Supply Chain Maturity

Supply Chain Maturity

Managing the supply chain and finances are the core factors that determine the success of any organization. For ages, executives keep on experimenting with different approaches to optimize their supply chain and cash flow.

Supply chain management is one of the most important strategic aspects of any business enterprise. Decisions must be made about how to coordinate the production of goods and services, how and where to store inventory, whom to buy materials from and how to distribute them in the most cost-effective, timely manner. What are those Critical Dimensions or Key Performance Indicators that drive the agility and maturity of a supply chain? Most of them are quite obvious and most of the organizations keep a religious watch on this but even then those companies make only the 10% of all those organizations that can benefit much more if they streamline their processes, capabilities and compliance related stuff connected with SCM. Let us look at some of the critical dimensions in this respect:

Supply Chain Visibility: End to end supply chain visibility is the first major need to make it more agile and mature. It is highly recommended to use a commercially available best of breed (or ERP) solution to monitor line level statuses in orders, on hand inventory and those assets that are not stationary and this includes field inventory, service equipment, containers etc. Certain visibility initiatives like financing triggers, warning alerts on events that drive inventory stocking, tracking actual total landed cost as sales order progresses etc. are the hot initiatives in this area

Automation Level: It is not just automation of order entry to picking to shipping and from forecasting to demand to plan to build/procure but also end to automation of all systems that complements your main system of reporting and transactions. It includes systems like PLM or B2C order capturing portals that are input systems as well as Business Intelligence tools that act as the output systems to your main transaction system. The more the automation, more mature and agile is supply chain

Logistics Agility: Processes such as using nearest warehouse to the customer, supplier drop ship, transit order re-direction or grouping shipments in same route play a major role in streamlining the supply chain. Organizations need to keep on thinking on new actions in this space and plan to execute them frequently.

Business to Business Collaboration: Customers and Suppliers are to businesses that one must collaborate with. This will not only keep the inventory to the minimum level but also will help in improving fill rates and reduce stock-outs. Identify the processes where collaboration will help the organization most and take actions accordingly.

Risk Management: Supply chain resiliency is one of the most critical factors in maintaining the agility of supply chain and it is seen that though most of the organizations are worried about this but do not take substantial actions in this area. It is important to manage supply chain resiliency to risk related events. Also, employ network design and inventory optimization tools to quantify supply chain risk and create short-term and long-term crisis response plans.

Compliance in Trade: The more manual hand-offs are present in the processes, more are the chances of inconsistency in compliance of trade laws. Also, not having a single source of truth and independent databases for import and export data per country will also contribute to non compliance ultimately impacting the supply chain processes. It is high time to have one single enterprise wide trade compliance platform that is automated and integrated with all the related processes.

Competitive Resourcing:The times of in-house resourcing are now ripe and the success of outsourcing story has proven that while the in-house resources in certain areas are more costly, they also are less efficient that their BPO counterparts. Need is to evaluate carefully, where exactly this initiative is required and what are the tangible or non tangible benefits expected and take an informed decision. The good part is that most BPO’s come with their own collaboration and visibility techniques and also share their best practices that they picked from their customer across the globe and this makes move a “check and mate” move to improve the supply chain maturity.

3 Ways to Improve Your Company’s Security

3 Ways to Improve Your Company’s Security

As a business owner, you need your business to be secure. An attack against your business can not only lead you to lose significant profits, but customers’ private information as well.

When you think of security threats, you likely think of thieves and vandals who would break into your business and steal products, cash, or documents.

However, there can be internal security risks too. You must try to address all potential security risks in order to ensure that your business and your customers’ information are safe. Here are a few ways you can improve your company’s security and protect your business.

Surveillance System

Installing a business surveillance system can help protect you from both internal and external threats to security. When thieves are choosing a business to target, they are looking for buildings that don’t have a security system of any kind, and most especially ones that don’t have cameras; being caught on a security camera is a quick and easy way to end up in prison. If would-be thieves see that you have a surveillance system in place, they will likely pass up your business and find an easier target. The surveillance system also acts as a deterrent against any internal theft or illegal activities. When employees know that there are cameras throughout the office, they are going to be much more hesitant to steal cash, products, or client information. The last thing they want is to be caught stealing from the cash register or copying confidential documents on tape.

