Faced with rising expenses, companies often focus on cost cutting initiatives. Financial institutions dealt with this issue as their business models became more complex, and operations weren’t experiencing any efficiency gains. But as financial institutions cut costs, profits suffered because of service issues. Customers became dissatisfied, with some even pulling their business altogether.
In earlier years, manufacturing companies dealt with similar issues and learned valuable lessons on how to deal with rising costs. And since financial institutions hadn’t received any gains in labor productivity since 1995, they took a hard look at strategic plans to increase profits while managing costs.
The lessons manufacturing and financial institutions learned can apply to all businesses. Companies that haven’t had much success with cost cutting may want to look deeper. Implementing a few new strategies can assist your company in increasing efficiency, growing business, and preserving your customer relationships.
Recruit Manufacturing Consultants
Since manufacturing companies have faced issues of rising complexity and managing cost, consultants who specialize in this area are a huge asset. These consultants can assist your company in taking a look at improving efficiency while managing costs.
Evaluate Current Processes
To maximize growth and income opportunity, a company needs to carefully evaluate the existing processes. Initially, don’t consider changing business unit locations or decreasing staff. Instead, consider how operation functions are carried out. This provides opportunity to identify and eliminate wasteful practices.
Focus on Streamlining Business Activities
Once you have examined which areas need improvement, you can focus on streamlining current processes. Identify steps that don’t add value and look for duplicate activities. Then create models to streamline these processes, which will make business more effective and increase productivity.
Focus on Technology
With the rapid development of new technology there are many opportunities to move towards automating processes. Any opportunities to eliminate the need to re-key data will positively impact your bottom line. Also, look at opportunities to get rid of duplicate processes.
Evaluate Business Unit Locations
After you have thoroughly evaluated business processes, it’s time to examine location. Determine what makes the most sense, in terms of where activities should occur. Once you determine the best location, maximize your productivity by mapping out a plan for the consolidation of activities. Make sure to try different scenarios and keep all options on the table, including both onshore and offshore locations. This activity will also help you understand what is driving up costs.
Identify Opportunities to Eliminate Activities
As you go through this exercise, it may become apparent that some activities aren’t needed. Identify these activities to determine what isn’t creating value. This will assist your company in optimizing existing services and decreasing unproductive areas.
Centralize Operations
Centralizing operations can be a big driver in cutting costs. You get the benefits of economies of scale while reducing your bottom line. It’s also important that your operations staff work seamlessly with other business units such as sales and marketing to maximize efficiency. This will further streamline activities and increase productivity.
Consider Creating an Internal Common Platform
If business units across the organization are using separate platforms, you may be losing out on opportunities for efficiency. Hiring an independent company to provide a common platform can make business more fluid and ramp up productivity.
Examine Opportunities to Simplify
Companies that keep complexity to a minimum can benefit from increased efficiency. This business model usually means offering a limited amount of products or services. Companies that use this strategy often have a lower cost to income ratio and operations are more efficient.
Stay Focused on Growth
Successful companies need to strike a balance between managing costs and fostering growth. Never become so focused on controlling costs that growth and customer service is sacrificed. Because growing your business is what provides long-term opportunity for increasing revenue and expanding market share.
Centralize Management
There are many benefits to centralizing management. It provides management more opportunities to work closely to control costs, provide uniform guidance and also centralizes authority. Management can also hold each other accountable for following through on managing costs and growing the company.
Analyze Cost Drivers
The final step to increasing efficiency and preserving growth is to analyze and understand cost drivers. These drivers are essential to managing and growing your business. Create a plan for managing these drivers and make sure each initiative has a defined direction.
Looking further then cutting costs can provide many opportunities in the future. Your costs will naturally decrease, with the added benefit of increased growth. But remember to invest the time in analyzing and developing your businesses while laying a solid plan for efficiency.
Resource:
Scott Cade, Robert-Jan Hagens, Caroline Moss and Muir Sanderson. “Moving Beyond Cost-Cutting.” Booz Allen and Hamilton.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of "Driving Business Value in an Uncertain Economy", “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Wednesday, January 28, 2009
Tired of Strategic Planning? Make Your Company's Efforts More Successful!
