Strategic Thinking: A Four Piece Puzzle

Strategic Thinking

A Four Piece Puzzle

Bill Birnbaum

Douglas Mountain Publishing

www.DouglasMountain.com

Strategic Thinking: A Four Piece Puzzle

Copyright 2014 William S. Birnbaum

ISBN: 978-1-932632-02-6

Smashwords Edition

All rights reserved. No part of this book may be reproduced or transmitted in any form electronic or mechanical, including photocopying, recording or by any information storage and retrieval system without written permission of the publisher.

Table of Contents

Introduction

Part I – Focus

1. The Law of Things

2. The SWOT Matrix

3. Hey, Don’t Set So Many Objectives!

4. What Are You Doing that’s Different?

Part II – Markets

5. The Product Life Cycle

6. The Opportunity Grid

7. Selling to Your Peers

8. Selling Staples

Part III – People

9. Do Your Employees Really Care?

10. Hunters, Farmers and Shepherds

11. Managing by Neglect

12. Building Knowledge in Your Organization

13. Thinking Outside the Box

14. Nobody Can Sprint Forever

Part IV – Process

15. The 80-20 Rule Works About 80% of the Time

16. Get the Lead Out!

17. Keep Your Eye on Productivity

18. Work a Process

19. Successful New Products and Services

20. Planning for Profit on Smaller Orders

21. Beware of Wall Street

Appendix A – Developing Your Mission Statement

Appendix B – Reinventing Strategic Planning

About the Author

Dedication

Introduction

What's the difference? Why are some business leaders successful at building strong, thriving enterprises, while others continually flounder? Why do some consistently manage a healthy mixture of profit and growth while others prepare for their next layoff? Why do some firms radiate enthusiasm, commitment and fun while others leave hardly a memory?

Since launching my consulting practice in 1980, I've searched for answers to these questions. During those years, I've worked in strategy sessions with teams of senior managers from client companies. And those strategy sessions were far from just another meeting. Each was an intensive analysis of issues at the very heart of the organization. My clients wrestled with tough, open ended questions. Questions like…

• Why do customers choose to buy our products or services? What might happen to change their mind about choosing our products or services? What can we do about preventing that occurrence?

• What core competencies have led to our success? Are our competencies truly of competitive advantage? Are they impossible – or at least extremely difficult – for competitors to copy?

• What are our natural constraints to growth? What’s holding us back? What’s the weakest link in our business model?

The client companies I’ve worked with include organizations of every size – from Fortune 500s to entrepreneurial start ups. They represent a variety of industries including low, medium and high tech manufacturing, and services including financial, health care, law, communications, real estate development, and consulting. When arriving at their strategy session, each team of managers enjoyed its own specific level of success. Some of their companies were healthy, thriving, profitable businesses. Others thrashed about attempting to reverse their decline.

But large or small, fat or skinny, plain or fancy, all brought me closer to concluding why some build profitable, growing, fun to work at enterprises; and why others fail.

I’ve discovered that the more successful managers – and the more successful management teams – place more emphasis on strategic thinking than on strategic planning. Oh sure, they develop a strategic plan. And they publish that plan. And they share it with their employees. But their first priority is creating an environment of strategic thought. They then use strategic thinking to build a shared vision of their company’s future. Finally, in deciding how they’ll accomplish that vision, they use strategic thinking to develop their strategic plan.

I’ve also discovered that those successful managers – and successful management teams – focus on four fundamental factors, or four pieces of the strategic puzzle…

1. Rather than try to accomplish everything, they diligently maintain focus.

2. They develop and maintain an intimate understanding of their markets – and of their customers within those markets.

3. They truly care about – thus they nurture – their people.

4. And they carefully manage their processes.

Over the years, many have suggested that I write a book about these strategic lessons I’ve learned. And for years, I responded to those suggestions by saying I’m too busy. But, over time, I came to realize that, through such a book, I could help far more managers and management teams than I could through my consulting and teaching alone. And so, I found the time to write this book that you now hold.

Much of my work on this book I did during off hours. And in odd places. Places like hotel rooms and airports. Sort of here and there and everywhere. In fact, as I write these very words, I’m seated (not terribly comfortably) aboard a nighttime flight from Atlanta, Georgia to Orange County, California.

I’ve arranged this book in five parts, each containing a number of chapters discussing important strategic concepts. In Part I, we’ll discuss the first piece of the puzzle – focus. There, you’ll learn that focus is one of my two strong biases. It’s a point which I drive home consistently with my clients. And it isn’t enough to focus on just a few activities. You’ve also got to be sure they’re the right activities.

In Part II, we’ll discuss your markets. In our capitalistic economy, there’s only one way to make money – you’ve got to sell something to somebody. So you and your management team had better care a whole lot about marketing. In Part II, we’ll examine your marketplace, your product or service offering, and your relationship with your customer.

In Part III, we’ll talk about leading your people. Remember I told you that one of my two strong biases is focus? Well, my other bias is this – It’s one thing to develop a strategy; it’s quite another to get the darn thing implemented. And you’re not likely to implement it successfully if your employees don’t care about it. So you’d better get your employees to care about your strategy. There’s just one way to do that – you’d first better care about your employees.

In Part IV, we’ll discuss managing process. Businesses contain processes and systems. And those processes and systems follow certain truisms. Like diminishing returns, the 80-20 rule, and the path of least resistance. Also in this section, we’ll contrast working a process with working a project. And we’ll explain when you can beneficially use each. And when you can’t.

