Posts Tagged ‘growth’

LeisureEurope Case Study: In entering a new market, first decide “where to compete “, then “how to compete”.

Friday, July 20th, 2012

“LeisureEurope” is a major boat manufacturer that had been developed a leadership position in Europe for different types of recreational boats. In a period when the overall size of the boat market in Europe was quickly shrinking the company believed the best way to position itself was to enter the USA market.

Unfortunately the resources and the investments “LeisureEurope” made for several years to enter the USA market were not providing the results the CEO was looking for. Why did this happen?
The CEO asked Thinking Dimensions to indentify the main causes for the poor results and to support the company in implementation of a plan to properly enter the market.

The poor results were due to the following causes:

  1. LeisureEurope started launching products for the USA market without having a clear understanding of the customer needs and of the competition offerings
  2. The USA market was different from European markets:
  • The size and the complexity of the USA market was much higher
  • For the type of products offered by “LeisureEurope”, the concept of “leisure boat” as intended by the final user was very different
  • Certain types of recreational boats that practically didn’t exist in Europe, represented an important quota of the total market in the USA
  • The criteria adopted by the customers (i.e. the retailers) to select their suppliers of boats were different from the one adopted by the European dealers

In the first 2 months after the first meeting with the CE0, Thinking Dimensions helped “LeisureEurope” answer the following questions:

  • Which are the main competitors in the USA market?
  • Which distinctive capabilities or product characteristics could “LeisureEurope” offer relatively to the competition?
  • Which customer segment were actually willing to pay a premium price for these distinctive capabilities or products?

The results of the first phase of the project were very surprising for the CEO: it showed “LeisureEurope” was competitive in a specific market segment that has not been even considered for the USA.

In the second phase of the project Thinking Dimensions worked with “LeisureEurope” to implement the market entry plan focusing specifically on the market segment that had been identified.

5 months after the first meeting with the CEO the company was already generating a volume of sales (and margins) far above the expectations of the CEO and the management team

 

This blog post was authored by Diego Miglioranzi, Partner, Thinking Dimensions

Feel free to contact the author directly for questions about this subject.

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Posted in New Market Entry, Strategy |

The Economic Value of a Happy Workforce (Hint: 15.5%)

Friday, June 29th, 2012

In past postings, I’ve touted the value of “teamwork” in achieving company goals. That belief was based in part on my own experience as a CEO, recognizing that goals aren’t achieved through the dedication of productive silos! The way companies achieve growth goals is having cooperation and support across functional areas.

That reality has been integrated into Thinking Dimensions’ strategy implementation process and its critical component of holding employees accountable for living the basic beliefs that define for every company what “teamwork” looks like. A recent study has moved this fact from the “intuitive” to the “measurable”.

WorkplaceDynamics, a U.S. based research company, has tracked worker attitudes at over 7,000 companies in the last five years, 550 of which are public companies. Those public companies that scored in the top 10% in employee satisfaction have outperformed the S&P 500 index by 15.5%.

Stock Price and Worker Sentiment

The study found ” a strong correlation between stock price and worker sentiment on questions dealing with the company’s direction, execution and engagement of the employees behind the firm’s goals.”

All too often, particularly in larger companies, there is a disconnect between the top levels of the company and the people who are actually “doing the work.” Company leadership needs to monitor the temperature of the workforce. Feedback cannot be from “the top down”. The real value in feedback is “from the bottom up.”

4 Universal Components

Over the past years, as part of the Thinking Dimension’s strategy implementation process, we have asked CEOs and employees what the fundamental components of a successful company are. Their answers typically boil down to 4 distinct components:

1. Common goals

2. Everyone knows their piece of the goals

3. There is communication from the top down and the bottom up

4. Everybody works as a team

The first two points are easily understood and universally accepted as companies begin the implementation process. They are the big, tangible and fit into the business mode. The 3rd and 4th items are sometimes seen as “soft”. The reality is that having a workforce that works in concert and is getting and receiving feedback can create a competitive advantage.

But getting there isn’t just a matter of having a positive attitude or a memo to the troops. Creating the workforce that is aligned and committed to the company goals and each other, requires a structured, step-by-step process. A process that guarantees the goals and the teamwork aspect needed to achieve them get transferred from the CEO to the front-line management team and beyond.