Many companies come together for strategic planning meetings every year. After time, these sessions become ritualistic and don’t always payoff with new innovative ideas. Participants often stay within their comfort zone, creating strategies that don’t align with the desired results. If your company is tired of experiencing the same old results, try giving your strategic planning process a fresh new approach.
Design Creative Environments
Most executives know that the most innovative strategies don’t come up while meeting around a table. These ideas are generated when least expected, like when having an informal discussion in the office hallway. Executives need to make strategic planning flexible to encourage creativity in a more natural environment.
Change the Focus of Strategic Planning
Instead of expecting executives to come up with groundbreaking strategies during a short strategic planning meeting, focus efforts on preparing leaders to make strategy all year long. Spend time giving executives the tools needed to develop creative strategies as the ideas emerge. Also, make sure managers are prepared to create strategy by providing strategic context for decisions.
Focus on Innovation
Statistics demonstrate the majority of traditional strategic planning meetings produce ideas that are more uniform and less creative. These ideas won’t get your company far when trying to grow business and ramp up revenue.
Focus on ways to incorporate innovation into strategies. Don’t get stuck in the same old thinking – make sure you are questioning assumptions. Challenge these assumptions and be open to creating new ones if old ideas aren’t relevant anymore. And make sure that strategic planning involves real conversations instead of turning into a show and tell presentation.
Choose Your Attendee List Carefully
When planning your strategic meetings, spend time determining who should attend. The best strategic planning sessions are small. Keep your attendee list to groups of 10 or less. The attendee list should include the decision makers of the organization such as the CEO and senior management. Other high level managers should be included in the process by reading meeting notes, and being briefed during department meetings.
Understand the Time Investment
Taking a fresh new approach to strategic planning means ditching the annual strategic planning meeting. Understand that preparing takes time and CEOs expect to spend over 30% of their time in strategic planning. Therefore, you should expect to meet several times throughout the year and have a more flexible forum of communication for impromptu strategy sessions.
Choose the Location Carefully
Strategic planning that is specific to a particular business unit should be done at the given location. This may require the CEO and executives to travel from the home office, but this is important. Because keeping business unit managers in their element is more productive for brainstorming, and can also yield more creative and focused ideas.
Make Separate Time for Budgeting Discussions
When holding strategic planning meetings, table any discussions about budgeting. Agree on strategies first and then schedule a shorter meeting to discuss financial impacts. This approach is more successful because it streamlines productivity and doesn’t damper the creative process.
Resist Outsourcing to Consultants
Consultants play an important role in strategy, but don’t make the mistake of outsourcing strategic planning solely to consultants. Although consultants are valuable in the process, internal management should be heavily involved. Since managers within the organization will be responsible for implementing strategy, they can anticipate any possible issues consults may not foresee.
Make Strategy Guidelines Flexible
Although it’s helpful to have general guidelines, managers should have some freedom when coming up with strategy. Research has shown that strategy can’t be forced. If managers are trying to adhere to guidelines too closely, it may generate less creative ideas and hinder innovation.
Create a Process for Informal Initiatives
Since some of the most creative ideas will be generated in a less formal environment, create a process for handling these initiatives. The process should be designed to be flexible, allowing managers to act quickly on ideas as they naturally occur.
Handling the Larger Issues
Challenges such as the economy and environmental issues can throw a wrench into successful strategies. Companies need to have a flexible and resilient approach to dealing with these issues. Form an elite task force of your most talented individuals. This team can include your company’s best performing employees and managers. The task force should be a small group of 10-15 individuals.
When companies change the way they approach strategic planning, they have opportunities to positively grow and expand business. Using a more natural approach to fostering creativity will allow ideas to be more fluid and emerge throughout the year. Companies will also be better equipped to handle the most challenging issues.
