Business | Ideas, Strategy and Tips

Archive for November, 2009

Copyright (c) 2008 Curtis Bingham

Procrastination can be painful. When I recently noticed the flashing light on my car’s dashboard telling me that it was time service my brakes, I thought that perhaps I would get to it tomorrow. Tomorrow turned into next month… and then the most horrible noise could be heard from the rear brakes. When I finally got them repaired, I ended up paying more than four times what I would have if I had taken the car in when I first noticed the warning.

Business leaders often procrastinate establishing or updating their business strategy. Refining strategy is uncomfortable because you have to acknowledge the goals that weren’t met, or the activities that slipped by the wayside. It is sometimes hard to tear yourself away from the tangible, immediate issues at hand. For many busy executives, it seems impossible to take the time away from a hectic schedule filled to overflowing with customer fires, internal crises, delivering for customers, or closing new business. But what are the consequences of NOT stepping off the runaway train and spending time preparing for the future?

1. Customers grow tired of inadequate service and take their business elsewhere. Hopefully they don’t take some of your other customers with them.

2. You are so busy serving existing customers that you don’t have the capacity to bring in new customers, forestalling growth

3. Without new customers, you have no way to compensate for inevitable customer churn

4. Your employees are ineffective at best, and at worst, begin to burn out and leave. How much would it cost you if 50% of your employees were ineffective 10% of the time? For 200 employees, you may be losing a minimum of $1.5M each year!

5. Your competitors pass you by

6. Worst of all, you suffer from burnout.

Postponing the development of strategy may be a short-term strategy in and of itself, but it is ineffective. Unfortunately, the treadmill you’re on keeps running, dragging you with it, until you choose to get off and readjust.

For your business to succeed, you need to allocate time each year to evaluate and update your long-term strategy. In addition, you also need to set aside a smaller amount of time each month to test & refine it. By ensuring that you are regularly evaluating and refining your strategy, you ensure that your customers, competitors, or the market don’t leave you behind.

The time you set aside for strategy must be sacred; otherwise, it gets put off like my brakes until the penalty is much greater than the prevention. December is typically a good time to evaluate your business strategy because many customers are unavailable. Schedule the time and “Just Do It!”

Many people talk about business strategy but have a great failure to realise exactly what this is – is it surprising that a great deal of business people have a huge problem discussing this when they do not exactly know what this is!

Questions that should be asked may include the determination of the fact that is there even a strategy in existence or if so, is this the correct one? Additionally, how do we determine what a strategy is and how does one go about developing one?

It is important when developing strategy to look at some of the issues and why a chosen path can go wrong-if one keeps doing the same thing, one will get the same results.

Many complaints about strategy range from the fact that it is difficult to determine, it gets messy and unfinished, and many people involved either do not contribute or attempt to dominate proceedings and a general feeling of the future and the failure of any future chosen path.

Broadly speaking, some schools of thought hold with notion that there are three main reasons for a failure of strategy.

Managers often fail to realise what these differences are; business schools talk about corporate-centre strategy and business-unit strategy. Business-unit strategy is for controlled organisations that may be part of conglomerates or single-business units whereas the other is for conglomerates planning growth through the use of single business units.

Another is often no clarity of purpose; for example there is no point in using models that are simply intellectually attractive when the purpose of the task is to discover options and directions and gather proof to support decisions about the future.

The business – unit level requires methods that are relatively straightforward and the only real obstacles are intimidation by “professionals” and their jargon. Most means of analysis are in excess of 35 years old but there is a general lack of understanding of them amongst business people and most of them do not know how to use them.

So how do we correct this anomaly?
Initially, the ground rules need to be set so participants need to arrive with open,clear minds. Strategy may be likened to seeing everything around, from every angle available and even into the future and the following requirements must be met to be successful: Customers are paramount and form the basis of market uuderstanding, practicality must take priority over theory, the business needs of now and the future need to be thought about and the strategy needs to be measurable.

It is worth at this point to touch on the philosophy behind a strategy.

The best place to start is to take the old adage of begin with where you want to be and work backwards to where you are now.

If, on the other hand, one believes that strategy is an analytical process then start with where you are and work forwards. However there is a difficulty with this approach as straightforward arithmetical thinking stifles creativity.
Perhaps, in the real world, a combination of both methods is probably a necessity.

This is all, of course, driving towards growth of the business and that is largely down to marketing. So why are not all growing firms good marketers and why have not they developed a good strategy?

Very briefly, this begins with a failure to understand the difference between selling and marketing – marketing is about developing products or services that customers will want where selling is about simply getting people to but the product.

