Business Strategy Formulation - 5 Future Strategies

George Stalk writes a very thought provoking book. He argues that if companies want to survive, they must understand and adopt top innovative business practices long before the media catches wind and begins to spread the word. He warns that if you wait to pick up and adopt business practices from the media then it may be too late to become a viable player in the new environment. It is important to know about and tap into forces that can reshape your market.

According to George, there are five critical strategies that will become realities. This strategies pertain to:

• supply chain
• scale
• pricing
• complex markets

“The problem…is that the huge surge of goods arriving on our shores from China and elsewhere in Asia could easily overwhelm the infrastructure (in the Western U.S.) that receives and distributes them. The issue is how well you manage the supply chain, particularly the hidden costs and lost profits, rather than which countries you source from.” Business Strategy Formulation – 5 Future Strategies

Companies began shifting their production off-source to reduce cost, especially to Asia, to gain a competitive advantage. Now outsourcing has become commonplace and the new concern is that ports will reach their capacity soon.

One key to dealing with the supply-chain challenges is information management. To reduce your cycle time, consider tactics such as flying cargo, point-to-point shipping, outsourcing to Mexico or Eastern Europe, completing assemble at your home-base.

Economies of scale was key to competitive advantage. What this meant was bigger and more modern manufacturing facilities. With a more volatile economy, new players, new products and less predictable purchasing patterns, demand will be harder to predict. Approaches being employed these type of challenges include just-in-time manufacturing and disposable factories (factories built quickly and cheaply)

Mr. Stalk states that you are missing revenue opportunities if you have just one price option. He suggest that you shift pricing based on various factors (e.g., faster service, smaller quantities, maintenance support and bundling). Bus

Customers want product or service that most closely matches their needs and budget. The temptation is to simplify everything. George suggests instead to “embrace complexity.” In other words, help customers to consider, evaluate and make ideal decisions amidst numerous choices in a simple, quick but thorough way.

The author offers ideas on how to leverage complexity to help generating additional profits:

Many consumers are overwhelmed with too many choices, struggle making the best one, and are prone to buyer’s remorse after making a purchase. To address these anxieties, Zappos allows its customers to return products within a full year of purchase, and it provides free shipping.
To help people make decisions, Dell helps people to make a large decision through helping them through the decision process, one small educated choice at a time.
Seventy percent of sales come from 20-30% of the spenders. These spenders are referred to as “heavy spenders.” They spend for pleasure, fun, status, and to relax. Making shopping a pleasure; setting up stores as nice places to linger; differentiating your products and stores; deepening your selections; and, hiring king a knowledgeable staff” are keys for these customers

Everyone will be able to access information anywhere, anytime and at low to no cost. For those that think ahead and leverage technology, it means improved efficiencies (e.g., no inventories, no delays, automatic restocking).

Pervasive computing will emerge that involves networked devices communicating with each other. Virtual competition will be the new competition front. Integrated value chains will be identified by distinct stages. The best players will be linked within these integrated value chains. The result will be excellence at each step of the value chain.

Links to highlights from other Boston Consulting Group articles:

• Does Your Company’s Strategy Need Stretching?
• People Advantage
• Simulation Advantage
• Systems Advantage

Business Strategy Formulation - 5 Future Strategies

Highlights by David Willden