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Strategic Thinking Still Important In A Downturn

Posted on Saturday, Apr 11th 2009

By Guest Author Michael Kanazawa

Over 80% of respondents in recent surveys say their companies are thinking more strategically during the downturn.

There is a natural reaction to go into survival mode when a major disruption in business occurs. That means tunnel and short-term vision as well as tactical and reactionary measures. That can be a necessity for survival. However, a recent poll of the Strategic Planning Community (SPC), a business social network of strategic planners hosted by the Association of Strategic Planning (ASP), shows that for the most part, the knee-jerk reactions to the downturn have passed and most companies are moving towards more strategic moves.

Of respondents to the web survey on the SPC site, 82% reported that their companies are now thinking more strategically. Companies still operating in a purely tactical and survival mode will likely find themselves being left behind when the economy turns. This result matches well with a recent Bain Consulting survey of global corporations wherein they report that “Almost eight of ten executives agree “our company will use this recession to improve our competitive position”.

Some of the specific strategic questions suggested by the SPC members for companies can be categorized into two main groups that address both fundamental shifts in customer needs as well as business model changes. For a business, a shift in how you serve customers and how you generate profits are really the core fundamentals of a strategy.

In terms of customer needs, it is clear that there has been a sharp shift in demand across almost all industry sectors. Maintaining alignment with customer needs is one of the most important drivers of business success, prompting me to suggest the most important strategic question in the study to be, “What do our customers value most in what we deliver?” The intent is to be able to make cuts in areas that customers don’t value and increase focus on those areas that matter most. Business Week just ran an interesting article about how some companies are taking “de-featured” products that they sell in emerging economies and finding that bringing those into developed economies is proving highly successful. For customers, this means lower prices with delivery of just the most critical features or capabilities.

Shifting to a different product mix can require shifts in cost structure and channels as well. In the study, several other strategists suggested asking questions about business models. Kenneth Hein, an Association of Strategic Planning member and chief strategist, suggests asking, “How do we leverage our capabilities and capacity in a way that will allow us to expand while others are contracting or adopting a very defensive ‘hold on’ strategy.” Sue Arrell, another ASP member, suggests looking for opportunities in the unexpected situation by asking, “What unintended consequences of today’s economic situation can we capitalize on in the future?”

Successful survival techniques in any situation rely on quick action to avoid immediate danger as a first step followed by a careful assessment of the situation and developing a plan of action to exit the situation. For some, it is possible to become frozen in fear and unable to think clearly and objectively about the plan for exit. For those who plan to exit this downturn successfully, now is the time to reposition for the new market realities and begin to execute on steps to ensure successful exit.

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