Strategically are you leading ahead of the curve of behind the curve?

For a Managing Director or Chief Executive Officer, knowing where your business sits within its market is an important first step in leading it to where it needs to be. Where you are today is the result of action taken years before. For leaders' determining where they want their business to be is about deciding where a business is best positioned to succeed within its market over the leaderships tenure. 

Strategic Brand Positioning

That conversation of where to be (and where not to be) requires careful consultation with the shareholders, and key stakeholders as well as the people within the business.  What are their aspirations for the business today and over what horizon?  If a business is a mid-market player within a sector then is everyone happy to stay there and defend their market position and market share, or do they want to move to somewhere else?  Pressure mounts as other players within the market accelerate their growth by moving to other areas of the market. Staying where you are needs to be defended, then the leadership team must be able to defend these strategic decisions.  

That desire to shift should be based not just on a simple aspiration, or the selection of a new MD / CEO to move the brand, but on key factors which will include growth potential within segments of that sector, short-term opportunity analysis of moving compared to staying where you are as well as long-term goals including profitability and sustainability over the a long-term strategic and team culture goals.

Leaders' Biggest Decision

Moving position is not about dropping what you currently do, unless that is redundant within the market, but more about where will the business will be over time. Deciding where make prioritisation of future investments and place resources, including your energy is how businesses naturally migrate. Dramatic events such as Covid where businesses have to overnight pivot their model is the most often need to make complete shifts. Traditional change models are often driven by macro market drivers, (PESTLE) factors most of which are driven in response to consumer demand, reflecting changing preferences or within markets by changing dynamics of a market. 

The big decision for an MD / CEO is where to go from where you are today. That decision starts by answering why where you are today not where you want or need to be tomorrow. For a new leadership team moving the company's position is the reason they have been brought in as shareholders are not happy with the current position in terms of profits, ROI or sustainability. Deciding where to go requires some deep sole searching as well as emerging market opportunities from existing key customers but also in where and what impact emerging trends will make on the business. Dealing with the conflicting pulls and pushes of advice as to where to go, requires detailed analysis and evidence building, so as not to be pulled from pillar to post in strategic thought.

  

Leading ahead of the curve, or behind the curve.

Moving a business requires a thought process of where is that business sitting today within its market. Is the business ahead or behind the curve? Is the first and most important question to answer.  The gulf between the two is a huge chasm, are you a brand leader or a sector follower. 

What is the curve?

The curve is where a company/brand sits within a market. Any and every market are structured around the technology levels within them. From cars to computers, fashion to furniture, to energy to engineering every sector has its own defined structure. The curve is how customers see a market, and how customers engage with brands along that curve. In effect the curve shows where customers are by their buying behaviour, what they will spend based upon their value perception of each brand. It's why Rolex and Tag Heuer can charge more than Swatch and Timex. Those ahead of the curve invest more in research and their product across their marketing mix than those behind the curve.

This understanding of a market is a strategic issue for leader's to assess, understand and determine where and how they position their company to develop their long-term success. Where to position a company for long-term success is fundamental to the business's success.  Where you sit within a market provides you with a place to defend and an according accessible market presence, it is easy to use an existing cash cow to sell more downstream, it is harder to reposition yourself upstream with a new product as the brand perception is outside comfort or competency  The danger of growing using just cash cows is that it naturally slips the brand down the curve, a dangerous precedent which is hard to stop or reverse. 

Strategic Curve Positioning

This structure, the normal distribution curve is a line along which every player in the market is mapped by perception as to where they sit. At the far left are the innovators, small technical product/service creators at the cutting edge of the market who develop bespoke new products. While there are always very few of these players (in a mature market) they are vital as the develop the new and innovative products and services the sector is known for. To do this they require the right mix of talent, creative space to succeed and deep pockets to support their innovation development. That makes them small players but with disproportionally  big brand presences and are often funding (owned or in Joint Ventures with main stream players).  

