Getting your business to that handful of opportunities

<p>"In preparing for battle I have always found that plans are useless, but planning is indispensable."</p><p>-- Dwight D. Eisenhower</p><p>In our last column, we coined the term “strategery” to refer to the strategic approach to establishing a competitive advantage that differentiates your business from your competitors. Your assignment was to set aside an hour or so to jot down all of the opportunities you could think of to build your business.</p><p>Next, we need to launch a process to sort through the list to identify the “strategic handful.” We’ll get those by establishing a disciplined process to prioritize all of the opportunities you’ve jotted down – you may have 15 or 20, maybe more – which we will evaluate to arrive at the four to five choices that best serve your needs, our handful of key strategic choices.</p><p>The Strategery gurus might differ on how to prioritize the list. You may want to add a particular criterion of your own. What’s most important is that you apply the criteria consistently to make data-driven decisions about each of the opportunities on your list. Over the next few weeks, we’ll discuss at least four criteria that you can apply to your list of opportunities to arrive at the optimal handful.</p><p>The first criterion to apply to these opportunities follows an assessment of your current capabilities. Some strategerists call these your “core competencies.” It’s a great place to start to thoughtfully assess those things your company already does well. Remember, this is not about what you’d like to do better or wish you could do well. It’s about asking yourself: “What are we good at and can we exploit those capabilities to take advantage of this particular opportunity?”</p><p>Let’s look at an example. Suppose you’re considering the purchase of a key competitor to supplement your local food distribution business. They have a warehouse operation about 40 miles away that serves customers that are inaccessible without a closer location. The seller also carries additional product lines that you can’t get because they have exclusive distribution rights in your region, which would become yours if you acquired the company. Your business could really grow if you had that additional distribution center with the new, exclusive product lines.</p><p>It sounds like it may be right up your alley. You know the food distribution business, you’ve successfully run a warehouse operation, the new product lines are very complementary to your existing lines and your customers will understand and accept why you’ve added them.</p><p>Consider, however, an alternative case where the distribution center is in Los Angeles, with additional product lines in the snack food business. The seller has a lot of experience in this business and has successfully promoted those lines in the L.A. market. The company has a great reputation and you could establish a solid beachhead in Southern California.</p><p>Would you look at that opportunity in the same way you considered the local distribution center? In the alternative case, the distribution center is now a plane ride away, in a market you know nothing about. The seller is similarly situated with the majority of its product lines, but the snack products are new to you. You also know that the food distribution business in L.A. is hyper competitive, particularly in the cookie/cracker segment.</p><p>In this case, examining your core competencies might result in a different conclusion. You have to fly to L.A. to oversee the operation, you don’t know the market, their product line exclusivity doesn’t cover your local market and its additional product lines are in markets in which you have no experience. Would you rank this opportunity differently than you would the local choice?</p><p>It’s tempting to choose the local option but another issue arises that has tripped up as many companies as it has helped. Have you ever acquired another company? Do members of your leadership team have any experience integrating a new company with its unique culture, policies and procedures? Can you balance contrasting market strategies? How do you reconcile different compensation programs? Just as importantly, do you have systems in place to monitor business in a remote location that you can’t visit by driving across town? We’ll elaborate on this subject in a future column but it’s probably the most challenging issue that I have seen for companies expanding beyond their home territory.</p><p>Give this exercise a try by examining each of the opportunities on your list according to your current capabilities. Identify a handful of those that best qualify. Then, over the next few weeks, set aside some time to think about a second criterion: your competitors and how they compete against you. Next time, we’ll evaluate the original list of opportunities by considering the competitive landscape.</p><p>•••</p><p>Lary Kirchenbauer is the practice leader for the Business Advisory Group of Moss Adams LLP in Santa Rosa, www.MossAdams.com. He can be reached at 415-602-7870 or Lary.Kirchenbauer@MossAdams.com.</p>