Warning! This has nothing to do with cloud computing, which is a subject for another day and another writer, we hope. It is about dealing with reality in a sometimes surreal world.
Time was, and maybe still is in some quarters, that strategies were the purview of strategists, an elevated order of beings, held in awe by senior executives in corner offices and in contempt by the poor devils in the basement who had to make the dreams of those disconnected from reality come true.
Remember the fad, just a few years ago, that produced statements of Mission, Vision, and Values for organizations great and small? Terrific concepts, to be sure, and no doubt valuable to those pioneers who were authentic about them. But they quickly degenerated into what might be called "word piles," all sounding about the same and generally devoid of plain-spoken meaning that might be accepted and adopted by real people.
Happily, the day is largely past when people who said "Harrumph" frequently produced elegant (and bound) strategy statements that occupied prominent spots in CEOs' bookcases. Of course, they were little read, and even less revised, and began to lose value about a week after publication.
Is anybody driving this bus?
With all that complaining out of the way, we must recognize, though, that there's little point to process execution without strategic context in any business, and certainly in the realm of logistics and supply chain management. No organization, particularly in a globally competitive environment, can simply careen from point to point, from event to event, reacting and progressing, halfway between lost and adrift, tacking and jibing toward an unanticipated destination.
So, strategy has got to provide, direction, targets, and vision. How do we get there from here? Easy to say; hard to do.
Start by forgetting the elegant strategy document and focus on simple, clear vision and mission statements that actually mean something. Then exercise strategic management. (See what we mean by "hard to do"?)
Clarity in strategic expression
Consider the difference in intent and impact in these two statements:
- "We aim to exceed customer expectations – consistently."
- "We only do one thing, and we do it better than anyone else!"
The first came from a multi-billion dollar diversified communication and technology company; the second, from a small medical billing company. In that context, which one sounds and feels genuine—and focused? In general, we favor open promotion of a strategy statement to management, associates, customers, and suppliers. But there are times when an underlying strategy must remain confidential.
Some strategy examples
Strategic objectives and directions profoundly influence—or should—how an enterprise is operated. Think about options in strategies for growth, marketing, and resilience.
• Growth. If Company X takes the tack of pursuing growth by being the lowest-cost provider in its market (never mind the issue of top line versus bottom line growth) and Company Y intends to grow by providing exemplary quality and service, their processes, metrics, and day-to-day management focus will be radically different. We call this linkage "connectivity."
Either of these strategic approaches might also include floors or ceilings for growth, with one aiming to be the largest company in its space (whether in volume, number of employees, retail locations, distribution network, etc.), and another determined to stay small, "sticking to its knitting," and continuing to build a quality reputation (and margins).
Once again, processes and management actions will be different. The differences get magnified if the growth strategy includes or excludes a global presence. And if the growth objective is to lead in innovative changes, processes will be different yet from the low-cost and the transaction volume-driven providers.
• Marketing. There are a few variations on the theme of generalist versus specialist. Companies can elect to be functional specialists, industry specialists, or geographic specialists. Similarly, one might decide to be a generalist in dimensions of functionality, industry, or geography.
A generalist strategy can usually be publicized for positive effect. A specialist strategy might be impressive within a selected community of prospects, but could lose business opportunities outside that targeted circle. In other cases, companies could decide to concentrate on handling a few large customers (and handling them extremely well). The downside is that any customer loss, would, by definition, be a major loss. Those companies that limit reliance on one or a few major customers can spread their risks, but could be eliminating sizable upside potential for new business with a larger customer.
• Resilience. Although not ultimate corporate strategies, there are sub-strategies—or policies—that are essential to long-term success in consistent strategic execution. We began to classify them as "resilience" following Yossi Sheffi's work in The Resilient Enterprise. Sometimes referred to as "contingency plans," they are more robust, comprehensive, and imaginative than old-school contingency planning. This area is often neglected because of our incurable optimism—taxes may be certain, but death is optional in the view of most North American executives. Examples include restrictions on the number of managers who can travel together, the value of inventory in any one location, over-dependence on a single customer, and alternative sources of supply for key products, components, and materials.
There's more ...
Some organizations deliberately use one business component to advance the interests of another. These strategic decisions are generally confidential, because they imply second-class status for the immediate business unit—and could easily turn potential customers away.
For example, some logistics service providers might want to use brick and mortar facilities to support their real estate interests. Others might use distribution operations as a foundation for supporting transportation assets. There's absolutely nothing wrong with these kinds of optimization efforts, but they can impact the judgments of potential customers.
Other sub-strategies ought to be widely publicized:
- Commitment to the acquisition, retention, and development of talented staff
- Authentic inclusion of differently-abled individuals in the work force
- Serious cultivation of value-adding diversity in the management and associate components of the workforce—and in the supplier base
- Adoption of aggressive and advanced quality and performance programs
- Development of long-term business relationships with customers and suppliers
- Profit-sharing with community enterprises: schools, food banks, etc.
- Employee ownership opportunities
Others might not be quite so overt, such as intentions to remain or become union-free. But it's important that many of the sub-strategies eventually link to elevating supply chain performance, e.g., in cost, in perfect order performance, in quality, in cycle time.
And don't forget the development of 21st century sourcing and procurement practices to build a stronger and more compact supply foundation.
And measuring success?
Most every strategic initiative can be evaluated with metrics—consistent and continuing measurement—in, for example:
- Growth, in whatever dimension: volume, revenue, profits, new patents, and so on
- Quality, in selected and relevant activities or outcomes: order fill rate, fulfillment cycle time, inventory accuracy, etc.
- Cost, expressed in various comparatives, e.g., as a percentage of revenue, compared with budget, per unit shipped, versus competitors
- Value-adding services offered, with associated revenue
- Market penetration in targeted verticals
- Revenue (and/or profit) distribution among customers or industries
Reiterating the obvious
In summary, the strategy is not a notebook on the shelf or a plaque on the wall. The strategic management process(es) answer the question, "Where's the beef?"
When you've got a clear vision, difference-making targets, and logical strategic initiatives under way, you're on the path to making the company become what it wants to be when it grows up.
Harrumph.