Go Paperless

Today, the most secure way to handle documents is to not actually handle them at all, especially if those documents include valuable, confidential information like clients’ Social Security numbers or credit card information. Rather than keeping hard copies of these kinds of documents in your office, you should have digital copies on a secure drive, and that drive should only be accessible to those employees who really need access to that information. By going paperless, you decrease the odds of losing information or having it copied or stolen. There are a lot of secure, paperless systems for sharing documents out there, so look into them and find one that’s right for your company. And if you do happen to have hard copies of important documents, make sure you shred them as soon as you no longer need them.

Electronic Access

If you want your building to be secure, you should use an electronic system that only unlocks the building for those with an access card. These electronic access systems are a lot harder to break into than simple lock-and-key systems, so you don’t have to worry about any common criminal being able to break into your business. These types of systems can also be used to restrict employee access to certain areas, or to limit the times at which certain employees are allowed to enter the building.

Each access card can be coded to only open certain doors during certain hours so that you can ensure nobody is going somewhere they shouldn’t or entering your business during odd hours. Additionally, these systems can track what cards are being used to access which areas. If something goes missing, you can look at the history in the system to see which employees’ cards were used to enter the building or access the area where something went missing. This can be a valuable feature to have, and can be a deterrent for internal theft.

Impacts Of E-Commerce On Business

Impacts Of E-Commerce On Business

E-commerce has made a profound impact on society. People can now shop online in the privacy of their own homes without ever having to leave. This can force larger brick and mortar retailers to open an online division. In some cases, it can also force smaller businesses to shut their doors, or change to being completely online. It also changes the way people look at making purchases and spending money.

E-commerce has changed the face of retail, services, and other things that make our economy work. Undoubtedly, it will continue to influence how companies sell and market their products, as well as how people choose to make purchases for many years to come. The following are the impact of e-commerce on the global economy.

Impacts on Direct Marketing

Product promotion E-commerce enhances promotion of products and services through direct, information-rich, and interactive contact with customers. New sales channel E-commerce creates a new distribution channel for existing products. It facilitates direct reach of customers and the bi-directional nature of communication. Direct savings The cost of delivering information to customers over the Internet results in substantial savings to senders when compared with non ­electronic delivery. Major savings are also realized in delivering digitized products versus physical delivery. Reduced cycle time The delivery of digitized products and services can be reduced to seconds.

Also, the administrative work related to physical delivery, especially across international borders, can be reduced significantly, cutting the cycle time by more than 90 percent. Customer service Customer service can be greatly enhanced by enabling customers to find detailed information online. Also, intelligent agents can answer standard e-mail questions in seconds and human experts’ services can be expedited using help-desk software. Corporate image On the Web, newcomers can establish corporate images very quickly. Corporate image means trust, which is necessary for direct sales. Traditional companies such as Intel, Disney, Dell, and Cisco use their Web activities to affirm their corporate identity and brand image.

Other Marketing Impacts

Customization E-commerce provides for customization of products and services, in contrast to buying in a store or ordering from a television, which is usually limited to standard products. Dell Computers Inc. is a success story of customization. Today, we can configure not only computers but also cars, jewellery, gifts, and hundreds of other products and services. If properly done, one can achieve mass customization. It provides a competitive advantage as well as increases the overall demand for certain products and services.

Advertisement with direct marketing and customization comes as one-to-one or direct advertisement, which is much more effective than mass advertisement. This creates a fundamental change in the manner in which advertisement is conducted not only for online trades but also for products and services that are ordered in traditional ways.