Resource:
Eric D. Beinhocker and Sarah Kaplan. "Tired of Strategic Planning.” The McKinsey Quarterly 2002 Special Edition: Risk and Resilience.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of "Driving Business Value in an Uncertain Economy", “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Design Creative Environments
Most executives know that the most innovative strategies don’t come up while meeting around a table. These ideas are generated when least expected, like when having an informal discussion in the office hallway. Executives need to make strategic planning flexible to encourage creativity in a more natural environment.
Change the Focus of Strategic Planning
Instead of expecting executives to come up with groundbreaking strategies during a short strategic planning meeting, focus efforts on preparing leaders to make strategy all year long. Spend time giving executives the tools needed to develop creative strategies as the ideas emerge. Also, make sure managers are prepared to create strategy by providing strategic context for decisions.
Focus on Innovation
Statistics demonstrate the majority of traditional strategic planning meetings produce ideas that are more uniform and less creative. These ideas won’t get your company far when trying to grow business and ramp up revenue.
Focus on ways to incorporate innovation into strategies. Don’t get stuck in the same old thinking – make sure you are questioning assumptions. Challenge these assumptions and be open to creating new ones if old ideas aren’t relevant anymore. And make sure that strategic planning involves real conversations instead of turning into a show and tell presentation.
Choose Your Attendee List Carefully
When planning your strategic meetings, spend time determining who should attend. The best strategic planning sessions are small. Keep your attendee list to groups of 10 or less. The attendee list should include the decision makers of the organization such as the CEO and senior management. Other high level managers should be included in the process by reading meeting notes, and being briefed during department meetings.
Understand the Time Investment
Taking a fresh new approach to strategic planning means ditching the annual strategic planning meeting. Understand that preparing takes time and CEOs expect to spend over 30% of their time in strategic planning. Therefore, you should expect to meet several times throughout the year and have a more flexible forum of communication for impromptu strategy sessions.
Choose the Location Carefully
Strategic planning that is specific to a particular business unit should be done at the given location. This may require the CEO and executives to travel from the home office, but this is important. Because keeping business unit managers in their element is more productive for brainstorming, and can also yield more creative and focused ideas.
Make Separate Time for Budgeting Discussions
When holding strategic planning meetings, table any discussions about budgeting. Agree on strategies first and then schedule a shorter meeting to discuss financial impacts. This approach is more successful because it streamlines productivity and doesn’t damper the creative process.
Resist Outsourcing to Consultants
Consultants play an important role in strategy, but don’t make the mistake of outsourcing strategic planning solely to consultants. Although consultants are valuable in the process, internal management should be heavily involved. Since managers within the organization will be responsible for implementing strategy, they can anticipate any possible issues consults may not foresee.
Make Strategy Guidelines Flexible
Although it’s helpful to have general guidelines, managers should have some freedom when coming up with strategy. Research has shown that strategy can’t be forced. If managers are trying to adhere to guidelines too closely, it may generate less creative ideas and hinder innovation.
Create a Process for Informal Initiatives
Since some of the most creative ideas will be generated in a less formal environment, create a process for handling these initiatives. The process should be designed to be flexible, allowing managers to act quickly on ideas as they naturally occur.
Handling the Larger Issues
Challenges such as the economy and environmental issues can throw a wrench into successful strategies. Companies need to have a flexible and resilient approach to dealing with these issues. Form an elite task force of your most talented individuals. This team can include your company’s best performing employees and managers. The task force should be a small group of 10-15 individuals.
When companies change the way they approach strategic planning, they have opportunities to positively grow and expand business. Using a more natural approach to fostering creativity will allow ideas to be more fluid and emerge throughout the year. Companies will also be better equipped to handle the most challenging issues.
Resource:
Eric D. Beinhocker and Sarah Kaplan. "Tired of Strategic Planning.” The McKinsey Quarterly 2002 Special Edition: Risk and Resilience.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of "Driving Business Value in an Uncertain Economy", “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Wednesday, January 7, 2009
Innovation in the 21st Century
The majority of top executives agree that innovation is a huge driver in a company’s success. This concept has become even more important in a 21st century business environment as the landscape transforms to an increasingly global marketplace. Keeping your pipeline full of innovative ideas, backed with powerful execution, can yield excellent results.
