And what they must do to succeed in the new economy
Please read Parts I, II, III, IV , V and VI of this post for background information.
In management terms, transferred-value is a term that includes all forms of results and experiences that contribute to a customer’s long-term health and well-being. From individuals to corporate entities.
Per the above, companies must differentiate their offerings to provide values that exceed that offered by the competition. The value transferred must contribute to the customer’s "long-term health and well-being". The value benefit could be economic, or emotional, but fulfills a customer’s needs and wants at the lowest cost of acquisition.
Often an STM (small-to-medium size business) will use what is known as a ‘co-axial’ product strategy; adding performance features to existing products with increased or lower pricing. This may or may not increase the value delivered to a customer. If not, the strategy will definitely not increase sales. The STM management must formulate a Unique Value Proposition (Threat Rigidity Effects in Organizational Behavior, Administrative Science Quarterly, Vol 26, #4, Barry M Staw, Lance E Sandelands, Jane E Dutton). This is critically important.
Niche Marketing
STMs most often are already ‘niche marketers’ they are usually addressing smaller groups of customers requiring specialized products or services. Given recent economic changes, their niche may have shrunk, or changed in some way (could be the reason for the fall-off in sales)
They should ask themselves the question, "Who are our customers? Why do they buy our products or services?" It is often surprising that otherwise savvy business people either have little idea why customers buy from them, or they assume they just do (the better mouse-trap syndrome).
Given the fact that sales (in general) have fallen dramatically and that there is the possibility that their market has changed, maybe forever, STM management should be looking for new markets, new niches. The most successful STM businesses understand that only a limited number of people will buy their product or service.
The task then becomes to determine, as closely as possible, exactly who those people are, and how to direct the business’s marketing efforts and dollars toward them.
The STM should thoroughly examine its strengths and weaknesses (possibly a SWOT analysis), the uniqueness of its ‘intellectual property’ (IP), the strengths and weaknesses of its workforce, and the strengths and weaknesses of its management. A complete self-analysis.
STMs are best advised to seek third party support for these efforts, maybe a consultant or a services supplier. If they were capable of performing these kind of analyses they probably would have already done it, and would not be in any kind of business jeopardy anyway.
Third Party Support
Conducting these analyses, and turning them into a new market attack plan, takes some business and marketing know-how, and talent. If the STM has this kind of talent on-board they should use it immediately to discover their new market niche, and launch a new sales program.
Given normal STM behaviors however, they are usually very reluctant to spend money on something they don’t understand, and have not needed, or used before, so they forego seeking third party help.
Here clearly is the dilemma, how do STMs engage with third parties to get the help they need? They are right to be suspicious and maybe reluctant with regards to using this help, there are lots of ‘so called’ consultants who will not be able to get them the results they need.
Even the ‘big guys’ like the McKinsey’s, and Boston Consulting et al, would be difficult to trust. STMs are small companies, they are liable to get a recent MBA graduate from some elite school assigned to them. Can a recent MBA solve their problems, or is he/she still in learning mode?
Typically, STM CEOs who have the open-mindedness to realize that they need third party help, go looking for the wrong kind of help. They typically look for "problem solving help" and usually end up with a company that specializes in one, or a few areas of technology, management, or business.
The CEOs will also try to get help that is of the lowest cost, not taking as much into account of what they will get for their money as they should. Finding help to solve one or two problems is OK but the STM in the situation we are discussing has multiple problems, that are not really problems but processes that are lacking and need to be developed.
The best third party helper will be a firm that has a philosophical approach; with principals who have had lots of in-depth experience, probably from having worked in Fortune 500 or 100 companies previously. And of course who have also gained the academic credentials necessary for them to understand the STM’s business (and maybe operations) and to provide advisory and mentoring solutions and support.
Just as an STM’s customers require to have ‘value’ delivered to them so should the STM when seeking third party help. To better understand value in this case the STM manager needs to understand what he wants from the third party. We would suggest that the STM get the independent firm to conduct a ‘situational audit’ and get suggestions for what needs to be done.