Ordering System taking orders from customers can drastically be improved if it is done online. When taken electronically, orders can be quickly routed to the appropriate order-processing site. This saves time and reduces expenses. So sales people have more time to sell. Also, customers can compute the cost of their orders, saving time for all parties involved. The physical market is disappearing as is the need to deliver the goods; with the growing popularity of an electronic market, goods are delivered directly to buyers when purchasing is completed making markets much more efficient. For those products that are digitally based-software, music and information-the changes will be dramatic. Already, small but powerful software packages are delivered over the Internet. This fundamentally affects packaging and greatly reduces the need for historical distribution.

New selling models such as shareware, freeware are emerging to maximize the potential of the Internet. New forms of marketing will also emerge, such as Web-based advertising, linked advertising, direct e-mail, and an increased emphasis on relationship marketing. Customer’s convenience is greatly enhanced, availability of products and services is much greater, and cheaper products are offered. All these provide EC with a competitive advantage over the traditional direct sales methods. Some people predict the “fall of the shopping malls,” and many retail stores and brokers of services are labelled by some as “soon to be endangered species.”

Impacts on Organizations

Technology and organizational learning rapid progress in E-Commerce will force companies to adapt quickly to the new technology and offer them an opportunity to experiment with new products, services, and processes. New technologies require new organizational approaches. For instance, the structure of the organizational unit dealing with E-Commerce might have to be different from the conventional sales and marketing departments. To be more flexible and responsive to the market, new processes must be put in place.

This type of corporate change must be planned and managed. Changing nature of work and employment will be transformed in the Digital Age; it is already happening before our eyes. Driven by increased competition in the global marketplace, firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly less expensive.

The upheaval brought on by these changes is creating new opportunities and new risks and forcing us into new ways of thinking about jobs, careers, and salaries. The Digital Age workers will have to become very flexible. Few of them will have truly secure jobs in the traditional sense, and all of them will have to be willing and able to constantly learn, adapt, make decisions, and stand by them. New product capabilities E-commerce allows for new products to be created and existing products to be customized in innovative ways. Such changes may redefine organizations’ missions and the manner in which they operate.

E-Commerce also allows suppliers to gather personalized data on customers. Building customer profiles as well as collecting data on certain groups of customers, can be used as a source of information for improving products or designing new ones. Mass customization, as described earlier, enables manufacturers to create specific products for each customer, based on his or her exact needs. For example, Motorola gathers customer needs for a pager or a cellular phone, transmits them electronically to the manufacturing plant where they are manufactured, along with the customer’s specifications and then sends the product to the customer within a day.

Impacts on Manufacturing

E-Commerce is changing manufacturing systems from mass production to demand-driven and possibly customized, just-in-time manufacturing. Furthermore, the production systems are integrated with finance, marketing, and other functional systems, as well as with business partners and customers. Using Web-based ERP systems, orders that are taken from customers can be directed to designers and to the production floor, within seconds. Production cycle time is cut by 50 percent or more in many cases, especially when production is done in a different country from where the designers and engineers are located.

Companies like IBM, General Motors, are assembling products for which the components are manufactured in many locations. Sub-assemblers gather materials and parts from their vendors, and they may use one or more tiers of manufacturers. Communication, collaboration, and coordination become critical in such multitier systems. Using electronic bidding, assemblers get sub-assemblies 15 percent to 20 percent cheaper than before and 80 percent faster.

Impacts on Finance

E-commerce requires special finance and accounting systems. Traditional payment systems are ineffective or inefficient for electronic trade. The use of the new payment systems such as electronic cash is complicated because it involves legal issues and agreements on international standards.

Nevertheless, electronic cash is certain to come soon and it will change the manner in which payments are being made. In many ways, electronic cash, which can be backed by currency or other assets, represents the biggest revolution in currency since gold replaced cowry shells. Its diversity and pluralism is perfectly suited to the Internet. It could change consumers’ financial lives and shake the foundations of financial systems and even governments.

The Eagle’s Dynamic Strategy

The Eagle’s Dynamic Strategy

Business strategy is important as it can give you a competitive edge in securing clients over other companies who are pursuing the same business model. In order to develop that edge, you need to identify a competitive advantage and develop your business strategy around it.

