By George Brown Jr.
As businesses look toward 2012, many are developing ambitious plans to achieve their growth and profit goals. In conversations with many organizations, I hear four themes: globalization, expanding capabilities, acquisitions and investments, and sustainability.
Globalization has been going on for quite a few years, but many firms are planning to elevate activity levels. They know most of the growth in their markets will take place in countries like China and India. They also recognize that new competition from abroad is emerging in their traditional home markets. Responding to both the opportunity and the challenge is a 2012 priority across industry after industry.
Many initiatives are designed to help firms expand from selling a product to becoming a solutions provider. Such initiatives will be oriented toward stopping the commoditization that has been occurring in many of their product lines with its adverse implications on prices and margins. Initiatives in this category often involve new service offerings and require stronger relationships with customers.
Acquisitions and investments
Responding in part to the strong balance sheet many firms have developed since the 2008-09 recession, they are actively pursuing interesting opportunities for acquisitions and investments. The acquisition concepts will create headroom for growth by expanding into adjacent product and market spaces. Many internal investments will be based upon opportunities associated with new technologies, such as the cloud and social networking, and others will respond to current-day challenges, such as security of the supply chain and information vulnerability.
Sustainability also is being emphasized in 2012 plans. Sustainability is now viewed as an economic concept. If you can use fewer resources or shift to less expensive resources, you can improve your bottom line. This gets the attention of the profit and loss managers within the firm.
All of these initiatives are responsive to the business environment of 2012. And all of them will pose major challenges for the firms implementing them because they will require changes to core elements of many firm’s business models in 2012.
In my research on implementing changes to a firm business model, I ve seen over and over that successful firms think about their external relationships as part of their “get-to-market” plans. These firms emphasize the importance of getting input from customers about possible changes, while suppliers and channel partners also can provide valuable insight.
But the best intentions don’t always translate into results. I recently heard the following story from an executive in a firm that specializes in high-technology instruments:
Our plan was to lower our overall cost by outsourcing design and manufacturing to suppliers in various low-cost countries. The potential for cost savings was real, but our plan had unintended consequences. In retrospect, we did not understand the value proposition that had previously allowed us to succeed with our customers. In the past, by manufacturing and designing the product ourselves, we ensured the design and quality of the products met our customers requirements.
After this firm implemented the business model change, substitutions and design changes were made by the companies to which they had outsourced responsibilities for this product line. Many of these changes were immediately visible to the firm customers. And, as a result, their customers soon concluded that this company no longer provided the value they had considered important. Some customers even recognized they could easily purchase a similar product directly from the same off-shore suppliers with minimal resources or risk on their part.
New business models
The lesson cited by the executive who provided this case study was simple. In his words:
We learned that business model changes always impact in many ways. A too-narrow focus, in this case on the costs of design and manufacturing, can yield adverse outcomes when the other impacts begin to surface. The team that saw the potential for cost savings on this product line failed to understand what had been valued by the customers who bought it. A significant level of business was lost as a result. The summary is simple: We failed to reach out to our customers and hear their inputs before we implemented this plan.
His story is all too frequent. In another case study, an executive provided a post-mortem to a failed initiative with the following comment:
Getting our customers and key business partners on board was obvious in retrospect. But we never included doing so in the implementation plan, and our implementation project took six months longer than we had expected, as we had to bring them on board on an ˜afterthought basis.
Experience after experience suggests there are few times when a change in strategy or in a firm business model doesn t ripple through to impact customers and key third-party business partners.
Involving customers and key business partners is not just about avoiding clashes. It involves ensuring that processes link correctly when they need to. It involves making sure that each party to a business relationship understands their own roles and responsibilities. It involves making sure the two firms are interacting often enough and at the right places to get ahead of problems and opportunities. It involves making sure that discussions are focused on the future, not looking in the rear-view mirror.
There is one other dimension to this lesson on involvement of key third-party organizations: Involve them in implementation planning, not just in the implementation plans. Many times, the vantage point of these business partners provides a perspective that isn t obvious to those in your own firm. Take advantage of their experience and insights. After all, they share a stake in the success of your plans.
We ve learned that strong leaders of implementation projects carefully think about the impacts of their plans on their firm customers and business partners. Then they bring them into the process and make sure both parties are aligned. The insights that can come from such conversations can ensure that your plans are well-aimed before you decide to fire.
George F. Brown Jr. is the CEO and co-founder of Blue Canyon Partners Inc., a strategy consulting firm working with leading business suppliers on growth strategy. See www.bluecanyonpartners.com. Along with Atlee Valentine Pope, he is also the author of “CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs,” published by Greenleaf Book Group Press of Austin, Texas.