Strategy Design and Execution
We serve by designing strategies and mapping your business environment. Doing so enables your organization to outperform in execution and hence to better serve your customers.
Our service tools that we list below never constitute an exhaustive list, no matter how long we would make such list. Point is: we will together with you look for an answer to your question, aiming to enable you to take better decisions. We are not tool-driven, but solution-driven. To find the solution that you need, we may have to apply different tools. We may even have to invent a new tool when the strategic relevance of getting your question answered justifies us doing so. Analysis tools that have, however, often served us well in answering strategic questions include those that answer two questions: Where to play? and How to Play?
Where to Play?
The tools listed below focus on answering the questions ‘Where to play?’.
Click on the title of a specific tool to unfold its content.
Market volume and value sizing
Few industries can prosper without knowing what size of market in value or volume they are serving. Getting a sufficiently accurate sizing of a market, however, is rarely easy. Not the least because in many industries, transparency of the markets usually equates to low competitive entry barriers. The latter is often a sign of modest market profitability. Understanding elusive, non-transparent markets better than others can be a powerful source of a company’s competitive advantage. We master six different market sizing methods, sometimes applying them in parallel, to efficiently come to a market sizing that is having exactly the right accuracy required for your decision-making.
Market profit pool sizing
My single most favourite business school jargon is to define industrial sectors in x-star industries. At Harvard Business School I have been taught that a five star crappy industry is an industry that is so poorly positioned as sector versus its suppliers and customers that no single participant in the industry makes a decent return on capital, no matter how hard they try. Full-service passenger airlines have for many years been such industry.
At the other end of the spectrum today are some data-based industries, we all know their names, where the winner takes all and does so at extraordinary high profits. Prior to their approving investments in an industry, we have often served customers by assessing to be expected market profit pools. How great or crappy are current players performing? What drives their good or not-so-good performance? How would the customer’s performance compare? At the end of the analysis we always apply a rule based on an axiom once presented by master investor Warren Buffett: when a good company invests in a bad sector, it is usually the sector that maintains its reputation.
Free markets tend to be characterized by consumer or customer choice from several suppliers. All these suppliers aim to serve these same customers: hence there is competition. When one competitor wins an order, an other has not. Any company can approach the question of whether or not to win an order as a lottery: fate determines. It doesn’t have to be like that. The best-run companies know what orders they want to win, and win most of them. They do so by having created an in-depth and continuously actualized understanding of the capabilities and intent of their competitors. Already some 2500 years ago, the Chinese (military) scholar Sun Tzu formulated this enduring one-liner of wisdom: Those that know themselves and know their enemies shall not be defeated. We believe this line still applies, the difference being that the pace of change in society and business has since Sun Tzu’s times dramatically gone up. We help customers both in building a picture of their today’s competitor environment as well as in enabling their organizations to turn that single one-off picture into a continuously actualized movie.
Competitor management profiling
Most companies, especially those that are private equity or family-owned, over the years become a shadow of their leader. In pursuit of generating a competitive advantage against such (competitor) companies, understanding the leader assists in predicting the company’s next moves. Together with our clients, we have occasionally been able to justify the efforts to profile a competitor top team, in search of predicting how they would turn their stated strategy, given their known capabilities, into action. It is far easier to determine what a company or even an individual can do than to reliably predict what a company or an individual will do.
Can do focuses on capabilities. Those are tangible and can be determined. We talk about a company’s brands, products, fixed assets, distribution systems, management capabilities etc. Will do is determined by intent. To use a military metaphor: in conflict it is essential to know how far the enemy’s tank can shoot its grenades. That is a capability. It is, however, in battle much more important to know where that very tank is now, where it is heading, with what speed, intending to shoot at what target. That is intent. Intent looks often more elusive than it is. We have really contributed to better customer decision-making quality by spending time on analysing the behavioural drivers of their competitor’s leaders.
Industry position benchmarking
Many industry still tend to determine their product or services pricing on a cost-plus basis. For customer value based pricing, the key insights lack, as either customers successfully keep their sources of profit hidden from their suppliers, or suppliers simply lack pricing power to their customers given the commoditized markets they have ended up operating in. Iconic strategy thinker Michael Porter in the late 1980s suggested all company strategies could be summarized as either cost leadership or diversification / innovation leadership. It was a dichotomy – a choice between the one or the other without much room for nuance.
