Hi, Jim here,
If you’re looking for guidance and practical advice on how to develop successful strategic management, then I’m glad you’ve found this website, and I strongly suggest you keep reading.
Because many years ago when I was appointed to run a series of US corporations in Europe, I faced the same problem. After a few false starts, I gradually learned the best way of building a powerful and successful business strategy.
I’d like to share that practical approach with you and show you how you can do it too in your world.
There are lots of ‘experts’ and websites that will give you the definition of strategic management – who will provide plenty of academic analysis. If that’s what you want then check out the useful link on the right.
However, what I want to do is to show you how to develop successful strategic management so that you and your business become much more capable and competitive.
Step 1 – How do you compare to your competitors?
Some people will tell you that the first step is to do a SWOT analysis or to Benchmark your business against your competitors. And that’s the way I started too.
These exercises helped me identify my strengths and weaknesses, my opportunities and threats; they could tell me where I compared to my competitors in many operational areas – and sometimes it took a lot of time, effort and money to get that information – but at the end of the day I was still faced with the question, “So what do I do now?”
What I began to realise was that, while these exercises were kind of useful in a way, they didn’t really take me forward. There had to be a better way. (But if you do want to find out more about SWOT analyses and Benchmarking then check the links on the right).
As I struggled on I then began to understand that my competitors were not standing still.
If I was behind the performance of my competitors in any way, then I had to improve at the fastest possible rate to catch up and pass them.
On the other hand, if I was ahead of my competitors in any way, then if I improved at the fastest possible rate I would leave them further behind and get an unassailable lead.
Either way I had to improve at the fastest possible rate.
But I couldn’t just do that incrementally. It would take too long. I had to take a leap forward – to get ahead of my competitors – and stay there. How could I do that?
Step 2 – What really drives your success?
I began to challenge what drove my success. Was it my intelligence, knowledge or skills? Was it my luck or my creativity? Was it my connections or my experience or my commitment level?
I eventually concluded that it was none of those.
Oh, they’re all important attributes. They help to determine my potential for success. But they don’t determine my actual success.
I discovered the hard way that what really determined my success was the extent to which I consistently added value in everything I did.
Almost everyone I knew faced massive amounts of activities every day that did not add any value. They were really bright, intelligent people with very responsible jobs. But their work life was crammed full of dysfunctional activities that simply did not add value to what they were doing – that left them angry and frustrated with their colleagues and with the organisation – that seriously affected their productivity and ability to do satisfying work.
Between 50% and 80% of their total time at work was spent not adding value. But that was the way everyone worked. That was normal.
If I could eliminate all this non-value-adding activity then I could become much more productive than everyone else and leap ahead. Once I realised this, I then began to really move forward with developing the right business strategy objectives and solutions.
Value-adding in a manufacturing process only occurs in those steps that change your raw material closer to what the customer is paying for until you complete the final product.
Value-adding in a non-manufacturing process, such as an administrative or service process, only occurs in those steps that gather information for the first time, or process that information for the first time.
Nothing else you do adds value.
But what was the right level of value adding? It couldn’t be 100%. So what was it?
Step 3 – How do you compare to world-class?
From that experience I gradually put together a grid of performance levels using value-adding as the basis.
This grid originally covered six key operational parameters. But as I began to apply the findings from this grid, I realised that I really only needed to concentrate on just three of the parameters – Responsiveness, Productivity and Right First Time.
I called the grid the Path to Excellence and I reproduce part of it here. It shows for each of the three parameters the spectrum of performance from Innocence to Excellence.
‘Responsiveness’ is the ratio of overall lead time for any process to the actual value adding time involved in that process
‘Productivity’ is the proportion of the total time that your assets (whether people or equipment) are used productively to add value.
‘Right First Time’ is the proportion of the total items or transactions that start a process which finish it right first time with no defects or rework required.
When I created this grid I ensured that ‘Excellence’ represented world-class standards of performance. I was then able to assess my performance against these standards.
I discovered to my horror that the performance of my processes was sitting somewhere left of centre on this grid (see red line). But what it also highlighted was what I had to do to reach the level of ‘Excellence’.
And that was the breakthrough for me in planning and developing my strategic management.
Once I knew where my performance sat on the Path to Excellence grid, I could then develop a strategy to help me get up to the ‘Excellence’ standards at the right hand side.
And once I achieved the ‘Excellence’ level on all three of these parameters (see green line) my businesses transformed from being OK to becoming the best in their sector.
And to me, that’s what the right strategic management should achieve.
Since then, as a consultant, I’ve applied this approach to all my clients in many different sectors with huge success. And you can do that too.
Step 4 – So how do you reach these world-class standards?
Firstly by analysing each of your key processes, whether they are manufacturing processes or administrative or service processes, and eliminating the many steps that you take that don’t add value. This then means that you can complete the processes much more quickly, which allows you to provide a more responsive customer service with lower costs and working capital.
Secondly to ensure that the steps that set the pace for these processes operate at their most effective. This then means that you get the maximum volume through these steps – and therefore through the whole process – for the amount of resources involved. In other words you then achieve your maximum productivity, lower costs and improved profitability.
Thirdly to ensure that in all your processes you operate them right first time. Apply root cause analyses to ensure that you have minimum rework or duplication and minimum waste, which also allows you to achieve the two other main objectives.
It can take time and effort to get there, but I can assure you that once you’re operating your processes at the ‘Excellence’ level, the operational, financial and business benefits are amazing and will transform your life and your company’s competitive position.
That’s how to develop a really effective strategic management capability – one that takes you to the ultimate levels of performance and leadership – which is where you really need to be in this highly competitive world.