Identify how you are going to compete in your market. What’s your strategy? Will it be through customer intimacy, product or service leadership, or lowest total cost? Identify your strengths and capitalize on them.
For more resources on building your strategic plan, view the Essentials Guide to Strategic Planning.
“Hi, my name’s Erica Olsen. Today’s topic is Organization-wide Strategies.
Because strategy is such a confusing word. Let’s start with the definition first. We just confuse it with tactics and goals and all sorts of other things, and planning and… Think of it as a method, a series of maneuvers, and my favorite word which is guard rails. So an analogy would be, if you’re climbing a mountain, going from base camp to the summit, what’s your strategy? Is it two people, four people, six people on your team? Are you roped? Are you unroped? Which path are you taking up the mountain? Are you using cram pounds and ice axes, or are you hiking? All of those components would make up your strategy.
Organizations have different levels of strategy, and today’s talk is specifically about organization wide strategies, but let’s put it in context first.
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Corporate level strategies, there are three: growth, stabilization and retrenchment. Most of the time in planning we’re focusing on growth but not always, sometimes stabilization, especially in government today.
Organization wide strategies are more specific to the business unit, or perhaps the overall organization at that time. So it tends to be somewhat time-based or plan-based, as the case may be. We have two boxes here because if you have different business units you may be executing different organizationwide strategies.
Footnote: Micheal Porter is the one that dreamt this up, and he calls these generic strategies. So we’re going to talk about that more in just a minute.
Within these strategies, you’re always executing market level strategies for specific markets, such as going deeper in your current markets, entering new ones, expanding perhaps geographically or buy new products and new services. So market level strategies is the next level of strategy that is a maneuver or guard rails to go after a specific market. But let’s pop it up to here, because this is where we tend to get quite confused.
Over here, there are of course three organizationwide strategies. And they’re based on two axes. The scope of competition – is it broad or narrow? Is the market broad or narrow? This tends to be pretty confusing. Let’s clarify it for just a minute. These two particular strategies are focused on the fact that you’re going after a non-specific, maybe multi-market segments that might have similar needs, they probably do, that’s why they’re buying your products and services, but it’s fairly broad.
More specific is the customer intimacy strategy, where perhaps you’re developing specific products and services to meet a very specific narrow market segment. I wouldn’t think about this so much based on the size of the market, as much as it is a need based.
This axis up here is your base for competition, your competitive advantages. Is it primarily cost, or is it primarily uniqueness? Total cost is the intersection of low cost, or lowest cost or best price and a broad market. Don’t confuse this with the fact that it’s always the lowest cost, because it might not be.
Southwest is our poster child for the low cost strategy. It’s not always the best price, but definitely the total best cost. IKEA is another example. The strategy looks like limited options, best price, convenience, limited selection. Wal-mart’s another one. We’re definitely buying because we have a perception as a consumer that it’s the best cost.
Product/ Service/ Leadership on the other hand is competing based on the uniqueness of the product and service to a large target market. Examples here, and again we know these well: Apple, Intel, and perhaps from sort of the newer companies, let’s go with Groupon. These strategies get executed based on innovation and very much first to market. You do not get to execute this strategy if you’re not first to market.
Customer Intimacy is leveraging both uniqueness and cost to more of a narrow market. Now, let’s not get confused. Both this strategy and this strategy require you to know your customer. So don’t forget that. None of us would of course in today, but this strategy is first starting with targeting a narrow market and building upward from that choice. Examples of that would be Nordstorms and Goldman Sachs. This strategy is about building relationships and the best service with your customers and all the systems and infrastructure to make that happen. Think about how Nordstorms does that for their clients.
So the big problem that people have with organizationwide strategies is you have to do all of these things. And that’s absolutely true. You have to be standard at cost and product and service in order to execute a customer intimacy strategy, and vice versa for all of these. What we’re asking in strategy is, what are you competing on? What’re you leading with? What’re your customers seeing first? What choices are you making when it comes to investments around R&D, around internal structure, around CRM systems such that you’re able to beat the market with the strategy that you’re leading with. If you don’t do that, Micheal Porter would say that “you’re stuck in the middle, and you’re kind of just wishing around.” So in your strategic planning, make sure that you’re clear on what your organizationwide strategy is, and make sure your whole plan supports executing one of these three to the best that you can.”