Sustainable Advantage

As the study concludes, ” “having a healthy organization, in which workers feel engaged, valued and aligned with company goals, may be one of the last sustainable competitive advantages. If you’ve got a team that is enthused and rowing in unison, your reaction to shocks and setbacks will be more robust than somebody with a less healthy workplace.”

Smart leaders recognize that communicating with your employees and holding them accountable for mutually supporting one another is a smart investment…with a 15% return!

This post was authored by John Case, Partner, Thinking Dimensions Global

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Posted in Implementation, Strategy |

The P&L impact of understanding your competitive advantage

Friday, June 29th, 2012

To gain a competitive advantage normally costs a lot in terms of effort, resources and investments: therefore it is important to value your competitive advantage and understand what actions can be taken to protect or extend it. Often, companies do not know which are (if any) their competitive advantages and have even less knowledge on the effects of this competitive advantage on their P&L.

How do you measure the impact of your competitive advantage?

A Competitive Advantage is a specific (distinctive) company capability or competency that provides a superior return relative to your competition and can be validated through the eyes of your customer.  A distinctive capability is a competitive advantage only if it implies positive bottom line results (superior profitability) and higher top line performances (greater sales).

Measuring the impact of your competitive advantage means understanding to which extent your sales (and profit margins) are due to unique capabilities you are delivering to your customers. Customers are always the ultimate indicator of the value of your competitive advantage:  when a customer is willing to pay a premium price he or she has identified a unique capability you offer.

A premium price measurement alone compared to the competitors, however,  is not sufficient data for an evaluation. Once you have validated your competitive advantage, and the value per single opportunity (premium price), you need to estimate the potential market in terms of number of clients that have the same needs and therefore are willing to pay for your unique solution.

What is the impact of properly managing your competitive advantage?

An international B2B company we are working with for several years has a strong sustainable competitive advantage which management is aware of particularly from a technical perspective. Previously, it was clear where the performance of this company’s proprietary solutions offered improved performance relative to competitors. What was not clear to the management (and to the sales force) was that target customers were willing to pay a large premium for this improved performance.

The approach of the company was to begin to attack different industries with the same proposition. In this way the sales force was able to sell some products at a premium price but often they were beat by the competition. This was a case where the customer was not the right target (not high emphasis areas of the strategy), and therefore not willing to pay for a specific and unique performance they did not require. This sales inefficiency was damaging the financial performance of the company: they were certainly not getting any benefit even though they had a  “well known” competitive advantage.

Working with the management and finding the correct target for their products- considering who was willing to pay for their competitive advantage- the sales force became  focused on the “new” emphasis target customers:  Top line results increased by a 30% CAGR (calculated over a 3 year timeframe) and EBITDA increased from 5% to 23%.

 

Luca Girotto This post was authored by Luca Girotto, Consultant, Thinking Dimensions. 

Luca is currently based in the Thinking Dimensions NE Italy office and works with our B2B customers around the globe.

 

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Posted in Implementation, Strategy |

Managing Competitiveness Through Product Development

Saturday, June 23rd, 2012

While product development is not the only contributing factor influencing a company’s competitive position, the growth and profitability driven by products (or services) speaks volumes of an organization’s prowess to meet customer “needs or wants”. A well crafted Product Development (PD) process provides insight on how companies view and understand their internal and external competitive environment to ensure the right prioritized product mix is in place to remain competitive. The prioritization of products to be developed helps shape the future competitiveness of a company.

Prioritizing product development starts with the formation of comprehensive sets criteria including:

Strategic Alignment – Will this product enhance, support our strategic objectives? This is predicated on the company having a clear understanding of the markets they serve relative to the products they offer. Within the defined strategic timeframe of a company, not all markets are equal in business focus, resources allocation or the proposed introduction of new, improved or modified products. Strategic plans are about growing the company and profits sustainably. Proposed products are given higher emphasis “weight” if they align strategically to important markets areas.

Key Capabilities – What is the technical complexity required to develop this product? This is a critical question relative to the competitiveness of an organization. It is really inquiring about the people and process skills necessary to develop and produce this product: do they exist in the company or need to be developed/acquired? This creates a decision opportunity for management on how they will address and prepare for their future technical competitiveness.

Core Competencies – Does this product fit our core business competencies? Through the prism of customers, suppliers, or competitors, most leading organizations excel at some aspect of their business – innovative product engineering, low cost production, or product/customer service. It is what they do well, and it provides a competitive advantage. Management must determine if the product or service fits within their core competencies relative to the market, product realties, or seek ways to enhance their core competencies to be competitive.