Employees are the Untapped Drivers of Innovation
Attracting and retaining talented employees isn’t always an easy task. But when you create a team of innovative people, your ability to generate powerful ideas increases.
The key is to create an environment that fosters communication. This will allow employees to feel comfortable sharing their ideas. Some of the best ideas come from employees that work on the front lines, but getting them to share isn’t always easy.
Bridge the Gap Between Employees and Senior Management
Employees need to be included in the decision-making tasks. This will foster a culture of innovation and make employees feel more connected to the company. Bridging the gap between senior managers and employees will open communication lines and promote innovation.
Make Innovation a Permanent Fixture on the Management Agenda
Although most senior managers agree that innovation is a leading driver of success, sometimes it doesn’t always make an appearance on the management agenda. Innovation should be a discussion point at every senior management meeting. Implementing this change will shift more focus on developing innovative ideas.
Introduce Innovation Accountability
Since innovation is a primary growth factor, senior management should be held accountable for results. This component should be managed, tracked and measured. One strategy of accomplishing this goal is to determine a percentage of the total revenue that should be produced by new innovative products. You can also drive employee innovation by setting a percentage goal for generating internal ideas. Having goals to execute and measure will drive results and ultimately revenue.
Create a Team Dedicated to Generating Ideas
Marketing experts aren’t the only people that can generate great ideas. You need a broad network of individuals from a variety of backgrounds. For example, you may have employees that are great at brainstorming ideas, while others are stronger in analytical tasks. These team members can be responsible for conducting research on new innovative ideas. You also need producers that can successfully implement the idea. Having a mix of strengths will foster a seamless innovation strategy.
Transform Managers into Innovation Leaders
Every innovation team needs a strong leader. Identify and recruit key leaders that have the track record and ability to implement change. These leaders should be talented in identifying team member’s strengths to form a cohesive productive group.
Little Steps to Big Success
Once you have a solid list of ideas, it’s important not to go overboard with enthusiasm. Hand pick your strongest ideas to successfully implement. Measure the results carefully and spend some time analyzing the processes. You can then have the tools needed to perfect your innovation strategy.
Resource:
Joanna Barsh, Marla M. Capozzi and Jonathan Davidson. “Leadership and Innovation.” The McKinsey Quarterly 2008.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Employees are the Untapped Drivers of Innovation
Attracting and retaining talented employees isn’t always an easy task. But when you create a team of innovative people, your ability to generate powerful ideas increases.
The key is to create an environment that fosters communication. This will allow employees to feel comfortable sharing their ideas. Some of the best ideas come from employees that work on the front lines, but getting them to share isn’t always easy.
Bridge the Gap Between Employees and Senior Management
Employees need to be included in the decision-making tasks. This will foster a culture of innovation and make employees feel more connected to the company. Bridging the gap between senior managers and employees will open communication lines and promote innovation.
Make Innovation a Permanent Fixture on the Management Agenda
Although most senior managers agree that innovation is a leading driver of success, sometimes it doesn’t always make an appearance on the management agenda. Innovation should be a discussion point at every senior management meeting. Implementing this change will shift more focus on developing innovative ideas.
Introduce Innovation Accountability
Since innovation is a primary growth factor, senior management should be held accountable for results. This component should be managed, tracked and measured. One strategy of accomplishing this goal is to determine a percentage of the total revenue that should be produced by new innovative products. You can also drive employee innovation by setting a percentage goal for generating internal ideas. Having goals to execute and measure will drive results and ultimately revenue.
Create a Team Dedicated to Generating Ideas
Marketing experts aren’t the only people that can generate great ideas. You need a broad network of individuals from a variety of backgrounds. For example, you may have employees that are great at brainstorming ideas, while others are stronger in analytical tasks. These team members can be responsible for conducting research on new innovative ideas. You also need producers that can successfully implement the idea. Having a mix of strengths will foster a seamless innovation strategy.
Transform Managers into Innovation Leaders
Every innovation team needs a strong leader. Identify and recruit key leaders that have the track record and ability to implement change. These leaders should be talented in identifying team member’s strengths to form a cohesive productive group.
