Be wary of your company’s strategic decay

The first quest for growth by CEOs whose companies are approaching strategic menopause is benchmarking or adopting best practices used by other companies.

Soon, you find your CEO attending the same trade shows and reading the same industry magazines month after month, year after year.

In the end, corporate strategies converge because everyone defines the industry in the same way, uses the same market segmentation criteria, sells through the same channels of distribution, adopts the same service policies and so on.

As a general rule, wealth creating champions possess highly differentiated strategies.

Yes they do have competitors, but they have unique capabilities, unique assets, unique value propositions and unique market positioning.

If strategy is not different, it is dead.

If your company’s revenue growth and return on investment are clustered around the industry average, know that its strategy is converging with those of other competitors in the industry.

If your company is perpetually experiencing a decline in profitability and management is blaming its dwindling fortunes on imports, globalisation and economic downturns, know that the company’s strategy has hit menopause.

If a company wishes to escape from the eventuality of diminishing returns, the first thing the CEO needs to do is to be honest and admit that the company’s current strategy is running out of steam.

Working harder to improve the efficiency of a worn-out strategy is ultimately futile.

Few CEOs will do this and the best thing for shareholders to do is to show them the door as they are not performing.

To create new wealth, a company must be willing to abandon its current strategy.

Before this, the excuses from management will almost certainly be the regulator’s fault; everyone is losing money; we are investing for the long term; and investors don’t understand our strategy.

What will it take for your company to reinvest itself?

Will it take a direct and immediate crisis?