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Why Middle-Market Organizations Struggle
Developing and Implementing a Strategy
By Robert J. Meehan
In the article, “How to Profitably Grow Underperforming Companies,” I recommended that companies must develop and implement a unique Value
Proposition and detailed strategy as well as a team-oriented and customer-focused culture. Business magazines have published numerous articles on the importance of a strategy, but middle-market organizations still struggle with developing and implementing a strategy.
The Strategic Ingredients are: Unique Capabilities, Value Proposition, Detailed Strategy and Strategic Priorities.
Why organizations struggle developing a strategy:
01. Strategy process is only conducted annually.
02. Inadequate customer/product line data is available.
03. Limited understanding of targeted customer’s business exists.
04. No Value Proposition and its unique capabilities are not identified.
Why organizations struggle implementing a strategy:
01. Resources are not available.
02. Strategy is not translated into Strategic Priorities.
03. Organization doesn’t know/understand the Strategic Ingredients.
04. Stakeholder groups resist the changes.
” CEO’s must translate the strategy into a few—the most important—Strategic Priorities so that the entire organization can understand and help implement the strategy. These Strategic Priorities are part of the Strategic Ingredients and a roadmap for the strategy. They are the most important objectives that will focus the organization to successfully implement the strategy.”
01. Strategy process is only conducted annually
The annual planning ritual—SWOT’s, goal setting and endless financial projection scenarios—should have been scrapped years ago. Why? Because the projections and programs don’t produce a unique Value Proposition and detailed strategy, and this annual ritual wastes an incredible amount of time. The ritual typically drags on from October to January—while disrupting the organizations—and by March the projections are typically revised.
Given the exhaustive time spent on this annual ritual as well as the monthly board package/presentation, it’s no wonder CEO’s don’t have enough time to focus on an ongoing strategic process.
The organization’s strategy isn’t fixed. It continues to evolve based on changing market conditions, changing customer needs, organization’s unique capabilities and available resources to implement the strategy.
Recommendation: Engage the entire organization in the strategy process.
• Implement quarterly Strategic Deliberations sessions—this is not an operations review—that includes team members from all parts of the organization: senior management, middle management, business units and hourly.
• Consider suggested agenda items for the quarterly Strategic Deliberation sessions:
➢ Review your profitability from each of your targeted customers— overall and by product/service.
➢ Review the “intelligence diaries” of your targeted customers and determine how your organization can improve delivered value to them.
➢ Determine how to improve your unique capabilities that support your Value Proposition.
➢ Decide if the strategy needs to be adjusted given changes in your capabilities and the targeted customer’s needs, the competitive environment and resources available.
➢ Review cash invested vs. the market value—to free up available resources—for each business unit and product line.
• Implement a 12-month roll-forward—P&L, balance sheet and cash flow— that must be updated monthly by operations, sales and marketing as well as by the financial team. This roll-forward forces the organization to challenge the future monthly, and focuses it on more quickly identifying problems—as well as pursuing opportunities.
➢ When focusing on underperforming companies, a 12-month rollforward is initially appropriate. Other companies should consider 24-month roll-forward and then a quarterly roll-forward for the 3rd out year.
➢ Revenue forecasts must be driven by specific customer-projected revenues of probably the top 30-customers.
The monthly roll-forward and quarterly Strategic Deliberations will focus the organization on implementing the Strategy Priorities and force them to regularly think about the future.