The rest, for the moment, I leave you to ponder on.

We have provided both an American and Canadian business strategy for real estate in this investment tip. Read on..

The IRS has a “2 Years and a Day” rule that can mean money over and above your home based business tax deduction.

This secret alone can mean that your own home can earn you half a million dollars, so this is one real estate business strategy you don’t want to miss.

This IRS rule states you can generate up to $250,000 tax-free profit on your home, and up to $500,000 (if you are married) and $250,000 if you are not if you have lived in the home at least two years and one day out of five years of real estate ownership.

This means you can rent your home as part of your real estate business, get a home based business tax deduction and make up to $500,000 tax free. As long as you have rented your home for up to three years, you can take advantage of this great business strategy.

If you intend to make this claim as well as make a home based business tax deduction for your business, you need to move back into your real estate if it has been three years since you have lived there – but the amount of time you spend living in the real estate property before and after the rental counts towards the 24 month and one day rule.

As long as you have not bought and sold another real estate property while leasing out property A, this business strategy can work for you, helping you to make money from both the IRS and from any home based business tax deduction you qualify for.

Don’t forget to grab any home based business tax deduction you can – you will be taxed some money on your profit, in all likelihood.

If you need more information a great resource is the IRS Publication 523 Selling Your Home at http://www.irs.gov

In Canada this business strategy for real estate is much better!

Canadians can qualify for a home based business tax deduction or two for their real estate business, but their capital gains taxes exceptions are even easier because you are exempt from such taxes on your main residence.

If you have multiple homes, call a CA to figure out whether this business strategy will work for you.

Your CA will be able to explain residency qualifications for you. Again, though, focus on each home based business tax deduction while also going for the capital gains exemption.

It’s a solid real estate business strategy to spend less on taxes than you have to in order to expand your profit line.

That’s one way to make the most of each home based business tax deduction.

Take advantage of $147 in free investing tips showing examples of other investment techniques and real estate business strategy for you to profit from.

Why conduct a business strategy audit?

Nearly all the major initiatives undertaken by corporate executives today are called “strategic”. With everything having high strategic importance, it is becoming increasingly difficult to distinguish between the many priorities and imperatives that are initiated in organisations. When everything is clearly strategic, often nothing strategic is clear. When everything is designated as a high priority, there are, in reality, no priorities at all.

However, when the overall strategic direction is clearly understood by everyone in your organisation, the following benefits occur:

organisational capabilities will be aligned to support the achievement of your strategy resources will be allocated to different business processes in priority order – according to the importance of that process and its contribution to competitive advantage your company or organisation can excel in the market place or in its business/commercial sector.

 

The purpose of a strategy audit is to arm managers with the tools, information, and commitment to evaluate the degree of advantage and focus provided by their current strategies. An audit produces the data needed to determine whether a change in strategy is necessary and exactly what changes should be made.

Defining a Strategy Audit

A strategy audit involves assessing the actual direction of a business and comparing that course to the direction required to succeed in a changing environment. A company’s actual direction is the sum of what it does and does not do, how well the organisation is internally aligned to support the strategy, and how viable the strategy is when compared to external market, competitor and financial realities. These two categories, the internal assessment and the external or environmental assessment, make up the major elements of a strategy audit.

The outline that follows is derived from The Business Strategy Audit (see References). It’s intended to give you a clear idea of how to set about conducting a self-assessment audit in your own organisation, without the need for any additional training or external consultancy support. But note that this outline does not include the range of Questionnaires and Checklists and the detailed guidance to be found in the full, 124-page Audit.

Part 1 ~ The External Environmental Assessment

A conventional corporate mission is to provide distinct products and services to customers at a value superior to that offered by competitors. Without a strategy, valuable resources will be diluted, the work of employees will be unfocused, and distinctiveness will not be achieved. The external environment assessment provides any business with a critical external link between its competitors, customers, and the products/services it offers.

The fundamental reason for examining an organisation’s environment in the process of clarifying strategy can be summarised thus:

Ensure that the company is meeting the needs evident in the environment Prevent others from meeting those needs in a better way Create or identify ways to meet future or emerging needs.

 

The success or failure of a company often depends on its ability to monitor changes in the environment and meet the needs of its customers and prospective customers.

An organisation’s business environment is never static. What is viewed as uniqueness or distinctiveness today will be viewed as commonplace tomorrow as new competitors enter the industry or change the environment by modifying the rules by which companies compete. Consequently, an effective strategy will do more than help a company to stay in the game. It will help it to establish new rules for the game that favour that company. Successful companies do more than simply understand their environments. They also influence and shape the circumstances around them. Companies that fail to influence their environments automatically concede the opportunity to do so to their competitors.

