What makes bad business strategy?

Professor Richard Rumelt, an authority in strategy execution says “Bad strategy ignores the power of choice and focus, trying instead to accommodate a multitude of conflicting demands and interests… it also covers up its failure to guide by embracing the language of broad goals, ambition, vision, and values.” He recommends avoiding four pitfalls to avoid a bad strategy:

1. Failure to face the problem: “A strategy is an approach to overcoming obstacles. If you fail to identify and analyse the obstacles, you don’t have a strategy”. This in nutshell is the cores reason for many a strategy to go bad from the initial formulation stage to the subsequent execution stage.

2. Mistaking goals for strategy: “Setting goals without a supporting strategy can mislead the organization”.  Rumelt cites a military general who may justly ask his troupes for “one last push,” but the goal still needs to be supported by a clearly defined strategy.  A good strategy will create the conditions that will make the “push” effective and worthy of the effort required”.

3. Bad goals galore: A long list of goals cobbled together at planning session, or a set of ideas that no one has a clue about what to do or how to get there, are signs of bad goals. Here the setting of goals does not facilitate focusing energy on very few high impact items. Neither these goals build a bridge between the obstacles that are contemplated to be solved and the required action steps that must be taken within a given time frame.

4. Fluff: Professor Rumelt defines Fluff as a “Restatement of the obvious, combined with generous sprinkling of buzzwords that masquerade as expertise designed to mask the absence of thought.” He cites an example of “fluff” from a retail bank which declares “Our fundamental strategy is one of customer-centric intermediation.”

Avoiding these pitfalls would enable firms to make good strategy; otherwise these firms would continue to be in the bad strategy bracket

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

 

Here comes business strategy that makes real estate business a success

Real estate tycoons rule the world. Good example is Donald Trump. He made his money and fame in real estate before venturing into presidency. What is the business strategy that guided him: simple it is known as ECM an acronym for economic, construction and marketing feasibility.

Economic Feasibility

Fine print in economic feasibility is the hidden-value a piece of land offers to a developer. When I said hidden value it means nobody before you ever walked into that land. Mainly off the market, sometimes wedged between two big plots that are more conspicuous than the one you have picked up with an assured potential growth in the next few years. 

Three aspects require critical view: location of the property, the demographic structure at present and the demand and competition for real estate in that area. Because potential growth is going to give you the forecast return of the property. So by factoring a degree of uncertainty in the future market you have to size up with risk and return profile covering cost and revenue streams along with overall profit that you get out of the project.

Construction feasibility

In real estate development there are two stages. One relates to the land development and other is building. Raw land development is a sunk cost and does not give any return because it cannot be monetized. This includes implementing zoning regulations, paving roads, laying utilities and providing space for recreation, reserving part of the land un-built to facilitate movement of air and light. The second part of erecting the building is time and money consuming as you have to conform to building regulations and the architectural design that provides all modern conveniences in an aesthetic manner.

Marketing feasibility

Last but not least is the marketing aspect. At the drawing stage you can come with any marketing and pricing plan. Yet construction spans into few years and the cost over-run is immense. You have got to be smart in understanding the value proposition tomorrow and cost stream today. This is critical task indeed. 

A key barometer is to look at the current market pricing of comparable properties in the surroundings and project the likeable price that could prevail in time to come. Having done this it is the marketing promotion that matters a lot. It would be better to use two business tactics: either make a mock unit and skim the market for pricing or start the promotion blitz when 90% of the construction is done.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

What is good business strategy?

A company must have a good business strategy at works, to achieve its mission and goals. Four important aspects define a good business strategy. Here is a pre-view:

1. Image: First and foremost is the image of the firm in the minds of customers, market participants who may be competitors or alliance partners. Image includes, name, reputation, brand, goodwill and many others that accentuate corporate image to be imprinted in the minds of all participants. Being dedicated and passionate about what a firm does goes a long way in building acceptance. There must be core values that differentiate the firm from others in the pack. Core competencies of the firm give the impression that a firm has a doable proposition.

2. End-state: This is the all-inclusive purpose for which the firm is originally established. In simpler terms it is the destination a firm is seeking to reach and business strategy is crafted to enable to get there using the means and resources available to the firm. There are two limbs: actionable goals and doable work-in-process. When firm defines its mission and goals clearly and communicates these to its staff in simple language it motivates the staff to put the shoulders at the wheel to achieve the end-state. This is a classic instance where you get efficiency and effectiveness is on even keel.

3. Target market:  There is logical sequence in this paradigm where image leads to end-state and thence to the market place where the delivery of value takes place. In crafting good business strategy, identifying the target market, customer needs, segmentation and the modes of channels and distribution are considered in exhaustive detail. Moreover, business strategy must be properly aligned with image, end-state and target market to produce what we call an “absolute offer to the market”.

4. Value proposition: This in simple terms conveys what a firm offers to the market. In order to create value proposition firm must co-ordinate its means and resources. To produce the ideal product that goes to the market to satisfy the needs of the customers in better ways than what is being done at present by other participants. Business strategy functions in perfect way to translate means and resources to saleable product. This is in sum, creating the value. An excellent value proposition has high probability of success in the market place and business strategy aims at that.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist

Overcome these three stumbling blocks: your business would progress well

Firms are in business to make money and more of it too. Also it needs to survive and do well in terms of growth and profitability. In doing so firm faces three stumbling blocks. Business strategy must adequately provide safeguards to jump over these hurdles:

1. Not focusing on core business

In every business there is an area known as core business. A tobacco company has core business in the form of cultivating, processing and making cigars or cigarettes or tobacco for pipes. When such a company sees there is opportunity for inter-cropping tobacco with other vegetation well and good and it is good business strategy to go ahead. What happens is after sometime the other vegetation demands more time, resources and management attention. It is a classic Pareto Rule. Twenty per cent of the production takes eighty per cent of the management time. Finally, the core tobacco cultivation suffers resulting in business downswing.

2. Relationship is in shambles

Most cases business fails because it did not handle the human relation within the business properly or customer relationship outside the business properly or both. Today there is immense value placed on the relationship angle. A good

Relationship model should cover the stakeholder concept. Business stakeholders include: owners/directors, staff, customers, creditors, government, and society at large.

Business strategy paper must demand that the owners/directors conform to standards and ethics and give proper directions to staff and make human resource pool happy and contended. Satisfied staff performs duties well, resulting in: Retention of customer loyalty; Retention of human resource pool; Improvement in profitability & growth of company; contribution of taxes and revenue to government; involvement of the society at large. When this does not happen the relationship is in shambles and the business retards.

3. Cash-flow is dethroned

There is no doubt cash-flow is the one that keeps everybody going: owners, staff, creditors and debtors, government and society. Constant monitoring and progress chasing keeps the cash-flow intact and is enthroned as part of business strategy. It is like oiling a machine to be in good state of repair. If you do not oil, the machine breaks down one day. Cash-flow monitoring must be a continuous activity. Production can take a short-break in between shifts; sales can take a holiday. No interruption in Cash-flow, never. Business suffers because it dethrones the cash-flow and allows it to trickle and dries out finally.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist