When planning changes which may have an impact on either
costs or revenues a basis for evaluation is required. Ultimately
this will be shareholder value, but for practical purposes will usually
be defined in terms of profits growth, margin, ROCE (risk adjusted if necessary)
and gearing and NOT the size of the business. Are we clear what is
being expected? Any corporate objectives should reflect those aims.
When we subject ourselves to peer group review (by each
type of business in the organisation) can we see that the most outstanding
performers are consistently achieving results which would exceed (or at
least meet) our financial objectives? If so, can we see how they
are doing this? If not, however much we work at this business we
will not get to where we want to be.
For each type of business the potential for earning superior
returns can be a function of certain market characteristics - customer/supplier
power, new entrants, indirect competition, etc., that is, apart fom how
existing players compete. Do our markets have the right characteristics?
|HOW DO WE COMPETE?
It is not usually possible to mix competitive strategies
- either we position ourselves as a low-cost player, differentiate ourselves
in some way or focus on particular market segments. Are we clear
which we are doing in which markets?
In many examples of business process (re-)engineering,
it has not first been clearly defined how it is intended to contribute to our ability to compete - the
focus has been on the operational issues, ignoring the nature of differing
value chains for different competitive strategies. With the current
emphasis on systems solutions, this has not necessarily taken proper account
of capital productivity - are we replacing labour with capital, and thereby
losing skills? Are we using accounting procedures instead of investment
appraisal techniques to evaluate these projects?
There will be no clear-cut answers to any questions without
breaking down what we do into smaller elements - probably by several criteria
- geography, customer type, distribution channels, delivery mechanisms,
etc. - whatever is appropriate or measureable. Further segmentation
will probably be required when considering detailed marketing plans.
Markets are dynamic - in the sense that they are constantly
changing. We need to be able to describe it in terms of - which customer
are buying or could by which products? There will be overlap, because
there is substitutability between products and new products are being developed
all the time. We probably need to define this in terms of customers’
fundamental requirements, rather than products as they stand today.
Recognising dynamics in the market structure needs to
be explained in terms of why customers cross the boundaries - why do they
stop buying one product and buy another or change supplier? What
causes market shares to change? We need to understand buyer behaviour
These are fundamental marketing issues - do we have the
right combination of product features at an appropriate price to optimise
our earnings from our target market segments on the basis of how we have
decided to compete? Research techniques, such as conjoint (trade-off)
analysis can provide useful evidence here.
Are we analysing everything we can learn about our operations,
products and customers from our corporate "knowledge"? Are we analysing
profitability by products/market segment? Data mining has delivered
analysis tools to the end user (typically based on multi-dimensional frequency tables),
whereas, there are actually a whole array of useful statistical procedures such as CHAID or neural networks.
Do we understand how the customer perceives the product
features and how he values them? Are we selling on benefits of the
product as opposed to facts about the products? Are our sales people
fully trained in this? Are we targetting the most likely customers?
Are we concentrating on the most profitable products? Do we have
a clear sales message which is used consistently by sales and marketing?
Do customers know what they can buy from us and why they
should do so? In terms of a marketing concept - the "customer decision
continuum" - knowledge is built up gradually from awareness of the organisation,
through ever more detailed understanding of the products and the benefits,
through to buying and post-purchase evaluation. Can we position customers
on this line and use it to determine what messages we should be sending
to whom? Can we then determine how best to send the message?
Do we know what is going on in the market place?
Are our conclusions being fed back into our planning systems so that we
can constantly take account of changes and opportunities? Do we have
a planning system that allows people time to consider shifts in emphasis,
tactics and changes to our strategy? Are we communicating this around
the organisation? Are we leveraging our technology here to achieve