DEVELOPING AN INDIRECT STRATEGY

There is a logical and systematic process you can use to develop an indirect strategy:

  • 1. Define your strategic goals.
  • 2. Determine the resources needed to achieve your goals.
  • 3. Gather competitive intelligence.
  • 4. Establish security.
  • 5. Implement the indirect strategy.
  • 6. Develop a post strategy.

Define Your Strategic Goals

What does the next 36 to 60 months look like for your market? Based on the best information you can gather, what are the strategic goals or direction of your organization, business unit, or product line? Also based on the most reliable data available, what are specific objectives[1] for your operation?

As you develop your objectives, make certain to distinguish between the direct and indirect approach. The intent is to outmaneuver competitors and avoid dissipating your strength in misguided directions and costly competitive confrontations.

For instance, during one point in the ongoing battle for a favorable position in the raging mobile phone market, Motorola set an objective to regain momentum after relinquishing leadership to Nokia. Most notably, Motorola launched its RazrTM phone, which caught Nokia and other competitors by surprise and captured the attention of a worldwide audience.

The indirect strategy came about when Motorola executives decided to buck the growing industry trend to load phones with cameras and stereo speakers that made them heavier and bulkier. Instead, Motorola introduced a half-inch-thick phone with sleek lines and a shimmering keypad. At the time, Razr did more than just ring up sales; it achieved the strategic goal of getting customers around the world looking again at Motorola as creative, cool, and sexy.

To assist in developing your strategic goals, the following questions will guide you in distinguishing between the direct and the indirect approaches.

What Are Your Organization's Distinctive Strengths or Areas of Expertise?

Here is where you look at your organization’s or business unit’s distinctive competencies, such as:

Competitive strengths of your product or service based on such criteria as customer satisfaction, positive image, and long-term outlook for the brand

Depth of relationships with intermediaries along the supply-chain Efficiency of existing production capabilities

Availability of finances to fund day-to-day operations and carry out long-term plans

Commitment to ongoing product development, as well as applications of new technologies

Quality of customer or technical services

Level of morale, training, and discipline of personnel, especially of those who interact directly with customers Caliber of leadership

The ultimate in disposing of one’s troops is to be without ascertainable shape. Then the most penetrating spies cannot pry in nor can the wise lay plans against you. It is according to the shapes that I lay the plans for victory, but the multitude does not comprehend this.

Sun Tzu

What Business Should Your Organization Be in over the Next Three to Five Years?

Here is where you pinpoint the market segments or categories of customers you are likely to serve.

Highlight any standout industry and customer trends that would connect your strategic goals to customers’ needs and wants—yet be watchful that “the most penetrating (competitors) cannot pry in nor ... lay plans against you.” Then you can comfortably elevate your thinking into new product development, instead of relying primarily on the longevity of existing products to sustain company growth.

By taking the long-term view, you begin thinking strategically about how to position your business for the future. In turn, that view determines the breadth of existing and new product lines, which helps you identify new market opportunities. If you are too narrow in defining your strategic goals, the resulting product and market mix will be generally narrow and possibly too confining for growth.

On the other hand, defining your business too broadly can result in spreading capital, people, and other resources beyond the capabilities of your organization. Therefore, look to create a comfortable balance by positioning your business somewhere between the two extremes.[2]

What Segments or Categories of Customers Will Your Company Serve?

Customers exist at various levels in the supply-chain and in different segments of the market. At the end of the chain are end-use consumers with whom you may or may not come in direct contact.

Other customers along the chain serve as intermediaries and typically perform several functions. They include distributors who take possession of the products and often serve as a warehousing facility. Still other intermediaries repackage products and maintain inventory-control systems to serve the next level of distribution. And there are value-added resellers who provide customer service, technical advice, computer software, or educational programs to differentiate their products from those of competitors.

Examining the existing and future needs at each level of distribution helps you project the types of customers you want to target for the three- to five-year period covered by your strategic goals. Similarly, you will want to review various segments and target those that will provide the best opportunities over the planning period.

What Additional Functions Are You Likely to Fulfill for Customers as You See the Market Evolve?

As competitive intensity increases worldwide, each intermediary customer along the supply-chain is increasingly pressured to maintain a comparative advantage. This question asks you to determine what functions or capabilities are needed to solve customers’ problems.

