Strategy: Seeing the Big Picture
Strategy is about looking beyond the immediate to do list or this quarter’s financial plan and seeing the whole picture and the way things really are, not the way you’d like them to be.
Seeing the big picture is critical in creating successful strategy and probably something you’ve been advised to do numerous times without a clear explanation of what it means and how to do it. For me it’s about seeing things clearly, simply and completely and involves looking forwards and backwards, and inside and outside the company. As a business leader, historic success can ‘blind’ you to what the company should do next: stay the same and get better; stay the same and get bigger; evolve by introducing new parts to the operation; or become substantially different. Seeing the big picture provides you with context in making the right adjustments to the company’s strategy.
A good place to start is understanding what has driven the company to its present evolutionary state i.e. why these customers? products? cost-to-serve model? competitors? performance levels? as opposed to other possible combinations. This affords good insight into what worked and what didn’t but also the underpinning assumptions about what is expected to drive sustainable growth and performance in the future. For example, a company selling a product that accounts for the lion-share of revenue but sold to a diminishing customer-base or that’s losing market share to a superior competitor product, will, in the long-term, need to evolve or become substantially different.
We only need look at the declined performance of companies that were once heralded by strategy gurus as being custodians of excellence to realise things don’t stand still for too long. A company’s capabilities can become its disabilities if management wrongly assume what made them successful in the past will continue. Looking forwards involves interpreting trends and extrapolating them into the future to better understand how things will look different or the same. The context is always who will the company serve, how will it compete and organize itself? Business leaders should be clear in distinguishing between growth and performance drivers that are constants, predictions and uncertainties. Looking five years out is adequate for most companies.
If change is faster outside the company than inside, then sooner or later you’re going to experience fundamental difficulty growing the operation and/or maintaining current performance. It’s possible for a company to be growing its bottom line year-on-year but leave itself vulnerable to competitive attack. How so? A natural temptation is for incumbents to focus on the needs of those customers that provide the combination of volume and margin that maximize return – to the exclusion of other customers. This, inevitably results in some customer’s needs being overserved i.e. paying for value they don’t want. Ideal for a lower priced competitor offer. Looking inside the operation focuses on what drives profitability and why? Why complexity exists? And management’s aspirations on being bigger, better, faster?
Looking outside the company to see what other people are doing has probably never been more important as the pace of change seems to be accelerating in recent years. That said, I use some proven tools to structure my thinking, like the Porter Five Forces Analysis, future Customer Purchasing Criteria Analysis and Key Success Factor Analysis. For me, it’s always important to understand competitive behavior so you can begin to predict where future competitor weakness or strength will materialize – then start thinking about what to do about it. By way of example, if industry margins are being squeezed by, say, customer consolidation, whilst key customers are purposely minimizing product differentiation via their respective procurement processes, and competitors are streamlining their cost-to-serve models, then future competition looks like being price driven. A potential competitive disadvantage if you have a higher cost-base and can’t develop a meaningful point of differentiation for your product.
Seeing Things Simply
As Albert Einstein said: “any fool can know, the point is to understand”. However complex the analysis has been in establishing the big picture, I try and articulate and prioritise the ramifications for the company in a simplified way to help clarify choices. Thinking visually is a good way to simplify. Knowing what will likely determine future success is also a way to distinguishing between the nice to know and mission critical issues. You’ve probably established twenty component parts to the big picture but try and focus on just five. Difficult to do, I know, but it focuses you and the company on the most important factors.