Steps in conducting an environmental assessment

Step 1: Understand the external environment at a macro level

The first step in the environmental assessment is to develop a basic understanding of the trends and issues that will significantly change, influence, and affect the industry. The overall industry understanding comes from looking at the elements that influence the environment.

These elements include:

Capital markets Industry capacity Technological factors Pressure from substitutes Threat of new entrants Economic factors Political factors Regulatory factors Geographic factors Social factors

 

A useful framework to understand these issues comes from answering the following questions. They should be posed directly when used in an interview, and indirectly when analysing data:

What is the long-term viability of the industry as a whole, and how do capital markets react to new developments? What trends could change the rules of the game? Who are the industry leaders? What are they doing? Why? What are the key success factors in the industry? What developments could allow a company to change the rules of the game? Five years from now, how will winners in the industry look and act? What is the reward (and/or cost) of being a winner/loser within the industry? Where has the industry come from?

 

Step 2: Understand the industry/sector components in detail

Industry/sector components are normally broken down as follows: competitors, customers and stakeholders. Questions that should normally be asked of each key competitor include:

BUSINESS REVIEW

Strategy Issues:

What is the strategy of each competitor? Where do they appear to be heading? What is their business emphasis? Do they compete on quality, cost, speed or service? Are they niche or global players?

 

Capabilities:

What do they do better than anyone else? Where are they weaker than others? Where are they the same as others?

 

Business Objectives:

Who are their primary customers? What types of business do they not do or say no to? Who are their major partners? Why are they partnering? What do they gain from it? What are they doing that is new or interesting?

 

FINANCIAL REVIEW

Financial Strength – Internal:

How much cash does each competitor generate annually? What are the drivers behind their financial success (from a cash perspective)? How do they allocate resources (funds)? How fast are they growing and in what areas?

 

Strength as Perceived by Capital Markets:

Are competitors resource constrained or do they have strong financial backing? Is this perception consistent with the internal analysis? Why or why not? How has the company performed in the financial markets? Why? What constraints/opportunities do they have with respect to financial markets? Why?

 

ORGANISATION REVIEW

Top Management:

Has management kept the company at the forefront of the industry? Why or why not? Are the key players seen to be moving the company forward?

 

Organisation:

Is the company centralised or decentralised? Does the corporate parent act as a holding company or as an active manager? Is the organisation perceived as being lean and able to get things done?

 

People:

How many people are employed? Is the company over-or under-staffed? Are people managed to achieve mainly business objectives, human objectives or some of both? How does this affect the company? What skills are emphasised during recruitment?

 

Culture:

Is the culture results-oriented? Bureaucratic? Flexible?

 

Similar lists of questions should be developed for customers and stakeholders (or see the full Audit for ready-made questionnaires).

Step 3: Integrate the components into an environmental picture

Once the findings of the stakeholder analysis, customer analysis and competitor analysis (above) have been collected, audit team members should step back and integrate the data. Integrating the different components will help the team to understand the overall environment in which the business operates.

This integration should take place at two levels: assessing where the industry is heading and the likely impact of that direction on the company, and combining the organisational assessment with the environmental assessment.

The Business Strategy Audit offers a detailed framework for analysing this data. In brief, it should highlight significant changes in the environment, and the impact of those changes on the company’s competitive position within the industry. It should address the fundamental question of how the company can influence its environment in the future, and what the business will need to look like if it is to thrive in the future.

In addition, the analysis should highlight the requirements and capabilities that are needed within the company to meet external demands. These requirements and needs should then be matched up with the current capabilities outlined in the organisation assessment. This will enable the team to determine the overall alignment of the company’s strategy to its environment.

Part 2 ~ The Organisational Assessment

Once the company’s environment has been examined and analyzed, managers should consider the qualities and characteristics of the organisation itself that influence what can be accomplished in terms of strategy. This section is about organisational assessment. The steps shown here will provide insights into the effectiveness of the company’s current strategy, and provide guidelines for increasing strategic effectiveness.