More precisely, you are looking beyond your immediate customers and reaching out further along the supply-chain to identify those functions that would solve your customers’ customers’ problems. Such functions might include providing computerized inventory control, after-sales technical support, quality control programs, just-in-time delivery, or financial assistance.

What New Technologies Will Your Firm Require to Satisfy Future Customer Needs?

Look again at the previous question and think about the practices of your industry. Examine the impact of technologies to satisfy your customers’ needs.

From the viewpoint of which areas represent potential indirect strategies, look at where your company ranks with the various technologies and types of software used for product design, manufacturing, and distribution systems. Look, too, at the continuing changes in information technology and business intelligence with the resulting effects on product innovation and market competitiveness.

Also appraise such current technologies as expert diagnostic systems, dashboards, and other business performance management (BPM) systems for problem solving. And look at the rapidly changing communications systems to manage and protect an increasingly wireless enterprise.

What Changes Are Taking Place in Markets,

Consumer Behavior, Competition, Environment, and the Economy That Are Likely to Impact Your Company?

This form of external analysis permits you to sensitize yourself to those specific issues that relate to your business from which you can develop an indirect strategy. It is an intimidating task, however, to stay apprised of the vast amounts of information in all of the above areas. Therefore, it is in your best interest to set up (or upgrade) a communications hub that gathers, sorts, and disseminates key news and intelligence through your internal network.

Generally in battle, use the normal forces to engage; use the extraordinary

to win.

Sun Tzu

To further illustrate strategic goals and show the application of the “normal” and “extraordinary” forces of indirect strategy, the following case illustrates how a well-known organization engaged a market leader firmly entrenched in a specialized market.

Wal-Mart Stores decided to attack one of the largest consumer-electronics chains, Best Buy Stores. Wal-Mart began by sprucing up the interiors of many of its electronics departments and adding several high-end products from companies like Sony, Toshiba, and Apple.

However, simply adding products to its line was “normal” and not a strong-enough move to unseat the leader. To win with an indirect strategy, Wal-Mart would have to do something “extraordinary” by locating and striking at an area of Best Buy’s greatest vulnerability.

The area of vulnerability at that time lay in the most profitable line of business for Best Buy: extended warranties. Real earnings were not in the sale of the electronic gadgets. Rather, they were in the sale of multiyear protection plans that were actively hawked by the retailers’ salespeople. For Best Buy, warranty sales accounted for more than a third of its operating profit.

Wal-Mart pulled out all stops and concentrated on that line of attack by launching extended warranties on TVs and computers at prices that averaged 50 percent below its rival. “Profit on extended warranties has always been the Achilles’ heel of Best Buy,” declared an industry analyst.

What was Wal-Mart’s strategic goal? The company’s push into consumer electronics is part of its long-term objective to attract more upscale shoppers. Wal-Mart managers observed that wealthier consumers shopped mostly for food and cleaning products. To get them to go through the whole store, managers reasoned that upgrading the electronics departments as well as other high-end product lines would achieve that strategic aim.

In all fighting, the direct method may be used for joining battle, but indirect methods will be needed in order to secure victory.

Sun Tzu

Strategic aim, therefore, is the first step in developing an indirect strategy that “will be needed ... to secure victory.” The purpose, again, is to guide your activities with discipline, rather than wander off in several directions, expending resources without a defined purpose and a measurable end.

There is another but no less important purpose to the strategic aim: to coordinate with the long-term direction of the organization. This broader view adds credibility when seeking budget approval from senior management.

To accept superiority of numbers as the one and only rule, and to reduce the whole secret ... to the formula of numerical superiority at a certain time in a certain place, was an oversimplification that would not have stood up for a moment against the realities of life.

Clausewitz

  • [1] These are specific objectives for the period covered by your business plan and include quantitative statements with projections of sales, market share, and other long- and short-term objectivesrequired by your firm. Also included are qualitative objectives related to what you want to achievein such areas as: new product development, product quality, customer satisfaction, technology,market position, and the like. More details are provided in Appendix 3.
  • [2] Some individuals advocate reaching far to the extreme and seeking entirely new horizons.Bold, audacious goals are commendable. For those robust managers willing to make such a push,it’s prudent to do an in-depth reality check and determine if the corporate culture is orientedto the totally new and untried, personnel are skilled and up to the diverse tasks, and enoughresources are available to sustain the effort.
 
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