Once you have done that, you need to sustain that advantage. Simply put: Business strategy is the process that allows you to leverage, develop and sustain a competitive advantage over other companies targeting a similar market. The problem is sustaining that competitive advantage over time.

Can you sustain your advantage?

The problem is that we no longer do business in a bubble. Therefore, your competitive advantage can be enjoyed only for a short period of time. Modern business strategy must be a continuous process evolving with new competitive advantages. One must build their business on the basis of moving from one competitive advantage to another as smoothly as possible. This is a continuous process and one that is critically important to long-term success. In general, you can only depend on new innovations giving you an edge for a year or two. For example, lower cost of base elements and new configurations can last a short period of time, sometimes as little as one-quarter of a year.

These are tangibles that will impact your current edge. There are intangibles that must be paid attention to as well including how you are perceived by your customer base. This includes issues like how satisfied your customers are, how strong your brand is nationally and in some cases, internationally, how strong your distribution channels are and whether they can be expanded. The best part of the intangibles is they are far more challenging for your competition to duplicate without a significant investment in time, energy and in some cases, money.

What is the bottom line?

In short: your overall business strategy and the competitive advantages you develop and nurture have to be more dynamic than ever. You have to identify a business strategy that works for you, analyze your competition’s responses to your advances and work out your next steps. Stop and think about it like an eagle on a migration route: The eagle already knows where he is going and how he is going to get there. However, his decisions remain dynamic, responding to altitude, air currents and stops. There may be other factors that come into play including the weather and his need for food and shelter. Simply put: The eagle is always on the lookout for a new competitive advantage and he has developed a dynamic strategy to ensure he reaches his destination regardless of the circumstances he is facing.

Without this type of dynamic strategy, the eagle would quickly exhaust himself; he must always be ready to adapt to changing conditions along his route. While this may seem like an oversimplification of the problem, business strategies must have a competitive advantage roadmap. This means determining early on how long we will have a competitive edge once we have a new innovation and being able to jump to the next area that will provide us that competitive advantage once again.

If it were only that cut and dry

One of the biggest obstacles that a company has with maintaining a competitive edge is internal issues. One has to be poised to extract maximum value from each advantage and have the flexibility to adapt to new advantages nearly immediately. For most companies, this means having a continuous process of innovation and research and development. Competition within the industry is not always the main competitive threat; in fact, there are far more significant threats that most businesses face like new business models, new technologies or new companies.

You might be surprised to find out that the least of your problems is current competitors; there may be others waiting in the wings to pounce at an opportunity. These “nonobvious players” may be a more significant threat than your current competition. This means you have to be constantly looking out for ways to keep your brand in a competitive model and be prepared to address changes nearly immediately. This is why businesses are now dealing with what we identify as “transitory competitive advantages”. If your strategy for staying on top is not flexible and easily maintained through a dynamic strategy, you will lose any competitive advantage you have quickly and may not have an opportunity to regain your position.

What is the new approach?

Whether you are operating a small company, a business unit inside a major corporation or a medium sized company, we all have to change how we look at how we develop proper strategies. Successful companies may have a static strategy that allows them to focus on a single, sustainable competitive advantage. While this may work in the short term as new competitors arrive in the market, prices erode and our products become more mainstays, we will lose our competitive edge. Today, business strategies are far more complex and a product roadmap should be drawn up that includes the potential that another player is going to step into the field and how long you will have the advantage both prior to their involvement and immediately following the involvement.

“Yes, God plays dice with business”

Albert Einstein in a 1943 conversation with William Hermanns said “God doesn’t play dice with the world” refer to quantum mechanics. He was not happy with the idea that probabilistic interpretation of Quantum Mechanics where identical measurements get you different outcomes. While we want to stay away from these complicated theories, they can be helpful in some manner. Bad strategies will produce bad results and a good strategy will produce good results.

The take-away is simple: A good strategy is important and critical for long-term business success. Your outcomes may not always be exactly what you anticipate but if you have a plan in place for dealing with both positive and negative outcomes, you should be able to succeed. Never forget about “probabilistic interpretation”: The strategy perhaps does not deliver the outcome you expect but the end result is close enough. When developing your strategy in the end, this must always be taken into consideration.