Little Steps to Big Success
Once you have a solid list of ideas, it’s important not to go overboard with enthusiasm. Hand pick your strongest ideas to successfully implement. Measure the results carefully and spend some time analyzing the processes. You can then have the tools needed to perfect your innovation strategy.
Resource:
Joanna Barsh, Marla M. Capozzi and Jonathan Davidson. “Leadership and Innovation.” The McKinsey Quarterly 2008.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Tuesday, January 6, 2009
Beating the Recession: Strategies to Grow Your Company in an Economic Downturn
Most companies envision recession as a time to tighten belts and safeguard reserves. Any plans for acquisitions and mergers are often placed on hold until the economic turmoil blows over. But what many companies don’t know is a recession yields tremendous opportunities. While other companies are holding onto their cash tightly and shrinking their workforce, many opportunities are overlooked that can provide a huge competitive advantage.
Companies that learn how to take advantage of special opportunities that are unique to a recession will pull ahead of the competition. While the competition is struggling, successful companies are implementing growth strategies that will ramp up stock prices and grow revenue.
Ignoring Conventional Wisdom
When creating strategies in times of recession, conventional wisdom should be thrown out the window. Instead of locking up your assets and stopping growth activities, you need to create new strategies that foster growth. Finding the right opportunities during economic downturn can propel your company ahead of the market leader.
Reinventing Management Strategies
Some senior managers get stuck in the traditional way of accomplishing business. But management has to accept innovative growth strategies for a company to succeed. Everyone needs to understand that while a growth strategy during a recession isn’t traditional, there are huge gains to be made during this time. Having buy in from all senior managers will promote success.
Keep all Options on the Table
Most companies clam up during hard times – tabling plans for acquisitions and mergers. Historically, successful companies have done the complete opposite. They seek opportunities to grow through acquisitions and mergers. And because other companies aren’t participating in these types of activities, there are special opportunities available.
Conservative Companies may Fall Behind
Getting ahead in tough economic times means not being conservative. Instead of hunkering down to weather the recession, look for opportunities to grow and acquire. In previous recessions those who were conservative didn’t come out ahead. Successful companies become market leaders by focusing on growth and taking over market share.
Loosening up on Cash Reserves
It’s natural for companies to hold onto cash during a recession. But this strategy won’t get you anywhere with growing your business. Loosening up on your cash reserves will allow your company to participate in growth activities such as strategic acquisitions and mergers. The companies that thrived in previous recessions allowed their reserves to dip 41% lower than other companies.
Focus on Smaller Deals
Acquisitions and mergers are important to a company’s growth. These activities are advantageous because it’s much more expensive to grow a company organically then to acquire an established business. But during a recession, it’s important to focus on a large amount of small deals. Companies that implemented this strategy during previous recessions experienced the most impressive results.
Don’t Slash your Operating Expenses
Many business owners are focused on cutting operating expenses during tough economic times. But companies that don’t cut these expenses do better than the competition. Because cutting operating expenses doesn’t support growth activity - it can actually limit your company’s ability to grow. Instead, focus on strategies that promote growth while maintaining the current level of spending.
Ramp up Research and Development
Research and development is an area that often gets cut. But this area is essential in providing opportunities for growth. Ramping up research and development will enable a company to grow instead of lagging behind the competition. Companies that came out ahead in previous recessions more than doubled R&D expenditures compared to the competition.
Increase Advertising Expenditures
A company needs advertising to grow and expand. Yet some companies believe that trimming expenses in the advertising cost center will help them stay afloat. However, successful companies take the opposite approach to advertising. Industry leaders actually spend more money during a recession. Advertising is an important component to growing business. So don’t be afraid to ramp up your advertising budget.
Don’t Avoid Risk
Some business owners are steering clear of potential risks, afraid it will put their company in danger. But not taking risks during a recession may cause your company to fall behind. With the untapped growth opportunities available during this economic downturn, those who fall behind may not have an opportunity to recover. And for those willing to take risks, the payoffs are huge with the potential to take over market share and become an industry leader.
