Roy Ryniker, President of Reorganization Alternatives Group, Ltd., advises companies on
operational and financial restructuring programs to drive profitability.
Amongst the dramatic impacts of COVID-19 is its acceleration of a company’s opportunity to
evolve and innovate. Given all the economic uncertainties, today leadership needs to take a
hard look at its organization’s capacities and focus while determining in what markets will they
compete and how will they win in these markets. Strategic questions need to be asked; the
company’s future needs to be created. Bob Iger, the former Chairman & CEO of Walt Disney
Co. said, “The riskiest thing we can do is just maintain the status quo.”
Why Ask the Questions?
Markets, customers, products evolve. The pandemic environment
accelerates that evolutionary process. One question is how best to position your company for
continuous innovation so you can capture value from evolutionary disruption? To accomplish
this, what strategic questions do management teams need to be asking, and why? Because
access to equity, debt and labor markets is not unlimited, management needs to prioritize how
best to allocate all its capital (financial, human and physical) to maximize value creation. Gone
are the days of just answering strategic questions to create a plan for the year. View the plan as
an evolving work in process dynamic tool rather than a finished product. The answers to
strategic questions need to be incorporated into an action plan that has monitoring
mechanisms, a performance dashboard that indicates when consideration should be given to
the company reinventing the plan, making timely adaptations and resource reallocations in
response to changing market dynamics. Winning is more often the result of constant
innovation rather than a disproportionate focus on cost efficiency.
Often a vision exists of the markets where management wants to compete. An
implementation plan gets developed. In the intricacies of daily operations and resource
demands, the execution of that vision can get distorted. In the short term, often excuses are
prioritized over corrective actions. What were once core competencies can quickly become
core rigidities if management does not have timely meaningful information on the performance
of its business units and the will and resources to take corrective actions. Often it is difficult to
improve something you are not measuring. Management reports of unitized key performance
indicators provide the vital signs to illustrate the need for corrective actions.
Power in Simplicity
To create a dynamic action plan, management needs to ask, “How do we
cost effectively attract and retain profitable customers? It is in the rigor involved to answer that
question that the true value of strategic planning evolves. The output of that process should be
a summarized concise action plan no more than 500 words. There is power in simplicity. The
Ten Commandments, Bill of Rights, and Gettysburg Address, all power documents, all less than
500 words. Simplicity fertilizes success.
What to Discontinue?
As important as the strategic questions on what to do, is the question “What don’t we do well and should consider stop doing?” Whether it’s called a pivot, reinvention or oops, management needs to analyze which of the company’s products have lost their competitive edge and have limited profitability growth opportunities. Should these products be discontinued and the assets and staff supporting them be redeployed to other products with greater upside profitability potential?
It is often said that frequently customers die, but it can be a long time before
the corpse starts to smell. Death is defined as being unprofitable or the cause of a
disproportionate drain on capital, staff and production capacity relative to profits they
generate. Management needs true customer profitability metrics, and a quick set of CPR
procedures for a timely attempt at resuscitation to avoid supporting a lingering loss
relationship. Given customers die, what is your company’s competitive advantage in acquiring
new profitable customers, and finding persuadable audiences? Is it proprietary technology or
resources? Is it economies of scale in your sales process? How can you protect your competitive
advantage with an innovation element to protect against the new technology or the larger
competitor with more resources?
Not A over B, But Which of Two Bs
Management creates a vision for the future, and then
refines the vision by asking questions on how to obtain it, whether it is obtainable, and/or what
resources are required to get there. Often the comparison is on the way we operate today
versus the costs/benefits of an alternative strategy. Is it worth the financial and human costs of
changing from the status quo? But with increasing frequency, the comparison should be
between alternative new plans, and not a comparison against the current state of operations.
Your normal operations may not be a sustainable viable economic option. Don’t hesitate to
reject a good alternative if you think your team can create a superior alternative.
Ask the Bigger Questions
As a leadership exercise, ask your management team how they
would strategically proceed if collectively they were intolerant of the present and aimed to
make it obsolete. As Steve Jobs said, “Think different. Ask the Bigger questions.” Seek out the
less obvious perspectives in your planning process. Management needs to put its best people
on the company’s biggest opportunities, not on having them solve yesterday’s problems.
Create the Future
John Schaar said it best, “The future is not some place we are going but one
we create. The paths are not found, but made, and the activity of making them changes both
the maker and the destination.” Let the COVID-19 crisis be the catalyst for you to create your
organization’s future. Don’t be satisfied with just existing products and services. Allow yourself
to escape from the past mindset to develop the future. Foster the development of change
agents in your management team. Strive to have your new initiatives have transformational