The Garrison Report #2006-1

Why Your Company Needs Strategic Thinking!

Why is strategic thinking so important, if not essential? Strategic thinking expert, Michel Robert, provides the answer. "In our view, the difference between companies that succeed over the long term and those that fail and disappear is a process called Strategic Thinking." In other words, he continues, "The single most important element common to companies that attain long-term success as opposed to those that fail is this: They have a clear, coherent strategy that they pursue with singularity of purpose; they have total dedication to it and no deviation from it."

Successful companies must address two important aspects of their business in order to be truly successful: namely, develop a sound business strategy and create outstanding operational procedures. Unfortunately, too often companies fail to develop the necessary strategic skills. Michael Gerber explains part of the problem in his book, The E-Myth. He proposed that while most people think that people who start their own businesses are entrepreneurs, this isn't true. He says they are "technicians who have experienced an entrepreneurial seizure." The problem is that technicians focus on doing the work. No one would criticize anyone for working hard. Gerber explains they are merely working in their businesses instead of working on them.

The problem is worse than that because when someone finally convinces the technicians that he must work on his business, he steps back and works on how to work better on doing the work. In other words, he focuses on improving the operations of the business. Typically the technician is great at improving the efficiency and effectiveness of the operation. But this approach has a serious flaw.

In the author's seminars, he often asks the following question: Is it better to do things right, or to do the right thing? This causes some confusion because our society has taught us to do things right. However, this has created an atmosphere where many people would rather do something they can do well than do what really needs to be done because they can't do it very well. Ralph C. Stayer, the author of Flight of the Buffalo, has been quoted, "Anythingworth [author emphasis] doing, is worth doing poorly." This causes some confusion because people think he is saying you don't have to do a good job. However, that's not his intention. Instead he is giving you permission to mess up while you learn how to do it. The key word in the sentence is worth because if it's worthwhile, it's worth the pain and even the embarrassment to mess up while learning.

Another way of saying this is, it's more important to do the right thing than do things right. If you disagree, ask yourself the following question: Does it matter how well someone does something that doesn't need to be done? Of course, the answer is no! It's better to work on something that needs to be done. Of course, the home run is doing the right think correctly, but that often takes practice. So start practicing.

In the context of today's topic, this means you must start focusing on working on your business from a strategic perspective even if you aren't very good at it. But it's only a matter of practice before you improve this critical skill. Of course, you can always hire someone to help you through the process. In essence, get a coach. There is nothing wrong with that. After all, Tiger Woods, who is the best golfer in the world, has a golf coach. Therefore, you shouldn't feel embarrassed by obtaining a coach. The good coach helps you look at your business differently. What's probably more important is the good coach makes you stay focused on the strategic issues instead of allowing you to slip back and work on operational issues because they are more comfortable to you.

Keep in mind that if your company is working on the wrong the projects, it doesn't make sense to spend time improving how you run those projects. If you have hired the wrong people, it doesn't make sense to spend time attempting to improve their skills. If you have the wrong clients, there is no point in improving your marketing to get more of them. The process must start with strategic thinking -- in essence, focus on what your company should be doing instead of how you do it.

Strategic thinking is the heart and soul of any strategic plan. A strategic plan is really a misnomer. A strategic plan is not a plan, but rather a strategic thinking exercise to determining what your company should be doing. The plan aspect comes into play because you write that process down so you don't forget it and can communicate it to all the other stakeholders. Unfortunately, too many so-called strategic plans focus on operational issues instead of strategic issues. What these plans lack is strategic thinking!

In essence, the what involves determining your company's core strengths and finding a market niche where a high value is placed on those strengths. This is important because when you offer a service that your clients place a high value on, price becomes less of an issue.

Think of operational issues as things that revolve around your company, while strategic issues revolve around the client. Operational issues primarily focus on making your business run more efficiently in order to lower costs. These savings are either passed on to the client or allow the contractor to increase its profit margins. Increasing your profit margins doesn't give you any real benefit. The client doesn't care how much money you make. Therefore, the only competitive advantage you have with this approach is that you cost less, but this means you are competing on price. In the construction industry, this approach is probably the least profitable way to compete because someone is always willing to do it for less.

In contrast, strategic issues focus on differentiating your company from the competition. If you don't differentiate your business in a way the client places a value on it, the client will make its selection based on the default solution - price! However, if you differentiate your business to provide services the client values, price is no longer the driving factor. For example, the author has general contractor client whom he has had this discussion with. He told the client to go back and ask its clients the following question: "What could we be doing for you that we are not already doing?" The result was a long list of items. The contractor examined the list, went to its clients and said, we can do these tasks, but we will need to charge an additional 1 percent fee. The clients said, "Fine."

This contractor had a $20 million annual volume at the time. Therefore, they increased their fee by $200,000. The cost to perform those new extras was only $18,000. How many of you get more than 1,000 percent back on your projects? And to top it all off, the clients were delighted. That company has now tripled in size, so they must be doing something right.

Therefore, it's imperative if you want to improve your company's bottom line that you start thinking strategically. The next few issues of The Garrison Report will explore ways that you can differentiate your company from your competitors. However, if you haven't already read the past three issues of The Garrison Report, the author suggests you visitwww.TedGarrison.com/garrison_report.cfm and review them because they will further prepare you for the reports that follow.

Someone has said that the construction industry needs to start hiring people for their brains, not just their brawn. Another thought is that maybe we need to hire CEOs for their strategic thinking ability, not just their construction knowledge. See you next month!

 

 

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