If your company is willing to change its approach to handling a recession, the rewards can be well worth the effort. Creating a strong growth strategy can change your businesses’ course in a very positive direction. Because historically market leaders have emerged during these tough economic times.
Resource:
Richard F. Dobbs, Tomas Karakolev, and Francis Malige. “Learning to Love Recessions.” The McKinsey Quarterly 2002.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Companies that learn how to take advantage of special opportunities that are unique to a recession will pull ahead of the competition. While the competition is struggling, successful companies are implementing growth strategies that will ramp up stock prices and grow revenue.
Ignoring Conventional Wisdom
When creating strategies in times of recession, conventional wisdom should be thrown out the window. Instead of locking up your assets and stopping growth activities, you need to create new strategies that foster growth. Finding the right opportunities during economic downturn can propel your company ahead of the market leader.
Reinventing Management Strategies
Some senior managers get stuck in the traditional way of accomplishing business. But management has to accept innovative growth strategies for a company to succeed. Everyone needs to understand that while a growth strategy during a recession isn’t traditional, there are huge gains to be made during this time. Having buy in from all senior managers will promote success.
Keep all Options on the Table
Most companies clam up during hard times – tabling plans for acquisitions and mergers. Historically, successful companies have done the complete opposite. They seek opportunities to grow through acquisitions and mergers. And because other companies aren’t participating in these types of activities, there are special opportunities available.
Conservative Companies may Fall Behind
Getting ahead in tough economic times means not being conservative. Instead of hunkering down to weather the recession, look for opportunities to grow and acquire. In previous recessions those who were conservative didn’t come out ahead. Successful companies become market leaders by focusing on growth and taking over market share.
Loosening up on Cash Reserves
It’s natural for companies to hold onto cash during a recession. But this strategy won’t get you anywhere with growing your business. Loosening up on your cash reserves will allow your company to participate in growth activities such as strategic acquisitions and mergers. The companies that thrived in previous recessions allowed their reserves to dip 41% lower than other companies.
Focus on Smaller Deals
Acquisitions and mergers are important to a company’s growth. These activities are advantageous because it’s much more expensive to grow a company organically then to acquire an established business. But during a recession, it’s important to focus on a large amount of small deals. Companies that implemented this strategy during previous recessions experienced the most impressive results.
Don’t Slash your Operating Expenses
Many business owners are focused on cutting operating expenses during tough economic times. But companies that don’t cut these expenses do better than the competition. Because cutting operating expenses doesn’t support growth activity - it can actually limit your company’s ability to grow. Instead, focus on strategies that promote growth while maintaining the current level of spending.
Ramp up Research and Development
Research and development is an area that often gets cut. But this area is essential in providing opportunities for growth. Ramping up research and development will enable a company to grow instead of lagging behind the competition. Companies that came out ahead in previous recessions more than doubled R&D expenditures compared to the competition.
Increase Advertising Expenditures
A company needs advertising to grow and expand. Yet some companies believe that trimming expenses in the advertising cost center will help them stay afloat. However, successful companies take the opposite approach to advertising. Industry leaders actually spend more money during a recession. Advertising is an important component to growing business. So don’t be afraid to ramp up your advertising budget.
Don’t Avoid Risk
Some business owners are steering clear of potential risks, afraid it will put their company in danger. But not taking risks during a recession may cause your company to fall behind. With the untapped growth opportunities available during this economic downturn, those who fall behind may not have an opportunity to recover. And for those willing to take risks, the payoffs are huge with the potential to take over market share and become an industry leader.
If your company is willing to change its approach to handling a recession, the rewards can be well worth the effort. Creating a strong growth strategy can change your businesses’ course in a very positive direction. Because historically market leaders have emerged during these tough economic times.
Resource:
Richard F. Dobbs, Tomas Karakolev, and Francis Malige. “Learning to Love Recessions.” The McKinsey Quarterly 2002.