Even when management science now considers this thinking to lack nuance, many companies still fight in commoditized markets. In such markets cost leadership may not be the formally expressed strategy but may in fact be the strategy that many companies pursue. In such industries fighting against competitors that have sources of cost advantages (e.g. scale, proximity of major customers…) rarely is a rewarding choice. We have regularly assisted customers in benchmarking their cost positions against competitors, offering them a realistic view on (future) margin options when retaining their commoditized product-market-combinations.
Predicting is difficult, especially when it concerns the future. As so often with clichés, this cliché is more true than we may like. Accepting this truth helps us move to the next stage. When it is truth, we better act on it. Some industries regularly look or do invest in fixed assets that have a lifetime of thirty or more years. Think office buildings, passenger airlines, large cargo ships, power stations and oil and hydrocarbon or other bulk chemical processing plants. Investors in their business plans thus implicitly presume that the asset not only has a lifetime of thirty years but that it even has a useful lifetime of thirty years.
German energy company E-On that up to a decade ago still massively invested in coal-fired power stations has learned the hard way that lifetime and useful lifetime are not the same. This is not about blaming. This is just about identifying their missed opportunity to apply scenario planning. For about 40 – 50 years, scenario planning is not about predicting the future, but about defining in parallel several potential futures. Such a potential future is (simply…) the result of a set of self-chosen assumptions over time to materialize. We have assisted customers in uncertain environments by using this technique to not only identify how possible futures can look but most of all what moves they can take today or tomorrow that prove to work for them in any potential future we today could imagine together.
How to Play?
The tools listed below focus on answering the questions ‘How to play?’.
Click on the title of a specific tool to unfold its content.
Strategy stress-testing (wargaming)
If any organization understands there is a merit in exercising prior to having real-life contact with an adversary it is the military. The military in conflict may face questions directly involving life and death. Hence a military axiom has it that it is better to sweat in training than to bleed in battle. Businesses in contact with their competitors fortunately do not face life and death situations for their staff – with the possible exception of some illegal sectors like drugs – but sometimes ‘big bet’ investments may indeed determine the very continuity of even a legal company.
A company’s staff will gracefully survive but a company itself may not. Looking from a distance, corporate continuity is in the end the ultimate cause that all company staff are fighting for. Over the past decade we have at least at fifty different business occasions working with teams on three continents, applied wargaming techniques to assist management teams in exercising / stress-testing their plans, prior to turning them into irreversible action. As wargaming necessitates scarce time and effort of multiple company staff members we always carefully ensure that it is only applied when it is the optimal tool for the occasion.
Over time two occasions have come out that prove particularly useful. The first occasion is when a company aims to do a ‘big bet’ investment. Think of a major new product launch, an acquisition or a large investment in fixed assets. The other is when a company faces a large competitor move that may significantly affect its future profitability. In both cases, role playing the adversary assists in a team-based sharpening / stress-testing of the own plans. Without exception, a stronger team emerges from such exercise. The methodology for wargaming has been developed in close cooperation with our partner Military Formats in Business. It has been presented at CNA in Reston (VA) to the US Department of Defence Community of Practice on Wargaming and at King’s College (London) Faculty of War Studies-hosted Connections UK conference as a best practice of how to apply this 200 year old military tool in business. Our methodology has received the 2nd price in the 2016 CiMiCon “Excellence in Market Intelligence Methodologies” Award contest.
Structured analytical techniques
Nobel Prize winner, behavioural economist and psychologist Daniel Kahneman has remarked that the human mind is a machine built to jump to conclusions. During the human evolution this mental wiring must have contributed to the survival and even flourishing of our species on earth. Unfortunately the evolution is slow and the change of our society is fast; much faster than the human mind can cope with.
Hence, at all times relying on our intuition and wiring developed and tested at the savannahs and in jungles may seriously poison our thinking with biases and hence our decision-making with flaws. To cope with the challenge of making good or preferably ever better decisions whilst operating human minds we see two ways forward that current crystallize out. The one is to augment the thinking of the human mind with Structured Analytic Techniques (e.g. pre mortem analysis, brainstorming, analysis of competing hypotheses and many others). Our partner Globalytica is world leader in developing applicable techniques in this field. The other way is to accept the limitations of the human mind and increasingly rely on artificial intelligence (AI) to do the heavy lifting. We have built up experience in both fields. In AI for a customer we successfully worked on predictive analysis of future commodity prices; work we have been invited to present at our partner Berry Professionals 2018 data science conference.