As the curve increases businesses are seen as early adopters, where higher growth companies sit who have developed sufficient market size to stand alone, and who quickly adopt ideas form innovators and take it to the mainstream market. for many people these flagship companies are what determines a market as they reflect the innovation but in a larger scale than then the pure innovators. Typically good at marketing and sales as well as product development these companies can premium price their products and services to the discerning customer who buys the pure value proposition that early adaptors offer.

Early majority companies, play in the mainstream, safe, established with a wider value proposition than the product they bring innovation in once proved. By being a mainstream player the brand USP and value proposition has to be clearer across the entire marketing mix and unlike the earlier sections a wider skillset of people are needed who can identify trends and develop them into the mass market position early on in which those companies operate. 

Late majority companies gather trends and repackage them with lower priced versions of that trend, but bring it to new audiences with enhanced convenience, more support and rely upon mass acceptance using a wide range of marketing mix techniques suitable to their sector.

At the tail end of any sector are the laggards, players in the market who hoover up trends that are now past, but have some lower price or new laggard customer segments who they can resell these products too. Laggard markets can be extremely successful where they extend lifespans of trends to keep them alive by repackaging them to wider, often high value alternative markets. 

Why being ahead of behind the curve matters

Where a new or existing customer, sits on its sector curve is a core strategic issue. A company must play it its competitive advantage, and shifting that takes time and resources to achieve.  The gulf between the front of the curve, the innovators compared to the laggards is huge. Players within the same sector but at significantly different market positions are almost speaking foreign languages to each other and certainly very different cultures.   

Innovator and early adopters will more heavily invested in new products and services while those behind the curve invest significantly less, sometimes very little in products and services.  This reflect sin visual differences in the relative prices they can charge for their comparable products and the timeline with which they bring bring their respective products to market.   

That investment in new products require high investment which is offset by higher profit margins to premium customers, while those further down the curve have to offset lower gross margins with lower costs in product development coupled with larger market segments increasing sales volume and therefore lower costs to come to market. Choosing where to sit 

Strategic Sustainability

Choosing where to position your company is therefore a vital strategic decision to take. The key criteria of a long-term strategic view is essential, where does the company want to compete over the next 5 years, not just to capitalise on next years' opportunity. It takes time, even in agile companies to orientate, become established and achieve positive ROI's and develop a sustainable position within a market.   

This means that strategic positioning defines a leadership's success or failure. Picking the right strategic position is the biggest single decision which a leadership team has to undertake, it will determine what your business future looks like, determining your business model through to defining your long-term success.

Getting your strategy right.

Strategic planning is the most reliable way to develop a sustainable and successful market position. Evaluating all options, stakeholder and shareholder needs aligned to the current and future market opportunities and risks. It also focuses leaders on setting their goals and aspirations in context with those key factors aligning the whole business with a focus and shared direction to take. 

For leaders to lead they must be going someone and that requires them to make the big decisions, but make them strategically not tactically.

What will Business Look Like After Covid 19?

As we've reach the point where we have been living with (or locked down by) Covid 19 for a year it is difficult to remember what impact the pandemic has had on all of us. We have become conditioned to living in lockdown. What started as a novelty, the no commute working lifestyle of Zoom and Teams, became a slight inconvenience, then a limiting way fo life. 

I've been working with people across multiple business sectors, from public sector to senior leaders in both PLC and SME leaders throughout, supporting them through the unforeseeable pandemic challenges.  As governments clumsy responded to the emerging pandemic, so business tried to keep everything running as normal as possible throughout the turbulence. 

Business leaders like stability, normality and predictability, it lets leaders work within the known parameters of a market and deliver results accordingly.  So uncertainty creates a whole series of challenges for business leaders depending upon their sector. Some where shut down over night, others were not immediately affected at all, but most fell somewhere in-between left to pulled back to a survival model or  tried to pivot into this new market reality. 