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Your Growth Strategy
There are five key factors to consider when developing your growth strategy. While these factors are the same for each company, the decisions made in regard to each is largely a function of the senior management’s approach to new ideas, plans for growth, and their style of managing ideas through the organization. Therefore, as you consider the following factors of your growth strategy, you should also contemplate whether long term changes to your organization’s management approach are required.
The first step in your growth strategy is to generate new ideas. Depending on your organization’s corporate philosophies and structure, these ideas may come from within the organization or from its leaders. If your organization has a strong brand following, most ideas will need to be generated, or at least vetted, at the top of the organization. In companies with less of a brand following, or those that are diversified in their products or holdings, successful growth ideas may be generated from within an organization. The individuals involved in the day to day minutia and details are more likely in touch with what may be the next big idea. These individuals are closest to and often know the organization’s customers best. However, regardless of who comes up with the idea, senior management must buy into and champion it.
Once an organization has identified its new growth opportunity, the proper human resources to carry it out must be identified. These are the individuals with the skills, drive, and know how to make the new venture a success. If a new growth idea was developed within the organization, the candidates to help carry out the initiative are easy to find. Additionally, the drive and motivation and attachment to the project are already present. If the idea is generated at the top of the organization, depending on the organization’s staffing process, it may be necessary to attract the right candidates for the job, or merely re-direct an individual from one position to another. In the case where candidates self select for a venture, it may be necessary to incent desired individuals to participate in the selection process.
Another factor in your growth strategy is determining from where within your organization’s budget the funding is going to come. This item may be settled by where the idea was developed. If the idea was developed internally within a business unit, its funding may make most sense to come from its budget. This funding option is more likely to be viable for ventures of a medium to short start up duration. If the new venture was developed at the top of the organization and is being rolled to a business unit below, the funding would most appropriately be provided out of the corporate budget. The decision to fund the venture in this manner is important because early on there may be little business unit buy in, and therefore, they may be tempted not to fund it appropriately, if left to themselves.
Next, it is necessary to determine where within the organization the venture will function. Unless only one business unit will be involved in its start up or roll out, it is best to create an entity that will oversee it. This entity can ensure the cooperation of the various parties included and ensure that the agendas of the different groups involved do not lead to an unsuccessful outcome for the venture. Additionally, if the project is being launched from the top of the organization, it is preferable to bring together those who developed the idea and those implementing it early on in the venture process. This step should help ensure that there is adequate buy in from those whose day to day involvement in the venture will likely lead to its success or failure.
Finally, it is necessary to determine how the project will be managed – from the top of the organization or from within it. Those within the organization are usually closest to the day to day issues and are likely in the best position to spot problems and areas in need of correction. However, they may lack the strategic vision of the company and how the venture fits into its overall growth. At the same time, a top down management approach can also be problematic. This approach does not lend itself to adaptability and quick change, which are qualities often helpful when implementing a new venture. One manner to deal with this issue is for senior management to create project milestones and strategic funding for the project, but leave the day to day running of it to those within the organization.
Your growth strategy is largely determined by your industry, culture, and high level management philosophies. Success or failure with new growth strategies is often determined by how carefully an organization has considered the development and execution of its strategy in light of these three elements.
Bibliography:
Burger, C., Koster, A., Lechner, C., & Szczepanski, M. (2008, March 25). “Making Growth Happen: How to Manage Growth Initiatives Effectively,”. Retrieved October 3, 2008, from Booz Allen Hamilton: http://www.boozallen.com/publications/article/39631032
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
The first step in your growth strategy is to generate new ideas. Depending on your organization’s corporate philosophies and structure, these ideas may come from within the organization or from its leaders. If your organization has a strong brand following, most ideas will need to be generated, or at least vetted, at the top of the organization. In companies with less of a brand following, or those that are diversified in their products or holdings, successful growth ideas may be generated from within an organization. The individuals involved in the day to day minutia and details are more likely in touch with what may be the next big idea. These individuals are closest to and often know the organization’s customers best. However, regardless of who comes up with the idea, senior management must buy into and champion it.
