Anyone who has been involved in starting a business understands, only too well, the many stresses and pitfalls that cause eighty percent of new businesses to fold within their first five years. So what is the secret of those businesses that manage not only to survive, but thrive in todays volatile market and economy? These businesses do not depend on luck to see them through; they practice Strategic Effectiveness Targeting.
When a company first opens its doors necessity dictates; because of limited resources, that young companies adopt a bolt-on approach management style. New companies add new components as and when they can afford to or as market opportunities demand. While this approach works in the initial establishment stages of a company, there comes a time when this approach can be detrimental to a companys survival. When the desire to grow the company to the next level arises, strategic business managers understand that a shift in management style is necessary to achieve their growth goals.
The fundamental essence of this shift to a strategic style is the transition of managements perspective. They need to begin viewing their company through critical eyes that can objectively assess where they are presently and translate that knowledge into a plan that will map out how to effectively move the company in the direction of growth targets.
While such a transition sounds simple enough, it can be a very difficult and painful process to experience. A lot of the old proverbial blood, sweat, and tears have been required to start and maintain a business. This emotional investment can make it difficult for senior managers to step back and critically assess the company. It is at this point that many strategic managers recognize the importance and difficulty of this process and opt to bring in an unbiased third party to assist them in this activity.
The first phase of this assessment requires a thorough and systematic dissection of the existing company infrastructure. This phase is important because allows senior management to identify gaps and weaknesses in existing company processes and skills sets. Under careful review, it is easier to comprehend how existing gaps can have substantial impacts on such areas as financial management, personnel, production, sales/marketing and distribution. Illuminating any weaknesses in these areas allows management to remedy these issues before introducing the added strains that accompany a growth initiative.
The outcome of such a review allows management to objectively map out what all the components of what the company does and how it does it. This clear articulation allows for the next phase of Strategic Effectiveness Targeting. This next phase requires defining how to measure what a company does what it does through using clearly defined performance metrics. These metrics will allow managers to measure the performance of their company and its individual components. The ability to know the whats, wheres, whens and hows of measuring a companys performance, through using consistent, yet repeatable metrics, assists management to lay the final cornerstone of a solid foundation, upon which, they can build a strategic growth initiative for their company.
Before launching any growth initiative, strategic managers understand the importance of getting a clear picture of how the company is doing at present. Does the already company possess the resilience to survive the ever-present challenges of external factors like economic downturns, competition, market shifts and internal factors like management styles/trends, financial management systems, operations and marketing? With this clear snapshot of the company, managers are able to conduct a meaningful reflection and assessment of how effectively their company presently fairs in the face of these ever-present external and internal challenges.
Once a company has identified how it is dealing both the opportunities and challenges at its present level of operations, it is armed with the tools to begin creating a framework that will facilitate a strategic and orchestrated growth initiative. This framework will allow senior management to conduct more accurate projections and provide the ability for them to forecast how present and future market demands and drivers will impact on a companys infrastructure throughout the various phases of this growth initiative. With this knowledge, management will possess the ability to account but also estimate the impact of how the ongoing internal and external challenges will impact on the companys performance in tandem with the increased demands relating to growing the company. This breath of knowledge and the comprehension of these many variables assists in the creation of realistic and informed strategic growth plan, in which actual timelines and budgets can be included to support the required infrastructure expansion, upgrades and enhancements all of which are intrinsic to any growth initiative.
Senior management will be able to use this framework and knowledge to conduct meaningful scenario planning activities. This style of proactive management means that a company can forecast and play out various approaches and timelines to determine which will best facilitate the attainment of its growth targets. It can also simultaneously be used to address how to reduce the impact of internal and external factors and allow for the inclusion of impact absorption margins in the strategic growth plan.
Managers who approach a growth initiative using the principles of Strategic Effectiveness Targeting, will be building a company that is able to identify and optimize future growth opportunities rather than buckling under the pressure of these increased demands.
Copyright - Kelly Melanson, Certified Management Accountant |