Continued from page 1
In step 3 you assess your customer. This is a key step, get it wrong and you may not be able to recover. In fact, customer value proposition and how it translates into growth and profitability for company is foundation of strategy.
Start by asking your self a couple basic questions: To achieve my vision, how must my customers look? Who are target customers that will generate growth and a profitable mix of products/services? Next, ask yourself what is value proposition which defines how company differentiates itself to attract, retain and deepen relationships with targeted customers? There are basically 3 value propositions or disciplines that you can choose from: 1.Cost leadership – In this discipline you choose to provide best price with least inconvenience to your customers. 2.Product leadership – In this discipline you offer products that push performance boundary (i.e. newer and better than competitors). 3.Best total solution – In this discipline you deliver what customer wants, cultivate relationships and satisfy unique needs. In this case, you may not be cheapest or newest, but total package you deliver to customer cannot be matched.
In order to help you determine which of these value propositions you decide on, you may want to work through a value chain: 1. Determine your customer priorities 2. Determine channels needed to satisfy those priorities 3. Determine offering (products) that are best suited to flow through those channels 4. Determine inputs (materials/knowledge etc) required to create product 5. Determine assets/core competencies essential to inputs (ask yourself, in order to satisfy my customer at which processes must I excel? For example, product design, brand and market development, sales, service and operations and/or logistics).
4.Finish business model
The business model shows how all elements and activities of a business work together as a whole by outlining how business generates revenue, how cash flows through business and how product flows through business. By this time, you should understand revenue capability of business, how industry works and your competition, who you customer is, what you are going to offer them and how you are going to offer it. By drawing a flow chart that shows how these activities are linked together you will understand how business activities flow to generate projected profit, which you determined in step 1. This is also a good step to see if something is missing in your analysis.
5.Construct business plan
By time you get to this step most of your work is done. If you are looking for financing, a formalized plan will have to be completed. If you do not need financing, simply make sure preceding tasks are documented so that they can be reviewed and changed as time progresses (strategy is an ongoing process, not a one time task).
6.Learning and growth perspective
In this last step, you ask yourself how/where organization must learn and improve in order to become and remain successful. For example, determine skills, capabilities and knowledge of employees needed, technology needed and climate and culture in which they work.
Jeff Schein is a CGA and offers consulting and advice in the areas of business planning, business modeling, strategic planning, business analysis and financial management for new ventures and growing small businesses. Visit www.companyworkshop.com or mailto:jeff@companyworkshop.com