I’ve been in the industry over 40 years (yikes, I said that out loud!), and over that time I have created numerous strategic plans for businesses large and small. One thing I have learned that leads to the most success with the least stress – regardless of business size – is to focus on controlling the variables you can, and setting aside those you cannot.
Particularly in times of economic turbulence, many market variables are moving targets not under your control. So in my experience with planning, it’s best to start with solving the things you can actually solve for, then work on the more undefinable ones after.
The first area you can control is how well you build out a robust understanding, or as I like to call it, “what we believe to be true.” Do a deep dive into the dynamics of the market, paying attention to recent trends and triangulating forecasts from numerous sources to understand what the future will probably look like. Study the projections in new construction, R&R or multi-family down to specific geographic regions. If you are doing long-range planning, look at trends like population shifts to assess where housing will be needed in the future, or areas expecting declines. Also research and consider building practice changes or upcoming codes that could impact your products.
Most importantly, don’t forget one of the biggest strategic planning misses for companies: deeply understanding each segment of their value chain. Many companies understand their primary customers – the ones they have a financial relationship with – but they typically know very little about customers further down the channel. In the building materials industry, these are the people inspecting the jobs, or selling and installing (contractors) and using the products every day in their homes (homeowners). They are the audiences that will help influence the next generation of innovations.
Speaking of which, most companies focus on competitors who make the same products they do. Don’t overlook emerging technologies that may become future competition (you know, the “other” slice on the category pie chart). Sure, they may seem small now, but this is exactly how many innovators disrupt the market. Waiting too long to take them seriously can cost you in the long run.
While you can’t plan for everything that might happen, there are certain things history teaches that you can plan for accordingly. For example, according to the Brevet Group, the average American company loses more than 10% of their clients per year (due to many factors). So, if your plan includes some level of growth, be sure to bake in some losses that you’ll need to make up. Also account for the capacity needed to achieve your anticipated growth, and the contingency plan if you encounter operational issues that impact your capacity. Do you have toll manufacturers already qualified in the event you need to use their services? Do you have spare manufacturing line parts on the shelf for those key parts with long lead times if a line goes down?
You can’t control the weather, but you can prepare for the impact it may have on your business, including opportunities it may present. For example, in areas prone to storms (e.g., hailstorms for roofing or siding damage), make sure you have larger inventories of relevant products in warehouses or on consignment at customers. The extra carrying costs are pennies compared to the lost sales opportunity of not having material immediately available when needed.
Growth has been a part of every one of the strategic plans I have been involved with. Share growth. Market growth. Profit growth (the most important). But always keep in mind your competitors are planning to grow, too. The bottom line is someone is going to lose share, and the goal is to make sure it’s not you. The way to do that is to have a purposeful and tested strategy.
Never forget an essential part of strategic planning is to not only execute YOUR strategy, but also to predict and be ready to respond to how competitors may react. This takes scenario planning, and it is baffling how few companies actually know how to conduct it.
From my perspective, true scenario planning involves putting together a unique business strategy and then testing it against what you believe to be true about how your competitors do business and therefore how they may react to certain situations. The idea is to bring together people to play the roles of your key competitors. It forces you to deeply assess all facets of your competitors’ business – well beyond your sales reps’ POV.
Getting the most value from these sessions requires significant preparation, uncovering insights about your competition, such as:
A new plant permit in a certain geography
CAPEX for a new operations line in existing plant
A new product launch, or a test and learn happening quietly in a market
A code they are pushing that doesn’t make sense
Understanding why certain regions/customers/products are being eliminated
You’ll also want to understand your competition’s capacity utilization and where they might want to take on growth. And probably most important, look at the senior leadership’s mindset in their past and current companies. Do they have a history of managing to profit or trying to grab share by any means? If it’s public company, what have they stated on analyst calls about their future intentions?
All this will help you determine how a competitor will potentially react to your strategic plan in their market.
As with any problem-solving in life or business, beware of making thing so complex in your head that you end up in “analysis paralysis.” This tendency to get frozen in thought can make it difficult to take any meaningful forward action.
If a strategy has several components to consider, don’t try to solve all of them at once. You likely won’t be able to solve any of them well, if at all. Take the ones you can control and solve for them first. The rest may not turn out to be as important to the big picture, or the solutions will become more obvious as other pieces come together.
Take your next leap in business strategy. Contact us to learn about our Scenario Planning Workshops and how we can help you identify opportunities amid uncertainty.
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