Strategy Clarification. Strategy clarification helps the leadership team determine what business they are in, the direction of the business, and framework or criteria for making strategic decisions in the future. If people at any level of a business are unclear about any of these three areas, it is difficult for them to focus their attention, cooperate with other teams, and organise their efforts to gain competitive advantage in the marketplace. Viability and Robustness. Measuring viability and robustness helps a leadership team test strategies and ideas against future world scenarios to determine whether the strategies can be achieved and sustained. By looking at both market and financial viability and robustness in different scenarios, a management team can see what will create advantage in the future and what key measures need to be implemented to monitor changes in business conditions. Business Processes. The term business process refers to the overall work flow within a company and includes elements such as product design, manufacturing, and delivery. A good process analysis will help a leadership team to see what must be done given the company’s strategy, and how those processes can be improved. Capabilities. Capabilities are bundles of separate skills required to deliver the products or services that give a business competitive advantage. There are two parts of a capability assessment. First, the capabilities needed to execute the strategy must be determined. Second, the current level of ability in terms of those capabilities must be assessed. Without knowing what capabilities should be focused on and improved, competitive advantage will be difficult to achieve. Organisation Design and Resourcing. This part of the analysis looks at alignment issues between the environment, the strategy, the skills required to achieve that strategy, and the organisation structure. During this step, a management team can design an organisation that aligns systems in a way that will allow them to execute a strategy. Unless the systems within a business are aligned to improve effectiveness or efficiency, strategy statements are merely plaques on the wall that are seldom realised. Culture. Culture refers to the set of shared values that influence behaviour and direction over time. The style of management and the beliefs and assumptions commonly held by people in the organisation must be determined in order to ensure alignment and execution of the strategy.

 

Having completed each of these assessments, they must be integrated by the audit team. In this process, audit team members should attempt to answer one fundamental question: Is our strategy in alignment with the external environment?

To answer this broad question, the following issues should be addressed:

Do our capabilities match our customer requirements? Do we offer something required by our customers that is better than the offerings of our competitors? How are customer demands changing? How are competitors changing? How are our internal capabilities evolving to keep pace with those changes?

 

Depending on the answers to these questions, the team can implement the changes dictated by the audit. In making these changes, three issues should be considered:

Structure follows strategy – This means that current organisational boundaries and structures should not be allowed to determine the selection of a competitive strategy. Rather, the environmental and organisational assessments that you have just conducted should determine and drive strategy selection.

Plans for change must be widely owned – Those people ultimately responsible for implementing strategy (typically front-line employees) should be consulted for their ideas about what changes should be made and how they should be made. Otherwise, very little change is likely to happen.

Implementation should start with what is core to gaining advantage – In other words, start with core business processes, ‘pick the low hanging fruit’ first, make those changes that will make the most visible difference.

In addition, it may be useful to know that the following are the most common mistakes made by teams conducting business strategy audits:

Expecting all data to be equally useful Do nothing with the audit findings Failing to link other support systems (rewards, administration, etc.) to strategy Not thinking strategically about what processes and capabilities to keep in-house and what to outsource Failing to prioritise those core processes that must be world-class Failing to match internal capabilities with customer requirements Failing to communicate audit findings and strategy changes to people throughout the organisation is a clear and simple language

 

Developing a successful Internet business might include the following:

Unique product or service,

Implementation of different money making methods,

Having an opt-in email list,

Getting higher ranking of your website in major search engines,

Efficient use of no-cost and low-cost advertising techniques,

Setting up an efficient affiliated program,

Building joint venture relationship,

Optimizing retention policy with the help of effective follow-up system,

Building long lasting relationship with subscribers and customers,

Accepting money online,

Having total control over entire business.

You might know the importance of most of the above.

But one little thing you don’t forget – If you want to be successful, you need to have a good coordination between all of your activities and it could be decided and controlled by proper business strategies.

Proper strategies help you perform each and every activity of your entire business properly. It helps you decide your goal, helps you identify the paths towards your goal, helps you understand the tasks you need to perform in each step to achieve your desired goal. So, proper strategies make it simple to show you the end results of your total effort.

We already know that an Internet business means a killer product, a top selling ad copy, continuous flow of targeted traffic to your website, an automated sells system and off course maximum sales. But, running one successful online business essentially needs a proper strategy to get maximum out of each activity.

A proper strategy helps you in creating or selecting your products, it guides you how to offer your products, how to define your uniqueness, who could be your target market, how to build relationship with your subscribers and customers, how to market your product, who could be your joint venture partners and the rest of all so that you get maximum business in terms of traffic and profit. It doesn’t matter whatever product or service you do have, whether you have your own product or not, whether you are newcomer or experienced, you must have a properly defined strategy to efficiently coordinate between each of your activities.

Have your business strategy in front of you, define you goals; select your product, brand, offer; identify your target market; define your uniqueness, sales process, marketing process, follow-up process and off course everything.

You should remember one thing and that is properly defined strategies make almost 90% of your work already done for you.