Gaining a competitive advantage in today’s marketplace means not only being able to bring new products to market but it also means tamping down the ability of your competitors to imitate your success. It also means being flexible enough to move onto the next project that will keep your business, brand strong and your competitive advantage high.

Only when you combine the right business strategy with a history of strong innovation and keep your competition at bay can you hope to maintain a competitive advantage. This may be done by keeping your company’s internal and external successes from becoming formulaic which could increase competition. Today’s business markets are more challenging than ever, once you have developed a strategy for “staying on top” you need to have the tools, talents and financials to stay that way. And do not forget your strategy perhaps does not deliver the outcome you expect but should be close enough.

The challenge in the current business world is not just to develop a competitive advantage. The main challenge is to sustain that advantage. Can we really sustain today a static strategy focus on a single, sustainable competitive advantage? Or do we really need a new approach to develop our business strategy?

5 Factors of Consistent Marketing

5 Factors of Consistent Marketing

The first major marketing concept that small business owners and managers need to understand is consistency. Consistent marketing starts with the creation of an idea then the mission statement, and everything else to follow. Consistent marketing also lowers the cost of marketing, increases synergy among employees, and projects the proper image in advertising and promotions.

Establishing a Brand

When an entrepreneur starts a business, they decide what they are going to sell. Sometimes, they find a want or need in a certain market and create a product or service to fill that void. They buy necessary products or design the proper services, and then they begin selling. They sell to a few customers, get a few more, break even, and even begin to make money. Then sales drop. They are doing okay with their current customers, but some are not buying again, and they are not bringing in more business. They add other products and services, but these just cost more to offer and eventually cost the company more money than they are making. They run advertising campaigns that don’t really connect with the business, and they can’t understand what is wrong.

Here is the answer: Consistency. All marketing activities and concepts revolve around consistency. If owners and managers neglect consistency when it comes to their marketing, which includes collateral, advertising, promotions, and even products and services, they face huge up-hill battles that often are not won. Consistency plays a big part in other aspects of the business: sales, employees, physical locations, and many other elements.

When you begin a business and decide what it is you will sell, you must create a brand immediately. What is meant my creating a brand is determining who you are, who you sell to, what exactly you will sell, and how you will sell it. You must decide upon the specifics that make you unique and what makes customers come to you. While making these decisions you must remain consistent. It is not consistent for a bakery to open and say they are going to sell to health-conscious customers when all they sell are huge, fresh-baked chocolate cookies covered in mounds of peanut butter. There is no consistency to who they are selling to and what they are trying to sell.

There are many aspects to establishing a brand, which we discuss in later topics, but consistency must be a key element in every part of establishing a brand.

Consistent Marketing Collateral

We touched on consistent marketing collateral in “How Much Does Marketing Cost?” but we must reiterate that point here in consistency. If you are creating your marketing materials yourself, or you are obtaining the services of a professional designer, make sure everything is consistent with your brand, image, and the other pieces. It does your business no good to have a beautiful logo, eye-catching business card, and top-notch brochure if they don’t complement each other and lose consistency. The logo should match what you sell and to who. Next, the business card should match your logo in colon schemes, appearances, and what it conveys. Many business owners don’t value consistent marketing collateral and will decide or demand inconsistent elements because they look nice or they think it will make people pick up their card. You want to create business cards that are unique and eye-catching, but potential customers should know it belongs to you, the computer repair guy, and not a fashion designer.

Consistent marketing collateral also means to portray your company in brochures and websites the same way as you do in person. Make sure customers know what they will receive from you when they do reach the physical part of your relationship (i.e. consultation or online order). It will leave a negative result with a customer that sees a brochure with a downtown hi-rise pictured, model-quality customer service reps, and a $1 million dollar reception area and is presented with a small metal building in the middle of no-where and they have to wait in the sun to talk with you. There is nothing wrong with the latter part of that example, but don’t build customers up with different expectations that what they will receive. Being a successful business doesn’t require a huge investment in an office and personnel, but it does require consistent branding and image. A potential target will become a loyal customer if they are prepared before-hand for what they will receive and the business delivers the same way or better each time. Consistency is another name for success, and that includes marketing collateral.