Once an organization has identified its new growth opportunity, the proper human resources to carry it out must be identified. These are the individuals with the skills, drive, and know how to make the new venture a success. If a new growth idea was developed within the organization, the candidates to help carry out the initiative are easy to find. Additionally, the drive and motivation and attachment to the project are already present. If the idea is generated at the top of the organization, depending on the organization’s staffing process, it may be necessary to attract the right candidates for the job, or merely re-direct an individual from one position to another. In the case where candidates self select for a venture, it may be necessary to incent desired individuals to participate in the selection process.
Another factor in your growth strategy is determining from where within your organization’s budget the funding is going to come. This item may be settled by where the idea was developed. If the idea was developed internally within a business unit, its funding may make most sense to come from its budget. This funding option is more likely to be viable for ventures of a medium to short start up duration. If the new venture was developed at the top of the organization and is being rolled to a business unit below, the funding would most appropriately be provided out of the corporate budget. The decision to fund the venture in this manner is important because early on there may be little business unit buy in, and therefore, they may be tempted not to fund it appropriately, if left to themselves.
Next, it is necessary to determine where within the organization the venture will function. Unless only one business unit will be involved in its start up or roll out, it is best to create an entity that will oversee it. This entity can ensure the cooperation of the various parties included and ensure that the agendas of the different groups involved do not lead to an unsuccessful outcome for the venture. Additionally, if the project is being launched from the top of the organization, it is preferable to bring together those who developed the idea and those implementing it early on in the venture process. This step should help ensure that there is adequate buy in from those whose day to day involvement in the venture will likely lead to its success or failure.
Finally, it is necessary to determine how the project will be managed – from the top of the organization or from within it. Those within the organization are usually closest to the day to day issues and are likely in the best position to spot problems and areas in need of correction. However, they may lack the strategic vision of the company and how the venture fits into its overall growth. At the same time, a top down management approach can also be problematic. This approach does not lend itself to adaptability and quick change, which are qualities often helpful when implementing a new venture. One manner to deal with this issue is for senior management to create project milestones and strategic funding for the project, but leave the day to day running of it to those within the organization.
Your growth strategy is largely determined by your industry, culture, and high level management philosophies. Success or failure with new growth strategies is often determined by how carefully an organization has considered the development and execution of its strategy in light of these three elements.
Bibliography:
Burger, C., Koster, A., Lechner, C., & Szczepanski, M. (2008, March 25). “Making Growth Happen: How to Manage Growth Initiatives Effectively,”. Retrieved October 3, 2008, from Booz Allen Hamilton: http://www.boozallen.com/publications/article/39631032
Mark Jordan is the Managing Principal of VERCOR, an investment bank that creates liquidity for middle market business owners. He is the author of “Selling Your Business the Easy Way”, “Enhancing Your Business Value…The Climb to the Top” and co-author of “The Business Sale…A Business Owner’s Most Perilous Expedition.” For more information, contact him at 770.399.9512 or email him.
Mark Jordan is BusinessSummaries.com’s Author of the Month for November 2008
BusinessSummaries.com, one of the leading e-commerce sites for business book summaries, announces that Mark Jordan, acclaimed author of the book “Selling Your Business the Hard Easy Way”, is the Author of the Month for November 2008.
FOR IMMEDIATE RELEASE
PRLog (Press Release) – Nov 06, 2008 – Selling a business can be a tough, dicey process in which there are many potential pitfalls, but it doesn’t have to be that way. In “Selling Your Business the Hard Easy Way”, Mark Jordan, Managing Principal of VERCOR, offers readers down-to-earth insight into the key aspects of what is potentially one of the most momentous decisions of any entrepreneur’s life – deciding to sell one’s business – and everything that follows, from determining if potential sellers are really ready to sell their businesses, to finalizing a deal with the right buyer.
The BusinessSummaries.com editorial staff interviewed Jordan about his book and the story behind it. Key excerpts from the interview are posted on the BusinessSummaries website. The summary of “Selling Your Business the Hard Easy Way” was released on October 20.
VERCOR is a middle market investment bank that creates liquidity for small and middle market business owners. For more information visit http://www.vercoradvisor.com/.
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