Many business owners decide to go into business for themselves as a result of the confidence they have in their technical expertise and skill in their chosen field. The underlying premise is, “Because I am very good at what I do, I will be successful in business.” Unfortunately, rarely does that expertise provide them with the skills necessary to operate a business profitably and successfully.
Building a successful business requires an owner to transform from technical expert to master strategist. The focus must be on working “on the business” rather than on working “in the business.” Their efforts are no longer applied only to a product or service, but now must be expanded to include financial and operational management, production, delivery and aftermarket service.
A master strategist treats his business as if it is for sale — every day. Every decision must be evaluated by answering the question, “Will taking this action enhance shareholder value in the company?” And, at the end of each day, the master strategist must answer the question, “Am I building a business worth buying?” There is only one acceptable answer to these questions — yes.
There are two caveats to any strategy — it must be designed to increase the chances of success, not simply aimed at reducing the likelihood of failure; and it must provide a competitive advantage by differentiation and delivery of unique value.
Most competitors in the marketplace strive to maintain a reputation for a quality product, low price and high service quality. All of these are easily copied among competitors, and therefore, every product will appear increasingly similar. The key is to offer a product that is different in a unique and genuine way. Products that deliver a unique mix of value and appeal cannot be easily duplicated and will identify your brand as the market leader.
Together, the individual strategies form a strategic plan. The master strategist recognizes that for a strategic plan to be successful, there two parts — development and action.
To develop strategies, a master strategist must examine critical issues; determine how the organization’s strengths and skills can be employed to address the critical issues; analyze the opportunities available; and select the best approach.
To develop action plans, he or she must identify goals to accomplish; specify what results (or objectives) are to be achieved; specify how those results (or objectives) will be achieved; specify by when they must be achieved.
In most businesses, 20 percent of your customers yield 80 percent of your revenue. And even more important, 20 percent of your customers yield 80 percent of your profit. The problem is that neither of the 20 percent groups contain exactly the same customers.
Therefore, you must identify the top 20 percent of the following (that are responsible for 80 percent of your profit) and develop strategies and action plans to enhance their effectiveness.
* Sales. Top sales staff (create a support team to increase their productivity). And target top customers, territories and distributors.
* Market segments. Top products, services and territories
* Production. Top production employees and top production problem-solvers
* Quality. Product(s) with most defects and type of defects
* Employee retention.Reward the top 20 percent with inventive bonuses and benefits for increased productivity.
Strategies are not etched in stone; they must remain fluid and adaptive. As such, a master strategist is careful to avoid the three pitfalls of planning:
* Failing to successfully communicate your strategies and action plans
* Failing to manage change
* Failing to make the hard choices
Without effective strategies and action plans, success will be merely a matter of luck.
Kenneth Sweet ([email protected]) is the executive director of consulting services for International Profit Associates Inc. IPA’s 1,700 employees offer consulting services to businesses throughout the United States, including Alaska and Hawaii, as well as Canada. Reach him at (847) 808-5590 or at www.ipa-iba.com.
