• The Strategy Challenge
    The Strategy Challenge

    Many senior management teams are grappling with deciding how best to balance the multiple and often competing strategic considerations for their business. These may include shareholder value creation, ESG, decarbonisation, growth, reinvestment rate, dividends, business scale and scope, optimal offerings, customer segment priorities, cost structure, business footprint 窶ヲ just to mention a few. Clearly all of these things are important in one way or another, but how do management teams and boards consider them in the context of the future business strategy?  Put another way, what is the best strategic planning approach and process to address these many competing considerations and achieve the best overall outcome?

    Since the creation of formal approaches to strategic planning in the 60s and 70s by the likes of Michael Porter, strategic planning has been repeatedly recognised as a core competence and the foundation of critical decision making and sustainable value creation performance.

    Like many other things in the world, good strategic planning has become a lot more complex over time and now requires fresh approaches. Michael Porter窶冱 foundation principles remain true but businesses today are unlikely to be successful if they rely on simply being lower cost, or having a premium offering, etc. Today, business strategies need to be multi-facetted and typically require multiple business models, as well as multiple customer value propositions directed at multiple specific customer segments through different dedicated channels. This is true across a broad range of industries, including telecommunications, healthcare, FMCG, industrial services, manufacturing, financial services, building products, transport and logistics, retailing, and others.

    Having had the opportunity to assist the senior management teams and boards of many large scale and complex businesses across a broad range of sectors over the years, Mainsheet Capital has developed the following core principles to guide the development and implementation of the optimal future strategy. In our experience the ideal strategic planning process should:

    1. Have long-term sustainable shareholder value creation as the overall measure of success (the overall governing objective).
    2. Ensure the measurement of long-term shareholder value creation includes the consideration of all key ESG aspects as these are critical foundations of long-term strategic and value creation success (this can be done using a value driver approach).
    3. Be focussed on the key current and expected future issues and opportunities 窶 not all things are of equal importance at any time, and so depth in the key areas is better than a broad and shallow approach (avoid following the same annual templates).
    4. Recognise that most businesses are a 窶湾ortfolio窶 of one type or another (e.g. by industry subsector, or by capability, or by customer value proposition, etc.) and so knowing the expected future market attractiveness, competitive position and value creation performance of each element of the portfolio is an essential starting point to strategic planning, and highlights where to focus time and investment.
    5. Have a well-defined customer segmentation approach based on a deep understanding of customers窶 needs, the relevant customer value propositions by segment as well as appropriate channels to market / service delivery types.
    6. Include both corporate strategy (top down) and business unit / operational strategy (bottom up) considerations.
    7. Have a clear framework to assess and compare the long-term strategic, financial and risk impacts across the many potential initiatives and potential new investments (the internal capital market mirroring the disciplines of the external capital market).

    While it might appear that there is a wide range to cover, the key is to focus on the most impactful, as not all things are equally important at any point in time. The plan can also be built over several years as different aspects of the business portfolio change at different rates. Our final observation, without appearing too self-interested, is that gaining strategic planning support from an experienced third party can bring valuable external perspective and experiences, as well as expert resources and process efficiency and focus.

    If you would like to discuss the specific strategic planning context and needs of your business, please get in touch here.