In Part V, we’ll transition from strategic thinking to strategic planning. Keeping in mind that sound strategic thinking leads to sound strategic planning, and that, in the first four parts of the book, we’ve dealt with strategic thinking, we’re now ready to turn our attention to the planning process. There, in part V, we’ll talk about reinventing the strategic planning process. We’ll explain why it’s time to reinvent the process and we’ll offer a new planning model – a model more appropriate to the realities of our 21st Century.

And please be sure to read the appendix. There, we’ll cover the development of your mission statement. Among attendees at our workshops and visitors to our web site, more business managers ask about the mission statement than any other element in the strategic planning process. In the Appendix, we’ll answer three important questions, What is a mission statement? Why do we need one? And How should we write a mission statement?" In fact, I’ll share a proven technique for developing your mission statement with just a few people, or for that matter, with many people participating in the process.

I hope you will gain from this book. That the truths about business strategy I've discovered over the last three plus decades will help you improve your business. I hope my messages will help you to successfully lead your management team. To steepen your growth curve. To brighten your profit picture. Toward these objectives, I've written this book.

Bill Birnbaum, MBA

Part I

Focus

Chapter 1

The Law of Things

As a 22 year old electronics engineer, fresh out of college, I landed a job with Beckman Instruments in Fullerton, California. There, I had the good fortune to work for the Chief of Electrical Engineering, a fellow named Tony Del Duca.

Tony was a born teacher and, from him, I learned quite a bit about engineering. More importantly though, he was also something of a philosopher and enjoyed teaching lessons about life. From time to time, he’d instruct me, an impressionable young man, about such diverse subjects as politics, career development, playing the stock market, fine dining and dating girls.

Without doubt, the most universally applicable of Tony’s lessons, was The Law of Things. Most would refer to the diagram which Tony drew on the blackboard as The Bell-shaped Curve. It’s familiar to all who’ve ever sat through a course on statistics or probability.

Tony explained it like this…

On a scale of 0 to 10, most neckties cost about 5. Sure you can buy some very fine hand sewn, silk neckties at a price that would score a 9 or 10. And you can score a 0 or 1 by shopping for a necktie in a discount department store. But if you took all the prices of all the neckties for sale, and ranked them on a scale of 0 to 10, you’d find their prices clustered around 5.

And on a scale of 0 to 10, the height of most adult American males would score about 5. Sure, each of the Boston Celtics scores a 9 or more, and jockeys score 0 or 1. But on a scale of 0 to 10, the majority of American men center around 5.

The price of neckties and the height of adult American males have one thing in common. Both cluster around the middle, with only a very few either very low or very high.

This bell-shaped curve is a natural phenomenon. It applies with such frequency that it’s called the normal distribution. It works not only for neckties and the Boston Celtics, but also for the acceleration of automobiles, the time required to shine your shoes, and the annual rainfall in your home town. In fact, applications of the bell-shaped curve are so numerous that it’s only a slight exaggeration to call it, as Tony did, The Law of Things.

And the bell-shaped curve applies, in many ways, to the world of business. Consider an activity for which your organization might compare itself against its competitors. Take marketing, for example. A few firms are excellent at marketing. Amazon.com comes to mind immediately. Amazon.com scores a 9 or 10 in marketing. And some companies are terrible at marketing – like many of those that go broke each year. They score a 0 or 1.

Most firms, however, are just about as good at marketing as a whole bunch of their competitors. On a scale of 0 to 10, they score about 4, 5 or 6. Here too, the bell-shaped curve works.

It works too for cost of manufacturing, for product development and for financial strength. For each of those factors, almost everyone in the industry falls near the middle of the curve – about 4, 5 or 6 – while a few score very high and a few score very low.

You’ll find that the bell shaped curve is particularly useful when considering your company’s strengths and weaknesses because it helps you view those strengths and weaknesses in comparison to your competition. And that’s important. It isn’t enough to say, We’re good at marketing. You must be able to say, We’re significantly better at marketing than are our competitors. For only then could you build a strategy based on a significant competitive advantage.

Think about each suggested strength and weakness in comparison to your competitors. How do you score? Right there in the middle of the pack – a 4, 5, or 6 with all the rest? Or do you score a 0, 1, or 2? In financial management perhaps? If you do score a 0, 1, or 2, you’ve just identified a competitive weakness— something you can work to correct.

Go on to score the next issue. Marketing, perhaps. How do you score? About 8 or 9? Good. You’ve identified a competitive strength. Your challenge, as we’ll soon see, will be to build a strategy based on that competitive strength.

You’ll discover that, as compared to your competition, most of the skills, activities and assets of your organization are neither strengths nor weaknesses. In most areas, your company is in the middle of the pack. This means that your list of strengths and your list weaknesses will both be relatively short. That’s great! For short lists lead to focus.

An interesting example of an organization building on internal strengths comes from a client of ours – a small electronics manufacturer on the West Coast. The company, formed by two talented engineers, works in the field of process instrumentation. The company is very good at going out into the factories of the nation, finding out what a particular process is all about, identifying specific measurement problems, wrapping its arms around those problems, and inventing customized solutions. So this little company focuses on those tougher problems, such as problems in harsh environments – hot, dusty, corrosive, and, at times, explosive environments. This little company has managed to carve out a nice little niche for itself in an