[IMGCAP(1)]How should the managing partner or CEO of a firm think and react in order to keep the firm lively and vibrant?
In a previous article, I highlighted the first integrated action designed to create a sustainable advantage over competitors (see Strategizing a Successful Life Cycle for Your Firm). That action is knowing what quadrant your firm is in at the current time: Emerging, Growth, Maturing or Aging. Knowing this allows a CEO or Managing Partner to take appropriate strategic action.
The second action, which integrates with the first, is being able to identify “game-changing” events, either in the marketplace or self-imposed. These are game changers that can be driven by your products and services, your competition or the market itself.
The inevitable reality is that every person will die, and so will every company or firm. 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.
On the other hand, look at Netflix as an example of a company that was staring down a coming calamity and its CEO, Reed Hastings, obviously understood his accountability to keep the company vibrant and healthy.
Accountability. How can any CEO take accountability for a company or firm’s strategy when they do not know where the company rests within that life cycle and are not paying attention to game-changing events?
From my research about Netflix, their market segment of consumer entertainment was the same one in which Blockbuster competed with thousands of retail outlets, because both dealt with physical media such CDs and DVDs.
One can see the different business model of each, and therefore a different strategy to compete within that market segment. I believe the driving force for both companies appears to be the distribution process, and each had a different strategy therein.
Blockbuster’s strategy was to add as many retail outlets as possible to distribute the CDs and DVDs to the widest range of the public. Netflix could see that it arrived too late in the game to start building retail stores, so it used the Internet as a virtual store on its Web site, with subscriptions for the CDs and DVDs distributed by U.S. mail. Both distributed physical media.
Then a game-changing event occurred within the marketplace. Red vending machines of physical media began popping up at every convenient retail store by a company named Redbox, and because no fixed costs were involved they could rent the physical media for $1 for the same exact movie title as Blockbuster or Netflix.
In my opinion, Reed Hastings of Netflix knew exactly what quadrant of its life cycle that Netflix was in, and he was particularly aware of the game-changing event that Redbox brought to the marketplace for physical media.
But the CEO of Blockbuster was totally unaware of what quadrant Blockbuster was in, and his company was too big to fail since it had so many on-site video stores.
Game-changing events are always a part of the integrated actions of strategic planning, and many are actually a part of the plan itself against your competition. It is being aware of the changing event that separates those CEOs who are strategists and can strategize. It should be a critical ingredient of every CEO or managing partner’s strategy, not only to identify their own game changers, but including a “what if” scenario in the strategic plan for those key areas which will move their firms to the Aging quadrant.
Strategy is not a game, it’s war!
CEOs and managing partners should be very cognizant of what game-changing events are happening within their market segments because they allow for immediate changing of strategy while implementing their own game-changing event to maintain their firm’s presence in the Maturing quadrant. Otherwise the odds are that your firm will be like Blockbuster and move into the Aging quadrant, where it could pass away.
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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