One of the worst things that you can do is to engage in the planning process and base strategies on a flawed set of assumptions.
8 Key Strategic Questions is a tool for strategic and business planning reviews designed to get you thinking differently. Some of the questions may not be applicable in all circumstances e.g. process groups probably do have competitors, although they do have customers, changing market dynamics, etc.
1. What is the market? (Past, Now, Forecast)
- How do you define your market worldwide? Is it defined by technology? End-use application (products offered)? Customer type or characteristic (market need)? Method(s) of distribution?
- How big is the worldwide market in which we compete? How has it grown? How is it expected to grow? What drives the growth? Which geographical area is growing fastest?
- Which segments do we currently serve and why? Geographic? End-use? Price-point? Product performance? How have the segments (served and unserved) been growing? How are they expected to grow?
- What trends are affecting this market today? How are these trends impacting the overall market and the segments we serve?
- In what cycle of development is your market? (Start-up, early growth, maturity, decline).
- What are the key characteristics of your market? Concentration? Fragmentation? Oligopoly? Hostility?
2. What is the competition? (Now, Past, Forecast)
- Who are our major competitors? What is their share of market? Do they play in all segments? Where are they strongest? How has their market share changed over the past five years By segment?
- Do our competitors manufacture similar materials to our own? Did they develop their own technology? What are their facility plans? What are their technology plans? Are they a leader or a follower?
- What are the competitors’ manufacturing economics? Are their plants small or large? Flexible/inflexible? Are they positioned to capitalize on trends in the industry? To drive trends in the industry to their advantage? What is their pattern on bringing on new capacity?
- Is this market subject to competing materials? What materials compete? What materials are expected to compete in the next five years? Do these materials have large competitors or are they fragmented? What are the technology and economics of the competing materials? What are the performance attributes of the materials? Is their penetration of the market drive by specific applications? Is their penetration of the market driven by specific applications? Economics of the end-user?
- How does the competition market its product? How do they price? Are they a price leader or follower? Are they engaged in market development? Which segments? Have we noticed trends in their level of marketplace activity?
- Is any of the competition adding capacity? If so, where? Does this pose a threat? How? What are their economics for new capacity (both incremental capacity in existing facilities and greenfield)?
- What key competitor actions have been unanticipated in the past?
- How global are our competitors? What competitive advantages or disadvantages does their global network give them? If they are regional or national, do they have the capability of becoming global?
3. What are your competitive advantages?
- Are we the cost leader (including production, opex and capital utilization) in our major market segments? Are we cost leader at each level of the cost chain? Manufacturing? Distribution? Marketing and Selling? Are our customers’ costs lowest when they do business with us? Are their profits highest when they do business with us?
- Are we the technology leader in our major market segments In our rate of development of new products or penetration of new markets? In our rate of commercialization?
- What are our competitors’ costs? How does their technology compare with ours? What about their total delivered costs? What are the customers’ economics when they do business with our competitor?
- Have we effectively differentiated ourselves in our market segments? Have we done this through brand? Service? Product design/features/technology? How does our differentiation translate into improved profitability?
- What barriers exist to allow us to sustain our cost or differentiation advantage? Do we have proprietary technology? Economics of scale? Unique distribution? Government regulation?
- What switching costs exist for our customers? How might our competitors try to lower these switching costs? How can we lower the switching cost of our competitors’ customers?
- What strategic shifts have taken place in your industry over the last five years? Have they eroded or strengthened our competitive advantage?
- What changes do we expect over the next five years? How will they potentially impact our competitive advantages?
4. What is your mission, objectives and goals?
Goals, Objectives (market share, revenue growth, profit growth, cash flow, geographic, technology position)
Goals and objectives are definitive and results oriented, derived on strategic assessment and reflects what you must do to achieve your Vision. Accomplishment of the goal should be measurable.
- Should we grow, maintain or harvest this product segment? / CUSTOMER segment? / geographic segment
- If we are going to grow this segment, what is your growth goal – market share, revenue, EBITDA, cash flow?
- Do you need a partner or strategic alliance to reach your goals?
- What sustainable competitive advantage is your growth plan built upon?
- If the goal is to maintain your product segment, how will you make sure that you are following a maintenance and not harvest strategy?
- Why is strategy maintain as opposed to grow?
- Which criteria should be used to measure maintenance?
- Do we need to continue to own this segment? Should we joint venture it? With whom? Should we sell it? Potential interested parties?
- If your recommendation is harvest, should it be a slow harvest or a divestiture?
- Does your business strengthen any of your sustainable competitive advantages? If so, how?
5. What are the key strategic programs recommended to achieve your mission and goals?
Strategies reflect most efficient and effective road to achieving goals. They should show best practices and innovative thinking.
- What are the key strategic issues in your segment?
- What strategies will be implemented worldwide?
- What strategies will be implemented in specific countries or regions? End-use customers?
- How will technology flow between countries?
- Do we want to have one face or multiple faces to the customers in different geographies/based on product mix, quality, technology level?
- What growth opportunities exist worldwide and in each region and how will these be achieved?
- What trade-off decisions between opportunities in this segment have you made?
- Are there support products we must develop to implement a strategy?
- Where are your centers of manufacturing, technological excellence (development) for this segment? Does one region have the lead in development? If so, how will the needs of the other regions be supported?
- How will you encourage the development of different products based on the different needs and cultures of each region?
- What support do you need from the staff groups to implement your plan? (Finance, Human Resources, Sales, Marketing, Sourcing, R&D, Ops, Engineering, Legal, others)
- Does their need to be a high level of integration between the plan for your segment and another segment?
6. What are the resources required for the recommended strategies?
- What capital needs to be invested in each year?
- What R&D programs need to be started or completed?
- What training programs, new skills, etc. Are required from our employees?
- What support is needed from outside consultants?
- What resources are required from each functional area?
- What are the returns from these investments?
7. What are the risks in your plan?
- How much of your sales/earnings growth is tied to increases in prices?Volume?
- What is the impact on your financial results if price and costs are 1% higher or lower than you anticipate? 5%?
- How much of your plan is dependent on the economic environment?
- What change in customer need puts your plan at risk (or other customer actions)?
- What is the supplier fitness-for-use criteria to which you are most sensitive?
- Which competitor is best positioned to block your strategy?
- Which competitor has a competitive advantage which would make him better at implementing your strategy?
- How will we know if your strategy is not working? What is the lead time for major capital and strategic decisions?
- What technological breakthrough is your strategy dependent on?
- What technological breakthrough puts your strategy at risk?
- What critical employee skills is your plan dependent on? What training/hiring plans do you have in place to meet these needs?
8. What is your track record/credibility?
- If your business does not have a solid track record of performance, what critical success factors will lead to a different performance in the future?
- How do you want your strategy evaluated? Measured?
- Which elements of your strategy should be included in incentive compensation? Over that time period?
If you really want to succeed in your planning process, ask yourself this one simple question
If you were to join your competitor’s business tomorrow, what would you do to attack the business you worked on yesterday? What are the three most dangerous things competitors can do to you (can be from a product perspective, customer perspective, market access perspective, technology? What can you do to protect/immunize itself, offensively succeed?