Better Strategies

Every organization has a strategy, a long-term plan for achieving the organization's goals. Sometimes, the strategy is not explicitly defined or documented, but it always exists.

Wal-Mart's strategy, for example, is to provide more and more customers with an increasingly wide selection of goods at low prices through use of highly efficient logistical processes. This strategy has been designed to fulfill Sam Walton's mission for Wal-Mart: saving people money so they can live better. It has also been designed to produce significant growth in revenues and profits.

Wal-Mart has pursued this strategy successfully, and without distraction, for thirty years. From its regional and rural beginnings, the company has grown to become the world's largest retailer through relentless implementation of a highly effective strategy.

Since 1993, annual revenues have risen 11% every year, year after year, rising from $67 billion to an impressive $422 billion today. Annual profits have also grown 11% per year, increasing by a factor of eight, from $2.3 billion in 1993 to $16 billion in 2011. At the same time, Wal-Mart has provided its shareholders with double-digit return on equity.

Even today, with its gigantic size, Wal-Mart continues to grow revenues 7.6% per year and maintain profits equal to at least 3.5% of revenues.

Wal-Mart demonstrates the power of a good growth strategy.

Better performance will happen for any business if its leaders define explicitly the current strategy, assess its growth potential, and improve the growth potential if it is deficient.

Failure to define the strategy leads to problems-- lack of understanding; lack of commitment; misaligned activities; poor allocation of resources; lack of trust and teamwork; possible commitment to a strategy that does not work.

Failing to replace a deficient strategy leads to more problems. A strategy that cannot produce growth leads to mediocre results.

Good growth strategies have three key features:

Wal-Mart's strategy has these features. Be sure yours does, too. Here's why: A company that does not offer better value than its competitors, that offers just "me-too' products and services, will grow only as fast as the industry in which it operates. A 'me-too" Wal-Mart would have grown much more slowly, be today only one-fourth its current size, and be much less profitable.

Distinctive Value

Better growth is possible only if distinctive value is offered.

Note that every organization has some potential to offer distinctive value. The key is to find it and leverage it. See our newsletters listed in the Publications page for ideas on how to develop distinctive value. Or contact us for recommendations.

Right Market and Customer Focus

The second strategy feature, right market focus, is also essential for growth. A good strategy, one which achieves significant sustainable growth, must focus on markets large enough to support desired growth.

Growth is limited if all customers are treated the same. Focus more on best customers and growth will increase.

Right Business Model

The third strategy feature, the right business model, enables an organization to create and deliver consistently exceptional value again and again. A bad business model leads to inconsistent and inefficient performance, diminished perceived value, and limited growth. In the most extreme cases, a bad business model leads to bankruptcy.

A good business model insures superior value consistently at acceptable cost. A good strategy for growth includes steps to create and maintain the right business model.

If you would like more information on design of good growth strategies please review our Better Business Growth page, see the newsletters listed in our Publications page, or contact us by calling 323-933-8500 or emailing Lynn Davidson using lynndavidson@directionfocus.com


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