Uncertainty unsettled all. Every basic business assumption overnight was challenged. Leaders were left with shifting foundations of their business. What was solid and certain, became quicksand and uncertain. Were order books valid? Were orders still able to be honoured or delivered? Where had customers (b2B and B2C) gone? Confidence took a hit and business assumptions evaporated.  

The debate and planning for Brexit had taken years of analysis and scenario planning across every business sector, while many businesses had no time to plan their response to the Covid pandemic. We watched what was happening in Wuhan and elsewhere for months without fully understanding its impact on our business environment. 

Covid 19 Impact

UK business was suddenly trying to deal with the complete unknown, and even worse than that, ever changing business scenarios. From complete shutdown and furlough staff, to the yoyo open, shut, partly open and shut again, through to the carry-on your essential workers, to adapt and onto expand as you are now the future.  

Many sectors such as travel companies have shut down (nearly full hibernation), the high street (bricks only) through to events and leisure sector. These casualties of the pandemic are now about to reopen as the vaccine reaches the tipping point, but are they opening just as they shut, or will they have seen the shift in the market. The Government may provide a prime pump investment to kick open these markets (and significant pent-up demand and money exists), but will it be 'business-as-usual' or will the real shift be understood by these sectors? 

Other business sectors which has operated and thrived (yes there are sectors which have seen significant growth from home improvement, builders, home deliver and technology companies) who have seen exponential growth such as those involved in every aspect of lockdown Britain. 

Business did not stopped, but it has changed and here is what we know so far.

There's No Going Back To Normal after Covid19

The impact of Covid has been to jump the economy 5 years forward from its natural evolution for nearly every sector, and for some that could well be 10+ years forward.  That's not an evolutionary move forward but huge leap forward throughout society and one that it will not step back from. This is described as a paradigm shift within a market. In the same way a the iPhone changed the world of mobile communication so Covid19 has changed the business world forever. 

As we unlock post covid, many voices just want to get back to normal, book holidays, get back to the office and reopen the high street. These leaders voices are those who have not seen (or refuse to believe any change has happened). The reality is that while a semblance of what was normal may be seen (Government money often puts a short-term smokescreen over reality), in reality each of those markets has irreconcilable changed.        

Will the high street simply return once the lockdown ends? This is unlikely as much of it has been mothballed, some of it permanently, but the impact of a year of lockdowns has changed how society looks at shopping. The customer and business has changed, what and how people shop. Home delivery is now the normal for many people and the sector has changed. Why would it change back?  While segments of the population like the old shopping experience, the high street is not there to support it. It has been replaced by pure online / home delivery coupled with click-and-collect services.  The large format stores have shut up shop permanently or reinvented themselves as online retailers. 

The high street is not just mothballed but has jumped forward. Home delivery of fast food now dominates the market. For example Cinema's once the preserve of the new blockbuster release, must now compete with straight to home services form Netflix, Apple, Now (etc) services.  Huge investments by vertically aligned providers supported by the customer who have upgraded their home cinema experience and new infrastructure of 5G  (and 6G on the horizon). With home delivery of food and drink (you can order anything by Uber/Deliveroo (etc), why go out?     

So this is not a short-term hiatus between the norms, which normal can bounce back from, this is a complete paradigm shift across the entire business world. Let me explain why.

PESTLE Impact

In any market the macro factors which drive the market are defined within the PESTLE assessment of macro drivers.  PESTLE (Political, Economic, Social, Technology, Legal and Environmental impacts) a good as any model to summarise this, defines changes and their impact upon a market. A pandemic does not just impact on one factor for a short period time. A fuel shortage does make people sell their cars, but not needing commuting cars, city centre offices, business HQ's or regional offices through to high street shops, mean that the business world has changed forever.   

