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Month July 2013

Goals, strategy, and programs…

Goals tell where a business wants to go; strategy answers how it plans to get there. Every business must tailor a strategy for achieving its goals. The strategy must then be refined into specific programs that are implemented efficiently and corrected if they are failing to achieve the intended objectives.

Objectives and goals. Goals describe objectives that are specific with respect to magnitude and time. Here are some sample objectives: profitability, sales growth, market-share improvement, risk containment, innovativeness, reputation, etc. Remember, objectives should be stated quantitatively, so that they become goals.

In order to keep goals realistic and consistent, here are some key goal tradeoffs to consider:

  • Short-term profits versus long-term growth
  • High profit margin versus high sales volume
  • Deeper penetration of existing markets versus developing new markets
  • profit goals versus nonprofit goals
  • High growth versus high stability

Now, here are Porter’s three generic strategy types:

  1. Overall cost leadership. Here the business works hard to achieve the lowest costs of production and distribution so that it can price lower than its competitors and win a large market share. Firms pursuing this strategy must be good at engineering, purchasing, manufacturing, and physical distribution, etc. and need less skill in marketing.
  2. Differentiation. Here the business concentrates on achieving superior performance in some important customer benefit area valued by the market as a whole. It can strive to be the service leader, the quality leader, the style leader, the technology leader, etc.; but it is hardly possible to be all of these things. The firm cultivates those strengths that will give it a differential performance advantage along some benefit line. Thus the firm seeking quality leadership must make or buy the best components, put them together expertly, inspect them carefully, and so on…
  3. Focus. Here the business focuses on one or more narrow market segments rather than going after the whole market. The firm gets to know the needs of these segments and pursues either cost leadership or some form of differentiation within the target segment.

Once the business has has developed its principal strategies, it must work out supporting programs. For example, if the the business has decided to attain technological leadership [think Apple], it must run programs to strengthen its R&D department, gather technology intelligence, develop leading-edge products, train the technical sales force, develop ads to communicate its technological leadership, and so on…

Effective managers

Some of The Most Frequently Cited Skills of Effective Managers

  1. Verbal communication (including listening)
  2. Managing time and priorities
  3. Managing individual decisions
  4. Recognizing, defining, and solving problems
  5. Motivating and influencing others
  6. delegating
  7. Setting goals and articulating a vision
  8. Self-awareness
  9. Team building
  10. Managing conflict

Why do outsiders see the future better

Why has nearly 80% of business and product forecasting been wrong?

In short, the most important reason is that forecasters, by nature unduly optimistic, fall in love with their own forecasts, especially if the forecast is based on an exciting new technology.

Odd as it may seem, important innovations rarely come from firms that would seem the most likely sources. Firms that currently dominant in a given industry often seem to be the least foresightful. It is instead often the industry outsider that seems to be the most perceptive.

Many firms have failed to capitalize on technological developments because they came from outside their specific industry. Surprisingly, firms holding a commanding share of their market are often among the last to foresee potential threats to their bread-and-butter products. As a result, market leaders often miss the opportunities that they themselves should have created.

The evidence supporting this proposition is overwhelming. Many of the biggest growth markets of the past few decades have been discovered by upstate or industry outsiders. Industry leaders have paid for their lack of insight, and in most cases, either ignored the threat or embraced forecasts of opportunities in innovations that flopped badly.

Typically, market leaders are complacent about innovations that affect their served markets. As a result, they fail to foresee the technological developments that will change their markets forever. They often turn a blind eye to new trends and focus intently on their current product. They do not perceive imminent threats to their markets as imminent or threatening. As a result, they leave themselves vulnerable to the attacks of new entrants, who seem far better able to foresee the direction of change in the industry than they are.

Remarkably, time and time again, in industry after industry, market opportunities have been more apparent to outsiders than to those with a dominant position in the industry.

The lesson by using a car analogy: Do your forecasting while looking out of the front window in an open-minded fashion, and not by looking out of the rear view mirror while driving backwards.