Can You Future Proof Your Business By Making The Right Strategic Decisions?

By | July 22, 2010

In our work it’s fascinating to see where businesses have ended up and where they are thinking, or not thinking, of going. All businesses need to periodically reinvent themselves, to find a new direction; if they don’t, they wither and die.

Iron Mountain is a world leader in Data storage. You may remember the fantastic free publicity they received when Lehman Bros went bust and ex-employees were photographed carrying out their belongings in Iron Mountain boxes. This business grew out of a mushroom farm in 1920s East Coast America. Herman Knaust needed to expand his business so he bought a dilapidated iron ore mine to grow more mushrooms. By the 1950s this idea had run its course so used his ‘Iron Mountain’ to securely store public and private records. The rest is history.

Nokia began life as a 19th century paper and wood mill. It then moved into rubber and, through circumstance, got involved in early telecommunication in the 1960s. It finally made a strategic shift into becoming a pure telco business in the 1990s.

Some would argue Nokia is at another inflection point in its long history. Unless it calls the Smartphone market correctly it could become an also ran as it continues to lose market share and brand leadership to Apple, Samsung and other Far East competitors.

Today, many other organisations are at their own strategic inflection points. Do they carry on as before, trying to optimise further their existing business model? Or do they take a radical departure away from what got them here, to something that might get them to a viable, more profitable future?

What are the two business obstacles in making a strategic shift?

One is a people issue. A lack of vision, combined with being in denial is a fatal C-suite combination. Having two feet firmly in the past, means you are not moving forward. Unless someone has the courage to firstly challenge the current business orthodoxy, and then drive their point of view through to big decisions being taken, the business will continue to drift.

The other is an economic issue. There are two common financial symptoms of businesses that are at their strategic inflection point. The first is that they may be very profitable. Often a mature marketplace with a highly evolved operating model, with fully written down investment is highly cash generative, and the Board have got used to turning that cash into profits, bonuses and dividends. When the heretic makes the cry ‘We need to (expensively) change’ the answer comes back ‘Why? We’re doing great!’

The second is the death of a thousand cuts problem. The business keeps having bites taken out of them by (often) new, upstart competitors, none of them fatal, and no one competitor takes them head on, but slowly the business is drained of its future health. Short termism becomes the natural order, the occasional serendipitous win promoted as a ’turning point. ’

One of our favourite jokes is ‘When you come to a fork in the road, the best decision is always to take it’ .

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