This should take no longer than a week, and should cost the STM no more than $1,000, when the audit is complete. It should be reviewed jointly with the third party firm and an agreement reached about what needs to be done and what the expected results for the STM will be.
At this point the third party should be asked to tender a formal proposal, which should outline what was jointly agreed upon, the results expected (benefits in $), the time and result increments, and fees. The STM should minimize risk by only paying for results, maybe with a small retainer fee.
Summary – Parts I – VII – Underperforming Corporations
This publication is directed at Small To Medium (STM) companies; companies with between 10 and 1,000 employees. The underpinning to the discussions and solutions presented is that STM companies have a need to know what could prevent them from succeeding in the new economy.
It was demonstrated that things like rigidity of their management thoughts and behavioral processes, is a major contributor. Not knowing what they don’t know, makes it difficult for them to develop strategies and actions that will help them succeed.
Not knowing, is an ambiguity, which prevents success even with a great strategy! Because without adaptability and flexibility how does an STM succeed? It would be shooting in the dark! The biggest possible ambiguity is what will happen to the business because of the economic environment?
What ‘has’ happened (to the environment) has brought most STMs to their knees. If they have survived (good-on-them), they have more than likely seen an uptick in their business as the economic environment improves. This uptick is an opportunity to prepare their business for the future
Presented are techniques that will help the STM establish operational processes that will assist them in understanding themselves, their employees and management, even why they exist (their reason for being).and prepare their company to succeed.
Some of the steps to success have been outlined herein as follows:
- STM managers need to understand how ‘rigidities’ affect them
- They must rigorously audit their company to better understand its resources and capabilities
- Determine how good or bad their company is "Employee Engagement"
- Understand that their own behaviors may be locked in the past
- Understand that the new mantra is ‘doing more with less’
- Understand that Productivity is the name of the game
- Understand that the key to improvement and productivity is "people"
- "Know thy People"
- Performance metrics and performance measurement processes
- Develop the best managers and ‘leaders’
- Know the human capital implications of business strategies
- Be able to predict performance – be performance driven
- Set measurable achievable objectives
- Understand the market and the competition
- Understand the customer and how to deliver "value"
- Think strategically and innovate
If an STM’s management has not examined its fundamental factors (Values, Culture, Leadership) and articulated what they mean for their company, there is good reason that a company will struggle to succeed.
Bibliography for Further Reference
Competitive Strategy: Techniques for Analyzing Industries & Competitors: Michael E. Porter, 1998
Execution: The Discipline of Getting Things Done – Larry Bossidy & Ram Charan – Random House
How Employee Engagement Turned Around Campbell’s – T. Waghorn, Forbes Magazine 6.23.2009
Management: Theory and Practice – Carlos C. Lorenzana MA; Rex Publications 2003
Measuring Organizational Effectiveness, J. J Jamrog, Dr. Miles Overholt; Human Resource Institute
Profiles International – America’s Most Productive Companies 2009 – Dario Priolo; www.americasmostproductive.com
SWOT Analysis: It’s Time for a Product Recall; Hill, T. & R. Westbrook (1997).. Long Range Planning
Take the Cold Out of Cold-Calling; – Sam Richter, Beavers Pond Press 2010
The Balanced Scorecard – Measures that Drive Performance, Harvard Business Review, Feb. 1992
Threat Rigidity Effects in Organizational Behavior: – Administrative Science Quarterly, Vol. 26, # 4 Barry M. Staw; Lance E. Sandelands; Jane E. Dutton
What is Strategy – Michael E. Porter, Harvard Business Review, November-December 1996
Why do We Need a Value Proposition: – www.strategicvisions.org/Why_a_Value_Proposition.pdf
For a PDF of an eBook of this 7 part post, please download from The Evaluations Plus website.
Copyright 2008 – 2010 Henry Gregor, StrategicVisions. All Rights Reserved Worldwide.
