Strategy

It’s easy to think of strategy as a luxury: blue sky thinking about growth and investment for when times are good and cash is flowing.

But in the current economic climate, strategy is both important and more difficult than ever.

We are currently seeing unprecedented rates of change and levels of uncertainty in many industries. Many of our clients are seeing their markets turn down more rapidly that they have ever trended up. The particular combination of the financial crisis, volatile commodity prices and frightened consumers, is shortening the visibility horizon from years to months, or in some cases, weeks.

Good strategic analysis can help push this horizon out further. For example, a detailed and up-to-date understanding of what your customers really value – and what they are prepared to sacrifice – is a critical element in anticipating market change. Similarly, if you understand your cost position relative to that of your competitors, you can anticipate the level of price competition and your respective pain thresholds.

So now is the time to revisit your strategy. Remember that cost cutting is only part of the answer. A successful strategy will strike a balance between making tough decisions about size, shape and investment programmes, while preserving the ability of your business to pursue longer-term profitable growth. Above all, a downturn is an opportunity for the strongest business to steal a march on weaker or less agile competitors.

What questions should I ask?

• How will the downturn affect the different businesses in my portfolio? How deep is the trough, and what is the recovery profile?
• How will my customers' purchasing behaviour change?
• How flexible is my business model? Can I react quickly to changes in my business environment?
• How well do I understand our competitive position? Are my businesses in better or worse shape than the competition?
• What opportunities are there to steal a march on the competition? Can I use this downturn to my advantage?
• What rationalisation/optimisation strategies are open to me? (stock-keeping unit rationalisation, key account management, pricing, headcount, mothballing, capital expenditure, channel rationalisation?)
• How confident am I with the accuracy of our forecasting methodology? What is my visibility horizon?
• How is the current economic environment affecting my people needs?