the degradation of the support functions followed: pattern making, grading, marking, product development, specification writing and trim buying were diminished or disappeared altogether.

With these changes occurring in my client base, I needed to then ask the same question of what business I was in. The answer was that we needed to fill the same functions as the production department formerly located in our customer’s headquarters. To continue and grow in the contracting business, Greco Apparel required two major changes. We needed first to move offshore in 1985 to maintain an ample labor supply and second to develop core competencies to provide those manufacturing services that my clients no longer supplied.

Until we implemented our internal capability, some of the manufacturing functions were “outsourced.” And despite the fact that I respect Lou Dobbs, outsourcing is not a dirty word. It simply refers to those activities that are not core competencies and can be done better by other companies. Your business can be defined according to your core competencies. If you don’t have what is required internally you can hire the people or acquire a company or train your own personnel. A company should define its business according to the customer function it is trying to fill. While you cannot be everything to everybody, you can become a leader in selected areas. Knowing the answer to what business you are in and continuing to address that question will help you develop the strategy that will keep your company on the track to success.

You may want to read further on this topic. Ideas for this article were borrowed from “All the Right Moves, a Guide to Crafting Breakthrough Strategy” By Constantinos C. Markides, Harvard Business School Press, 2000.