What governments' have done to insulate this change through bounce-back loans, furlough payments, tax breaks and deferred loans, will soften the impact, but will not be able stop the change for the normal to return, but soften the rate of change for a new normal to emerge with the least impact that any society can afford. The impact fo Covid is not just on one element of a the PESTLE analysis, but on every aspect of the macro environment within which any business operates. Learn more at: PESTLE

People's behaviours have irreconcilable changed. Let me start with just one simple example: Work From Home will become the normal, it was on a growth curve, now it will be the expected normal for a workplace.  Why commute to an office, if people do not need to?  People are more productive working from home and provide lower costs to the company and less commuting will means that while the office is still needed, it is now somewhere to connect with the team, it is not the place to actually do the work.  

If people are not going to work then the commuter travel, parking, petrol stations, work fast food outlets, shops and support services are all redundant. While some can pivot, the fast food outlet can joint the Just East home delivery network, others such as the large format high street shops designed for high footfall cannot. The later high street features were slowly dying as pure shopping moved online through Amazon home delivery, this shift will mean that the high street will need to look very different.         

Our towns and cities can become something else. Somewhere where people can connect with society, but not somewhere people need to be 5 days a week.  PESTLE macro market factors cannot be ignored by business. PESTLE factors drive markets and create growth.

Where's the Growth?

For business owners in every market sector even those which have successfully pivoted so far, this shift is only the start of this unknown and unchartered new world. Change in business is usually seen at the edges, with a paradigm shift, the whole world shifts, except for the laggards (who just complain louder). 

Looking for growth is therefore a real challenge. Leaders cannot just look to their innovator or early adopter customers, but need to recognise that everything has shifted, new players, substitute products and services and whole markets have sifted overnight. 

The first thing for leader's to recognise is that the people have not gone away, they still exist, and so do their needs and expectations. They have been moving house, upgrading their homes and becoming more self-sufficient at unprecedented rates.  Customers still have needs and wants, it will simply not be the business suit.  Growth will come as the vaccine rollout takes effect, but will companies be ready for tomorrow's growth opportunities. 

The First Bounce of change is happening now across all sectors as a result from the Covid paradigm shift. The growth in markets from house sales, home building is just the tip of the iceberg off the growth that will come from this shift. As change happens so clarity fo the change will be seen and Second Bounce growth will also happen, as new and emerging markets become established and begin to shift into profitable volume.  

Looking for growth from historic analysis will be challenging for business owners. Paradigm shifts require owners to look for horizontal parallel examples rather than linear historical analysis.  Is Covid19 more the the arrival of the internet to a sector rather than your business performance over the last 5 years?   

Uncertainty is the New Reality 

Now is an excellent time to review your business model. We know that markets will open up, but what they open up looking like is not yet certain. For some markets such as tourism (in hibernation during the pandemic) knows that people want to go on holiday and that delayed and latent demand will enable an immediate short-term bounce-back of this sector as people will still want to travel (and probably more than ever before).  

The longer term effect of change for travel will have several major long-term impacts. Business travel will certainly change, why travel around the world when you can click a button and connect to them through Teams?  Couple the introduction fo 5G and the move to SaaS delivery of many services and suddenly established travel models will need to be redefined. Couple all of those factors with people's rapidly growing awareness about the environmental damage which long-haul flights have on their carbon footprint and suddenly safe assumed business models, may not be any more. 

This is true for many markets, every market has become uncertain.  But do remember that uncertainty is always an opportunity for the entrepreneur. It's the entrepreneur leadership mindset, between fixed and growth, do you see the opportunity or see change as a threat?  

Strategic Planning Workshop

Strategic planning enables leaders to review and plan out where they are going and how how they will compete and succeed within their chosen market(s).

Looking for direction, focus and an action plan to deliver success? 

Like to review your business strategy, find growth and develop a growth mindset and look for growth and plan where you re going and where, then why not look at our Strategic Planning Workshop  to support you redefine your market.

Learn more see our other blog posts or see my website for support leaders grow and develop their business at www.richardgourlay.com