The Challenges Involved in Developing a Viable Business Strategy

All too often companies develop their business strategy by relying too heavily on internally generated information and opinions. These opinions often represent a somewhat one-sided view of the value propositions expected to differentiate their products or the company in the marketplace. They also become the foundation upon which the company’s business strategy is based.

A successful business strategy is reliant on understanding the values that are critical to the customer, the market, or the other party being targeted. The values identified at the outset of strategy development need to be reconciled with the needs or unmet needs of the targeted customers, target market or the business opportunity. The challenge for companies is ensuring that their business strategy has been sufficiently vetted to avoid choosing a strategic path that is significantly flawed.

Validating and shaping a viable business strategy requires an in-depth understanding of the market or business situation you are planning on pursuing. While the original “target” may have been chosen based on a perception of the value fit for the features and benefit for the product, other factors and unforeseen situations frequently come into play once implementation begins.

It is understandable that companies formulate their business strategy around the values they feel their product or technology brings to the marketplace. Unfortunately, if their go-to-market preparation has overlooked or failed to understand key issues that are critical to achieving a successful result, the strategy is likely to fail.

Alternative Business Scenarios and the Role of Value Determination

The word “value” in a business context, has a wide range of meanings. In sales it can represent the importance of framing the value proposition(s) for the products your company is marketing to the needs or unmet needs of current and potential customers.

In finance, building the financial value of the business to meet targets set by management for their stockholders and the investment community is another. Quantitative financial values include a variety of industry recognized metrics that allow the organization to be measured against relevant competitors serving similar markets or industries. Financial values also include various qualitative elements that add to the company image and strengthen their overall value to potential investors. Brand enhancement and building corporate image can be included in this category.

In R&D and product development the internal prioritization (and selection) of projects is frequently determined by the net return that is projected from each alternative. A Stage Gate process is often used to capture the costs involved and the effort required over a given time frame to reach commercialization. This includes research & development costs, the extent of the commercial development and commercialization processes required, plus the time-to-market realities that are involved. These elements contribute to determining the relative value and merits for each project choice.

In M&A, from the seller’s standpoint, framing the opportunity relates to capturing the individual values that can be identified and documented about the company for perspective buyers. This includes the financial results for the business. It also includes items such as market strengths and technology or IP differentiators. These collective values determine the potential fit and possible synergies that can result for combining the two organizations.

Considerations in Value Assessment- Two Examples

The following two examples represent business scenarios that highlight many of the key issues important to determining the best strategic options for achieving a successful result. In each example, the objective is to identify items that are important for a company to research and understand prior to committing to implementing a particular strategy.

Example 1: Important Value Considerations in Product/Market Strategy Development

Entrepreneurial companies, start-ups, or niche” players who have developed novel products or technology face the formidable task of implementing a viable growth business strategy. The features and benefits that these materials, however, may not necessarily align well with the “values” that certain markets or a potential customer considers to be most important. The company’s knowledge, personal attachment, and enthusiasm a company has for their product or technology can limit the vision and scope applied to an analysis of the business opportunity.

Example 2:  Valuation Considerations in M&A

Values, in the context of M&A activities, are at the heart of the merger and acquisition process. At the outset of an interaction between a buyer and seller, the gap between what the seller perceives as the values of the business and what the buyer sees as the values that they are willing to pay for, can be significant.

The challenge in achieving a successful M&A result is to reconcile these differences through compromise, eventually achieving agreement between both parties. Personal attachment to the business and a partisan connection with the present vision for future growth often creates barriers between the buyer and seller.

Summary

The difference between a business plan and a successful business strategy is linked to the quality and the thoroughness of the planning process and the effort placed on understanding the needs and unmet needs of the target audience before moving forward.

The challenge for any company is not in articulating what they know about the features and benefits of their products or other attributes of the company. The challenge is in determining how relevant these known “values” are versus the needs or unmet needs of the market or business opportunity being targeted.