Business Cashflow during the Holiday Season

Where Do You Focus in 2021 Where Opportunities Exceed Capacity and Capability

By Tony Monisse

Clarity on who your target customers are, your value proposition and your unique key capabilities are the foundations for your success now and in the future.

It is that time of the year when business owners start planning for and thinking about their strategic focus for the next financial year.

The big challenge this year for many businesses, especially in the Western Australian economy, is there are many more opportunities than there is the capability and capacity to take advantage of these opportunities.  We are seeing this play out for many of our clients, where they are experiencing challenges retaining and finding staff and sourcing equipment and supplies.  Below we have set out a table that shows where;

  • opportunities are strong and weak in the economy and
  • there are forces that will either strengthen or weaken a business’ capability and capacity

  Download as a PDF

 

We regularly work through an exercise with business owner clients, where they address what I believe are the most important strategic questions:

  • Where will you play i.e. who is your target customer?
  • How will you win in the market where you will play i.e. what is your value proposition?
  • What are the unique capabilities you require that will allow you to win i.e. what key processes, resources and alliance partners are required to win? I also like to add to this Jim Collin’s (“Good to Great”) question: what can we be best in the world at?

These questions can be best illustrated by the pyramid below.

important strategic questions

My observation is that businesses that are not clear on the answers to these questions focus on activities outside of the pyramid.  Instead of focusing on high payoff activities that support their value proposition, they engage in wasteful undertakings that can be costly to the business.

In the current environment, these questions are even more important, given the capability and capacity constraints.

Two examples of business clients who have gone through the process of re-evaluating their operations, in the current environment, are a contracting business and a mining services business.  As a result of a strategy session, the contracting business decided to focus on managing revenue growth for the next year given labour constraints.  And to instead focus on strengthening relationships with their top 5 customers in each market segment that it services and to reduce the amount of tendered work that they price, which should improve the overall profitability of the business.  The other business chose to not renew a maintenance contract it had, given the struggles with sourcing labour and instead decided to focus on plant hire and product sales, which requires less labour and is more profitable.  In both cases, once the questions were answered each business was able to focus on the important activities to deliver on their “how to win” for their specific target customer.

These important strategic questions are what business owners should continue to answer each and every month, quarter and year, especially in the current environment.

If you would like to discuss how you can gain clarity on the right activities to focus on in your business, please contact your advisor or Tony Monisse on (08) 6212 7200.