Customer Relations – Does this product improve, maintain, or degrade relations with our customers? This is a complex question that can best be answered relative to the particulars of the product being offered and who constitutes your customer base – general public, suppliers, government, etc. New products must be assessed through the eyes of the customer and on the existing strength of the relationship. For example, when Coca Cola introduced “New Coke” several years ago, they misunderstood the customer acceptance of the legendary Coke product being changed. When complaints poured in, the strength of the customer relationship afforded Coca Cola to quickly withdraw the product and avoid any negative competitive long-term impact to their business.

Costs – What is the investment and the ROI if this product is developed? This is the basic cost/benefit analysis expected of any new product. Again it is a direct link to the company’s strategic objectives relative to profitability and growth. In a world of competing resources, companies must prioritize the right products to develop in order to maximize their financial goals and avoid excessive operational costs that reduce their competitive standing.

Risks – What are the issues and concerns associated with developing (or not developing) this product? Aside from the normal legal, regulatory concerns that any new product may have, it is also the “lost opportunity” in sales or market entry that can directly impact a company’s competitiveness if the product is not developed. All risks need to be assessed with preventive and contingent actions be planned and applied to mitigate potential problems.

Recap – Competitiveness enables high emphasis products and services to be produced for high emphasis markets strategically targeted to be better served. Product development projects need to be weighted, ranked, and prioritized relative to each other per the following criteria:
1) Strategic Alignment – does this product support our business goals?
2) Key Capabilities – do we have the people and process skills to perform?
3) Core Competencies – can we exercise our competitive advantage?
4) Customer Relations – are we “positively” addressing a customer need/want?
5) Costs – does this product financially benefit the company in a timely manner?
6) Risks – what are the potential problems and what can we do to mitigate them?

The author of this blog post is Keith Pelkey, Partner, Thinking Dimensions Global

 

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Posted in Implementation, New Market Entry, Operations |

Align your Executive Team to How the Five Forces Impact Competitive Advantage (i.e. Profitability)

Friday, June 15th, 2012

A firm’s competitive advantage is the unique and valuable combination of capabilities a company exploits to deliver higher profits relative to the competition. A company’s competitive advantage can only be confirmed if the customers truly deem it unique and valuable – and pay the premium. The definition is very intuitive to most executives – as they understand that price-cost=profit and they are either getting more, less, or a parity part of this equation. However the danger we observe on many occasions is that the dialogue on competitive advantage becomes too internally focused without testing the external factors that effect the three components of this Price-Cost=Profit relationship.

 

To enhance your management teams lateral thinking and cultivate strategic alignment we suggest you integrate the P-C=P discussion with the well known – but either, over, under or misused Michael Porter’s Five Force Framework (http://en.wikipedia.org/wiki/Porter_five_forces_analysis) in a two step process.

One, ask and capture the answers they have to the following questions.

  1. What impact do Substitutes have on Price? Cost? Profit?
  2. What impact does Threat of New Entrants have on Price? Cost? Profit?
  3. What impact does Buying Power have on Price? Cost? Profit?
  4. What impact does Competitive Rivalry have on Price? Cost? Profit?
  5. What impact does Supplier Power have on Price? Cost? Profit?

 

Two – then show them how the five forces relate to the P-C=P cause effect relationship see below) and have them evaluate your own firm’s situation with the new insights they have uncovered armed with this new visual on how it all fits together. They quickly see the critical factors they can and cannot influence and importantly the impact to the business.

Three key benefits emerge from this management dialogue

1. It forces your management team to think externally about key dimensions that impact industry profitability and helps to guard against insular thinking.

2. It provokes them to focus on the causes of competitive advantage and discern if you really have one rather than the effects ( profitability) which is an outcome.

3. It simplifies, connects and makes actionable important strategy thinking tools that once seemed academic

This blog post was authored by Tim Lewko, Partner, Thinking Dimensions

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Posted in Implementation, Strategy |

Create a True Competitive Advantage to Grow

Friday, June 15th, 2012

In the past few years, cost cutting has been at the forefront of many company’s priorities. Whether in the form of cutting employees, outsourcing, reducing marketing expenses or a myriad of other options, reducing costs has been the de facto strategy for a lot of companies. Those same companies now are faced with the reality that cost-cutting your way to success is a very slippery path, most times leading to a dead-end. As a result, many of those same companies are now seeking ways to generate real top-line growth, now that they have created a streamlined cost structure.

