“Our Strategy is crystal clear”. Are you really sure?

How many times have you heard business executives say “Our Strategy is really straightforward. We just need to execute it”, to then find that they did not have any clue of even extremely simple strategic activities such as for example market prioritization? Or, how many times have you seen companies performing strategy reviews every single year of their life, if not even more?

Believe us, this pitfalls are extremely common: in all industries, all geographies, and all competitive environments. To further complicate the solution of this very spread issue is the fact that executives can accept that they need help in very specific business domains (e.g. in optimizing operational process X), but they are as reluctant as possible (to say the least) in admitting that they do not have a clear view of the strategic direction to give to their company/business unit. And even worse, when they do have a clear view, but this is wrong.

The crucial point is that Strategy is the most important piece of success for companies. If the strategy is wrong, or even just weak, there is no business optimization that can save the company from failing.

The following example – taken from our direct experience with a key client of ours – illustrates our incredible capability in strategy, and the huge value that our work delivers to our clients.

In this case our client needed to define their Strategy for the coming 10-15 years, and build their 3-year Business Plan. In particular, their fundamental strategic question was – being the company in well shape – how to make a step change in growth.

Wanting to make a step change in growth very often generates a major risk for companies, coming from the psychological complex that we define as being “too hungry”: i.e. targeting growth in every single direction, in the end making the organization not effective/capable in each of them.

In fact, we need to remember that, talking of growth, the fundamental business dimensions to be addressed are as diverse as sectors/products, geographies, and “approaches”. For examples, as to approaches, there are at least three topics to be deeply investigated and defined:

• “Growth” approach: Organic, By acquisition, By partnership/JV
• “Size” approach: Incremental/trial, Focused, Massive/large scale
• “Time” approach: Return expected in the short, medium, long period.

For example, as to the “product” dimension, we convinced our client that the focus of their future growth had to be branded products (vis-à-vis PL and Bulk). PL was in fact a small and initial business for our client and so could in theory have represented a natural area to invest (see for example the below graph), but we demonstrated that the chances to generate a contribution margin capable to repay the incremental operating costs – and therefore, in the end, to have a profitable incremental business – were minimal.

After a thorough assessment of the options available and of their pros and cons, we defined as key driver of future growth for our client the international expansion. The issue was then to identify the key countries where to focus the investments and energy of our client. The key point is that geographical expansion priorities are extremely company specific. The attractiveness of the different countries around the globe depends in fact on:

• factors common to all industries (such as stability, easiness to do business,…)
• factors specific to each industry (such as consumers’ tastes, adoption of specific products,…)
• factors specific only to the company that want to expand (such as brand portfolio strength).

We therefore assessed all the key factors (external vs internal) potentially crucial for the success of our client’s growth. For example, the below graph shows two of the number of factors assessed:

• the market share of the leader (to avoid entering a country already dominated by a player)
• the market share of PL (to select countries where branded products were the majority, in line with our client’s key growth dimension, as seen above)

By combining together all the pieces of work that we performed and leveraging our methodology, we were then able to weight all the different factors analyzed, and so to identify the best prioritization of the countries vis-à-vis their attractiveness for our client growth. For example, Canada, Brazil, China, France, Australia and Switzerland resulted as the highest attractive countries to enter (see the graph below).

It’s also very interesting to note that thank to our work, our client was able to see for the first time that, of the countries where they were already present, only two ranked high in the scoring (US and Japan), while the others (Ireland, UK and Italy) displayed rankings lower than countries where our client was not yet present: this gave a key indication of where to put investment, also as to countries of presence.

With all these results achieved, we were finally able to write the company 3-year Business Plan. With a very clear and detailed view of the best strategy for our client.