Combining Strategic and Operational Management at Your Firm

IMGCAP(1)]The importance of implementing a formal three-year strategic plan is often lost in the moment of operational management.

This is the reason why there are so few companies and firms that actually combine strategic management with operational management. After all, strategic management is not necessary to have a successful company, and most successful companies do not utilize strategic management.

However, my experience with small and large companies and firms is that whenever a CEO or managing partner combines strategy with operations, it is like pouring gasoline on a fire. Boom! Those companies are always vibrant and exciting to be around. As much as they are constantly changing, they are constantly monitoring the markets and the competition for those game-changing events that will impact their business.

In each of my previous articles I keep hammering at one key point that is inevitable: Every person will die, and so will every company or firm (see Strategy is Not a Game…It’s War!, Strategizing a Successful Life Cycle for Your Firm, and Managing Strategy at Your Firm). The trick is being able to start out in the Emerging quadrant of your life cycle, grow as large as possible in the Growth quadrant, and then maintain your health and vibrancy in the Maturing quadrant.

The trick for the CEO to accomplish is to keep reinventing itself within the Maturing quadrant of its life cycle so it never moves into the Aging quadrant and dies. This is a challenge for any executive, and most CEOs never devote enough focus to those strategic areas that allow it to remain in the Maturing quadrant.

Think of names like Arthur Andersen, Eastman Kodak, Blockbuster and just recently Radio Shack. How could these companies fail? They were multi-million and multi-billion-dollar firms and companies.

I like to point out Eastman Kodak the most, because it once had 90 percent of the cellulose film market segment of photography. A 90 percent share of the market!

Eastman Kodak started in the Emerging quadrant when George Eastman invented rolled paper film, even before a camera that used rolled paper film even existed.

Kodak continued through the Growth quadrant of its life cycle by extending its film products to the point that every camera maker in the world utilized Kodak specifications for film. It moved into the Maturing quadrant, where it had a 90 percent market share! But then a game-changing event occurred in 1988, digital photography, and it took no strategic actions to maintain itself within the Maturing quadrant. It slipped into the Aging quadrant and died in 2012.

Who was accountable for allowing that to occur? There’s that word again, accountability!

History shows that CEOs who manage operationally and not strategically will be those executives of a company or firm who will be unaware of a competitive event which changes the market segment.

A better example of how a managing partner or CEO should be accountable is Reed Hastings of Netflix. To me it is obvious that he saw the game-changing event in Redbox with $1 videos as a need to reinvent itself before Netflix went spiraling into the Aging quadrant, as Blockbuster was doing. He latched on to another game changer he helped create: use of streaming videos for distributing movies, and moved back into the Growth quadrant.

In my observation of CPA firms, I see them working almost entirely operationally. The idea of changing the business model is offset by the premise that the business world will always need accountants to do tax, audit and wealth management. Their growth strategy always appears as one of merger and acquisition as opposed to the strategic view of setting up game-changing events that link with products and services that their clients need.

In their strategy of growth by M&A, the hunter inevitably becomes the hunted, and dies. Strategy is not a game, it’s war!

Greg Weismantel is CEO of the Epic Group, a strategic management consulting firm and advisor on strategy for small and large firms and companies. Its focus is on helping companies and firms analyze and dissect their strategy to support new and emerging businesses.

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