STRATEGY INSIGHTS



1. Getting more for less.
Jonathan Byrnes' new book (Islands of Profit in a Sea of Red Ink) shows an interesting and fascinating fact based on companies he has worked with and advised . An amazing 30-40 % of  company business is unprofitable ( by any measure including transactions,products,customers and accounts)

The implication is that without any need for new initiatives and instead a focus on which products and customers were profitable enables increased profitability.

A key to success is for organisations to increase the profitability of what they are already doing.So without capital spending and some change to the business mix big gains can be achieved.

What might this mean for any business?


Islands of Profit in a Sea of Red Ink by Jonathan Byrnes



2. McKinsey Survey on Creating More Value With Corporate Strategy

A recent McKinsey survey suggests that  the best corporate strategies is based on clear choices about an organisations portfolio and the allocation of its resources. However the survey shows that many companies lack a consistent process for developing strategy. The survey also considered whether strategy was treated as a distinct exercise that specifically addresses corporate level strategy and portfolio composition issues or as an aggregation of business unit strategies with no separate attempt to address corporate level questions.
  • Where an organisations approach to strategy was rated as  very effective  profit margins were higher than competitors
  • The best organisations spend more time developing strategy, review strategies more frequently and are good at eliminating barriers to implementation ( such as risk averse decision makers, business unit sense of entitlement to similar budget to last year v an oversight of the portfolio view, lengthy strategy development leading to obselete strategy because of changes in the environment)
  • Many companies are too slow at making critical portfolio choices and trade offs
  • Executives at effective strategy development organisations say that market facing groups such as client/customer insights, competitor intelligence and marketing are essential inputs

Top ranked inputs to strategy development were  :

  1. Macrolevel trends
  2. Portfolio performance
  3. Industry dynamic
  4. Financial projections
  5. Competitor plans and strategies
  6. Operational benchmarking
  8. Investor expectations
  9. Extent of regulation in countries of operation
  10. analyst expectations

The survey also suggests that better strategy is achieved through management processes that are fully integrated with decisions resulting from the corporate strategy process. The management processes include:

  1. Business unit strategy reviews
  2. Transactions such as M&A and divestures
  3. Budgeting
  4. Operating reviews
  5. Approval and strategic allocation of capital expenditures
  7. Investor relations management
  8. Analyst communications
  9. Incentive structures and compensation

Key conclusions were:

  • Robust corporate strategy development is essential to charting a future path to successful growth and returns
  • The corporate strategy development process must tackle key corporate level issues such as effective resource allocation informed by major economic trends and other external factors
  • Stronger links should be forged between corporate strategy and other key management processes such as  talent management and allocation of capital expenditures.
GREAT STRATEGY BOOKS