Online Marketing

There are many arguments to be had on the difficulty or simplicity of online marketing. Some professionals will say that online marketing, social networks, and a web presence are easy and anyone can be successful. Others will tell you that it is a complicated process that should be left to professionals that know how to manage it. Either way, they will agree on one thing: consistency. The online world has attracted a lot of players, and not all are good. For this reason, any business trying to establish their brand online must develop trust and lasting relationships with customers and potential targets. The easiest way to do this is through consistent marketing. Using the same avatar, posting similar ads, and targeting similar groups are examples of consistent marketing. Keep in mind, once someone sees any of these consistent examples and decides to surf to your web site, it must remain consistent. Using a crazy animated ad to draw attention may get clicks to your site, but those clicks will mean nothing if the user leaves your site immediately because it is not what they expected.

One major area that must remain consistent with the rest of your marketing efforts is your social network. As a small business, the owner or general manager will probably be in charge of social networking sites, blog postings, and other social activities on the web. You may also decide to outsource this work, and find a marketing firm that can handle these tedious tasks for you. Either way, you must make sure that you, your employee, or your hired firm produce a consistent image with what you sell, who you sell to, and how you sell it. You don’t want your MySpace page to be full of teen pictures, music, and alcohol bottles if your company sells computer equipment to doctor’s offices. Your networking pages can have a personal twist to them, especially if your business is small and the owner is the one managing this segment of your marketing, but make sure you are attracting potential customers and delivering the proper brand image. Another mistake that is made in online marketing is an inconsistent website.

Some businesses will never make use of social networking sites like Facebook or MySpace, but everyone must have a web site. Today’s society demands some type of online presence even if that means just a website. 66% of consumers surf the web before making purchases. Unfortunately, many business owners fail to convert potential customers because their website turns customers away. Businesses must realize that a website is just like a physical store. If it looks cheap, cluttered, and dirty, customers will leave. They will not dig deep, ask many questions, or make purchases. They will just leave! Web design can be an expense that many businesses can’t see a need for, but a properly designed site will go a long way.

Many owners and managers feel that they can design their own website with the help of a book and Microsoft FrontPage, but more times than not, that is not true. Some owners and managers have the experience and know-how to produce a professional website, but if you don’t have that ability, you should seek help. In the end, the site must be consistent with your other marketing collateral and your brand. When a customer takes a brochure and then looks to your site for more information, it must give them the same feeling and expectation as the brochure and your sales staff does.

Sales Management and Other Employees

One major key to success in your business is creating synergy among your employees. By establishing a consistent mission statement, purpose, and cohesive goal, you can bring your employees together and allow them to provide consistent results with that of your other employees and your brand image. There is an on-going feud between sales and marketing departments between who is responsible for what. By creating consistency between your marketing and sales management, these two departments can come together and work together instead of against each other. The primary item to understand is to make sure you are directing your company and its staff in a similar and consistent manner. Each department must perform their tasks in unison with the others so that you deliver a consistent message, product, and service to your customers.

Advertising and Promotions

The final area of marketing consistency is advertising and promotions. Once you have defined who your company is, what is will sell, and who you will sell it to, you have to maintain this consistency in promotions and marketing. Pay attention to the various marketing campaigns you encounter. Compare them to the rest of the message that you receive from that company. Is it consistent?

Do you get the same image and feeling from that advertising campaign as you do from their online efforts? Think about this when creating and implementing your marketing campaigns. To create consistent marketing and advertising campaigns doesn’t mean you have to run the same ads everywhere. Many times this is effective, but it is not always the case. Creating consistent campaigns means to analyze your basic brand and be sure you are conveying the right message. If one campaign positions your company as a traditional accounting firm with solid experience, and the next campaign portrays your company as the cutting-edge modern accounting agency with young professionals, your target audiences will get confused. Another place to consider consistency is within an individual campaign. Let’s say you are trying to drive your existing customer base that is used to coming into your physical store to your website.

You have created summer-long campaign filled with instructional brochures, direct mail pieces, in-store promotions, and various other activities. Consistency will become an issue and this campaign will probably end up a failure, if each activity is different. You give away golf balls in your store, but your direct-mail pieces are themed with cook-out imagery. Your brochures pitch your website as easy to use, but your sales staff tells you customers they need to sit through 8 seminars to be able to log on. All of these are inconsistent and don’t produce a similar theme or message.

There are several reasons for consistency, especially in advertising and promotional campaigns. First, potential customers are bombarded with advertising every where they go, everything they hear, and everything they see. Second, it takes at least 3 real impressions before a potential customer will take notice of something new that was not referred by word-of-mouth. Some sources say it is as many as 7 impressions before your campaign will take effect. Consistency in campaigns will result in more impressions that have effect on potential customers. This also relates to the rest of you business. Once you have a customer, you must continue to remind them who are and why they should continue to buy from you. Consistent letterhead, websites, brochures, advertising campaigns, and sponsorships all contribute to consistent branding and image-building.

Business Strategy Lessons From Apollo 13

Business Strategy Lessons From Apollo 13

Here are three lessons from the Apollo 13 mission that you can use to improve your strategic plan. If you’ve seen the movie Apollo 13, you might remember that early in the crisis, Gene Kranz, the flight director, gives assignments to his engineers. He cautions them to rely on data, telling everyone to “work the problem,” and not make things worse by guessing.

Throughout the crisis, the astronauts and the team in Houston study the data, perform calculations, conduct simulations, observe the results and then calculate again. They never guess when they don’t have to – they obsess over data to ensure they understand the whole problem and the entire range of possible solutions.

Creating a great business strategy requires the same obsessive attention to data. You have to base your solutions on statistically valid and comprehensive information about your company, your customers, your competitors and your industry.

Whenever you start a strategic planning process, every member of the planning team brings his own paradigms to the discussion. People make assumptions based on their experience, anecdotes and “corporate urban legends” that exist in every company.

Generally, we’ve found that 80% of these assumptions are relatively accurate, but the rest are not. That sounds like a good success ratio until you realize that if every executive is 20% wrong in her assumptions, then the team is seriously misaligned in their views of the current business situation. There’s just no substitute for good data. It level-sets the team and equips them to make decisions with facts instead of hunches.

Another great lesson from Apollo 13 is how the engineers dove into the details to develop and implement solutions. One of my favorite examples is when they realize that they need a round air filter to fit into a square filter box. They don’t waste time discussing it theoretically – they simply gather up everything that they know is available to the astronauts in the spacecraft, and they build a prototype solution. They hand-write detailed instructions about how to use a sock and some duct tape to solve the problem. Then they radio the instructions to the astronauts who implement the solution.

This situation models the second characteristic of a great strategy – your plans must be detailed enough so that everyone knows exactly what to do. Getting very specific is challenging for a visionary executive team that’s used to operating in the stratosphere. Some strategic plans fail at implementation because the strategy team doesn’t agree on who will do what by when – and with which resources.

The movie “Apollo 13” depicts one last extremely important strategy lesson. The flight director knows his team faces huge risks and that the outcome is uncertain, but he refuses to water down the goal. He doesn’t say, “Wouldn’t it be great if we could save the astronauts?” or, “Let’s try to save two out of three.” He says from the start that failure is not an option, and he deals with every situation assuming his team can overcome every obstacle. He won’t allow anyone to think otherwise. At one point, a White House representative asks the head of the Apollo program what he should tell the president. The NASA chief gives a dismal assessment, saying, “This could be the worst disaster we’ve ever faced.”

Flight Director Kranz overhears the comment, faces the two men and says, “With all due respect, I believe this will be our finest hour.” Let me ask you: If the flight director didn’t send this strong message to his team, if he showed any signs of doubt, do you think his team might have believed just a little less that they could save the astronauts? Do you think the outcome could have been different? A great strategy is bold, clear and uncompromising; it energizes your whole company around significant and vital goals. And remember, your people want to be on a winning team – your strategy must convey that you are serious about beating the competition.

