Invariably, strategies get overtaken by events, market forces, demography, changing consumer patterns and new laws. Gullifer says businesses need to follow one rule: fail quickly, fail cheaply.
“If it’s not working, then realise it’s not working and make some changes to your strategy so that you can get it back on track. Don’t let it fail for too long because then it disengages your customers and your people.”
Company director Catherine Walter says companies need to constantly review strategies, in case they get overtaken by events. That seems self-evident but it involves asking hard questions that help them anticipate market changes, which can make the strategy irrelevant.
“Robust strategies can cope with many changes in the environment but the knack is to identify when to change direction,” Walter says.
“By continually reviewing and testing you are picking up what’s a major theme and what’s incidental music.”
“Hard questions are also an antidote to the old problem of group thinking where people working together can have what looks like a fabulous idea but outsiders – or hard questions – are needed to look at the strategy afresh and identify where market, social, economic or political trends make it look vulnerable.”
Dwyer says the good companies cannibalise themselves. Their strategies are about constant renewal.
“If you can do it better, you’ve already beaten your competition,” Dwyer says. “If you don’t continue to invest and break your model, someone else will.”
That means strategy plans need to be constantly reviewed. Some companies do it every five years, some do it annually.
This is related to persisting with a strategy that is not working. Lawyer Murray Landis, a partner at Middletons, says it can come with the territory of running a business. This is why companies need to be prepared.
“Business people tend to be eternal optimists, always looking at the bright side and lawyers are trained to have nasty suspicious minds, always thinking about what could go wrong,” Landis says.
“From a strategy point of view, when you are planning to do something or go into an arrangement or buy and sell something, then as well as thinking about all the positives, there ought to be consideration to the downsides.”
“I equate that to the difference between good luck and bad luck. I define good luck as preparation meeting opportunity and bad luck as failure to plan meeting a threat.”
“That’s why you can see why some people always seem to have good luck and some people always seem to have bad luck, it’s just one of those things.”
Many companies make the mistake of trying to be all things to all people. Instead of concentrating on the profitable niche that they started from, they expand into other areas. Experts say it’s a process that comes in stages.
First, the entrepreneur identifies an unmet need in a target market and then establishes a company that focuses on meeting that market’s unmet need. The target market becomes aware of the offering and sales soar quickly.
Then as the entire market gets used to the offering, sales start to plateau. To get the sale growth going again, the company expands its offer to other geographic locations, local to national, national to global. Or it acquires another company with a different offering and expands into that market. That is when the loss of focus kicks in.
Business coach Ashley Thomson says he sees this happening all the time.
“I see a lot of SMES that think they are Woolworths or Coles and provide all these different products instead of concentrating on what they are good at,” Thomson says.
“There are businesses that started out and grew and became successful because they got more customers and they made more money. That’s when they started to look around and try to be things that they are not.”
“I tell my clients to go back to the core product which is usually the cash cow and which they know well and have produced some really good results.”
“You identify your niche and you don’t stray from it, you don’t try to be all things to all people. Your niche is often your cash cow so stick with it.”
Dwyer says companies should only have four pillars to their strategy. Any more than that and it’s the kiss of death.
“You don’t have the bandwidth to execute more than four strategic pillars,” Dwyer says. “If you chase too many things, you will ever do any of them really well.”
Once those pillars are established, he says, every section of the company from finance to HR is required to contribute to each of them.
Many entrepreneurs make the common mistake of thinking they will be there forever. There is little succession planning, or when it’s done, it is done in an ad hoc way.
Landis says this is similar to the difficulties companies have anticipating problems. They just don’t think about it. But sooner or later, they will leave the business. Without an exit strategy, the entrepreneur is less likely to get a good price for the business.
Business coach Lindy Asimus says: “Everyone should be thinking about what their exit strategy should be over time and review that over time because things might change going forward.”
“So you ask yourself if I wanted to get out tomorrow, how would I go about it? What do I need to do get the best price?”
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