Albu On Strategy

Three Critical Steps to Recalibrate Your Business

I received an economic report from a friend and Chair of Vistage, a leading CEO membership organization. The report was written by Roger Martin-Fagg, an economist from the UK, and he said, “It is now clear to me that we are not experiencing a typical business cycle. Instead we are in a discontinuity, where there is a step change in societies, systems and performance with outcomes which can only be guessed at, not forecast.”  We are experiencing turbulence in global markets that is new to all of us. Everything around us is in recalibration mode. The US consumer savings rate is increasing to unprecedented levels, while retail sales continue to decline. This decline in US consumer demand will continue to have an impact on everyone, no matter what business you are in.

The good news is that US companies, large and small, have quickly taken steps to reduce costs, and are keeping ahead of sales declines. This has produced better than expected earnings for most. The bad news is that this cannot be sustained because there is a limit to cost compression. Restoring top line growth, particularly in this uncertain economic environment, is more important than ever.

Recalibration requires a disciplined, nononsense approach that will drive change and reset your business model. Consider these three essential steps:

1. Find Your “Profit Zone” – The profit zone is the area of a company’s economic activity where it achieves the highest profits, enjoys the greatest leadership position and where it can sustain and grow value. Focus on your profit zone and leverage that solid ground into new and emerging growth opportunities.

2. Forget The Past Selectively – This is often one of the most difficult concepts for business owners to embrace. The concept is simple—there are some parts of your business that you should consider exiting. One question you might ask: if we did not offer this (product/service) already, would we offer it now knowing what we know today? Mature, stagnant products suck resources away from new and growing products. Make the tough choices by abandoning the past selectively.

3. Don’t Expect Perfection – It is an uncertain global market and predicting the future is more difficult than ever. This is where our strategic management system plays such an important role. There are four parts to successfully beating the odds in this changing world: get a strategic plan in place; convert the plan into action; execute relentlessly; and monitor and refresh the plan regularly. If you would like to learn more about how we can help you, please give us a call.

Posted in Newsletter, Strategy Development.