So there you have it – three lessons from the Apollo 13 mission that will improve your strategic plan. Remember to base your strategy on data, develop detailed action plans, and set goals that build excitement and conviction across your company.

The Five Components of a Business Strategy

The Five Components of a Business Strategy

Can you define exactly what makes up a business strategy? Some people say no, but we think you can. In fact, we believe a valid business strategy has five components:

1.) Your company’s current or desired core competencies
2.) A description of how you will differentiate vs. competitors
3.) The industry or industries in which you intend to compete
4.) The initiatives you plan to implement in the areas of marketing, operations, information technology, finance and organizational development
5.) A financial forecast that shows how your plans will meet stakeholder requirements over the next three to five years

Let’s look at each of these components. The first component of a valid business strategy is a clear description of your company’s current or desired core competencies. You may be thinking, “Great, but what’s a ‘core competency?'” While there are many definitions.

Here’s a good one from Wikipedia: “A core competency is something that a firm can do well and that meets the following three conditions:

• It provides consumer benefits
• It is not easy for competitors to imitate
• It can be leveraged widely to many products and markets

A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers. It may also include product development or culture, such as employee dedication.” For example, we could say that Southwest Airlines is a reliable airline that offers low fares. But in order to provide those benefits, it has to have certain “core competencies,” important capabilities that enable it to have low fares and to be reliable. We believe that Southwest Airlines has four core competencies that it executes so well that it regularly beats all other US airlines in terms of profitability.

These core competencies are:

• The lowest operating costs per plane
• An economical point-to-point airport network
• A fanatical culture focused on customer service and cost savings
• An ability to keep planes in the air more of the time than its competitors

Southwest airlines couldn’t offer the benefits of low prices and reliable service if it didn’t master these core competencies. What key benefits do you want to offer your customers? What core competencies do you need to master to provide them?

The second component of a valid business strategy is a description of how you differentiate vs. competitors. In our experience, differentiation is about being the best at something. This should be encapsulated in your mission statement – what are your company’s aspirations and how are you going to beat the competition? We just talked about how Southwest Airlines differentiates — what are you going to offer customers that will make them choose your products or services so that you can grow your business? It takes a lot of hard work to come up with a great answer to this question and even more work to make that differentiation real. It’s easy for us to say that Southwest is the best low-cost airline in the US, but it’s extraordinarily difficult for them to pull it off.

The third component of a valid business strategy is a description of the industry or industries in which you intend to compete. You need to be able to define just what kind of company you are – are you a furniture manufacturer? A gift card retailer? A consulting firm, a bearings distributor, a toy importer, etc.? This step sounds easy but we find that companies are often so concerned about getting too narrow in their focus that they fail to become really clear about what they want to do. A company with a good business strategy will have thought through these issues and made the hard decisions necessary to clarify its identity. If it has, it can easily pass the litmus test of identifying the industry or industries in which it operates.

The fourth component of a business strategy is the set of initiatives you plan to implement in the areas of marketing, operations, information technology, finance and organizational development. These are the plans that guide your company’s focus and resource allocation over the next several years. If your business strategy is specific enough to be relevant, you will have detailed plans in all of these areas.

The fifth component of a business strategy is a financial plan that forecasts the results you expect to get from your plans and illustrates how they will meet stakeholder requirements over the next 3 to 5 years. Your strategic planning process cannot be separated from your annual budget process. In the vast majority of companies, if it’s not in the budget, it doesn’t exist. That’s why you have to have a very senior financial person on your strategic planning team, preferably the CFO. During the planning process, your team must compile a financial plan that estimates the results of implementing your strategy.

This plan needs to earn the approval of your company’s management and board and should be reviewed on a regular basis to track results and make refinements. So – those are the five components of a valid business strategy. Good luck planning your success. And succeeding because you plan.