The first question they need to honestly answer is….”what is our competitive advantage?”

 

What is it about our company that we do better than any one of our competitors?

Or put in another way, why do our customers choose us over our competitors?

 

More often than not, the answer is “I don’t know”. That may sound like an exaggeration, but its not. The fact is, during all that cost cutting activity, the investments into what made your company unique, your competitive advantage, may have gone away.

In order to grow, you need to either

1.recreate what you had as that competitive advantage, or,

2.decide what your new competitive advantage will and make the investments necessary to bring it to reality. This is often referred to as “pick it and be it.”

 

Understanding your true competitive advantage, and crystalizing it with everyone in your company, leads to a key criteria for decision making on a daily basis.

Does a planned investment reinforce your competitive advantage?

Does a new product help reinforce your competitive advantage?

Does a new hire help reinforce your competitive advantage?

 

If you fall into the group that really doesn’t have an answer, don’t panic. Its not to late….yet.

 

When it comes to competitive advantage, “pick it…be it…and grow.”

This post was authored by John Case, Partner, Thinking Dimensions

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Posted in Implementation, Strategy |

There are Only Two Doors to Look Behind to Find New Avenues of Growth

Tuesday, April 17th, 2012

Every CEO or senior executive drives homes and plays mental gymnastics in their head wresting to find next big growth opportunity for their business. In fact – they should be doing this because this is a significant part of what they get paid for. But are they (are you) searching in the right places to find profitable and strategically compatible areas for growth?

The answer we hear from senior executives is somewhere between yes and NO. Yes – I am searching – and No I am not finding the opportunities that make sense for my business. This response along with the brooding reality that the global economy is fragile, competition is fierce and our company is too big or contains some unique trait of non-growth DNA baked into it are all common responses. Maybe a different perspective or lens to look through for growth is needed?

The search for growth – that is profitable and compatible – begins by looking behind only two doors.

Door #1 – The Products Offered Door – this path says to examine the very core products of your business….the ones that you really are good at and are profitable at: determine new customer segments, industries or geographical regions that have the same need – but do not yet have the distribution of your product. Any international growth is really a product offered tack. Think Coca-Cola when they first started – Where can we sell our basic product —and keep asking where else and they did to the tune over 200 countries. Don’t get caught in the response – we already tried that region or that customer base and it doesn’t work. You have not dug deep enough in defining the real need your product satisfies, really distilled sharp customer segments or both.

Door #2 is Markets Served. This avenue says that we really have a strong franchise or relationship with a customer group and we really understand their needs. So what additional unmet needs do they have that we could readily leverage our relationship resulting in profitable growth. Some may call this brand or product extensions as a label – but the deeper thinking and value is, matching the intimacy in understanding your segments to the abilities your company has to deliver a modified or new product.

To begin to alleviate your angst for the next wave of growth consider trying the following 3 steps ( as a starter):

  1. Outline your key product segments – and define the need they serve
  2. Outline your market segments- and attributes that make them segments
  3. Determine if your company’s capabilities match up best with a product to more places (PRODUCT OFFERED) or more products to the same places (MARKETS SERVED)

Do this strategic examination on a piece of paper or with your key executives and you will be surprised to find areas of uncovered areas of opportunity – along with the strategic rationale you will need to explain to the board why we are growing this way. The Caveat: You can’t grow both ways as your capabilities and capacity to growth both will fracture.

If you are looking for a real-life and relevant example consider the recent announcement by IKEA on April 17, 2012. Their announcement to “enter” the consumer electronics market with products developed with China based TCL Multimedia is a classically crafty example of a MARKETS Served growth opportunity. They saw an unmet need – removing clutter of cords and remote controls in livings rooms – and will now offer customers an integrated solution – not only from a home perspective – but from a one stop buying perspective. Even with Revenue of more than 30 Billion Euro – they are still asking the products offered or market served question to find growth. The funny thing is…most of the reporting on the story will probably say “why did they wait so long the growth opportunity was obvious.”

If you company has not examined – deliberately examined- and compared (with visible and clear criteria) door number 1 and door number 2 – your drive to work with continue to be plagued with rightfully energetic thinking but less that actionable results.

This blog piece was authored by Tim Lewko, Managing Partner Global Strategy Practice, Thinking Dimensions

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Posted in Strategy |