Three different regulatory responses and their impact on industry

An item on the TV news a few mornings ago caught my attention and reminded me just how much regulatory action can affect an industry and the firms which compete within it. The regulatory environment, and the possibility of regulatory changes falls in the "P - Political" quadrant of a traditional PEST analysis, and it is vital to understand it in order to form a clear view of the competitive environment in which you operate.

The news item concerned the new laws being proposed for plain cigarette packaging. But what it got me thinking about is the widely differing regulatory response to the tobacco, automotive and pensions industries.

In each of these industries, government would like to influence, if not control our behaviour.

1. In the automotive industry, government would like us to drive safely, which often means more slowly. This is to reduce the burden on emergency and healthcare services, as well as to limit the potential dangers to other road users with whom you might collide.
2. In the tobacco industry, the government wants to reduce the number of people who smoke or start smoking. This is to reduce the long-term burden on the health services, as well as the risks to other people that come from passive smoking.
3. In the retirement savings industry, government wants to increase the amount of money that people save while they are working. This is to reduce the number of people who fall back on state benefits during retirement.

In all three cases, the government's reasons are similar:

1. the behaviours have social consequences if individuals get it wrong (think about passive smoking, innocent people being killed on the roads, etc.), and
2. it costs the government money to clean up behind us (whether in the form of higher NHS or social welfare bills).

But the regulatory responses to these three situations is significantly different, as is the impact on the industries that serve them:

1. In the case of speeding, it is simply against the law. Speed limits are entrenched in the highways code, and there are financial and other criminal penalties for exceeding them. However, with a few exceptions (think about rules about including seatbelts in cars, etc.) the automobile industry has managed to stay out of the fray. Certainly, if a driver exceeds the speed limit and is involved in an accident, nobody blames the car manufacturer for building a car capable of going too fast. And as far as I am aware, there are no laws governing how fast manufacturers are allowed to allow cars to go.
2. In the case of smoking, governments actively campaign against it, limit where you can do it, and control advertising of cigarettes. However, they seem reluctant to go as far as to ban it outright. Is it more of a civil liberty than speeding, or is it just backed by a powerful tobacco lobby? Could the tobacco lobby have avoided all of this had it taken a different approach? Clearly, the risk to the tobacco industry is huge: it could be excluded from the UK market entirely!
3. In the case of retirement savings, the government appears to be moving in the exact opposite direction by lifting the existing restrictions on what people can do with their accumulated retirement savings, despite warnings from numerous quarters of the potential dangers to individuals in doing so. Is it purely an electoral ploy and revenue raising activity? (Pensioners will get access to the cash before the next general election, but probably won't have to pay the tax on it until after the next general election.) It is not yet clear whether these changes are beneficial to the industry from a long-term financial perspective. However, what is clear is that costs of implementing these change is immense, and the probability of unplanned for and large scale customer withdrawals is significant.

These three examples demonstrate just how widely different regulatory responses can be, and therefore how important it is for a strategist to understand what they currently are, to anticipate how they might change, and to consider how the firm might influence them in its favour (or against its competitors).

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Career development as an exercise in strategy

I've mentioned before that I tend to look at most problems through the eyes of a strategist. A short while ago, someone asked me for some career advice. This is what I told them.

Start by imaging the strategic questions your firm typically asks - let's keep it as simple as is possible:

1. Who are our customers?
2. What do they want?
3. What's the best way we can deliver it to them (taking into account your strengths, weaknesses, and any opportunities and threats you can see)?
4. How do we know how satisfied they are with that?
5. What can we do to improve? (This cycles round to 2)
6. What else could we offer them?
7. To who else could we offer the same things?

Now imagine you're not an employee, but you're a one-person business. The answer to the first questions is: your boss (and also the firms management and your colleagues). Now answer the rest of the questions as they relate to you and your role.

Before you know it, you have a pretty robust career development plan. Of course, you could apply a much more complex strategic reasoning process, but that probably wouldn't be necessary.

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A perspective on internal communications

As your career progresses and you move up the corporate hierarchy, I think you naturally gain more exposure to decision making and strategy setting processes. It is likely that you become part of those processes yourself. As a result, you have a much greater understanding of the forces shaping your industry and business, and feel a greater sense of control over larger areas of your organisation.

It's easy to forget, when that happens, what it feels like to be lower down in the hierarchy, or earlier on in your career, before you were exposed to those decision making and strategy setting processes. If you cast your mind back, you will likely recall a feeling of not understanding how and why (or even when and if) those decisions were made, and consequently, feeling a certain arbitrariness about them.

It is important to reflect on this from time to time so that you can plan appropriate internal communications to alleviate these feelings and get your teams fully engaged in what it is that the organisation needs to do. Pitch your internal communications not at people who have your exposure to  the decision making processes and the key data that support it, but to people who don't have the experience and benefit of such exposure.

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The change hierarchy

Understanding Failure Demand

Failure demand is what causes good solutions to problems to destroy value.

Let me explain by way of example. I regularly stay in a particular hotel when travelling for business. I like to stay there because, amongst other things, the service is both good and quick. However, during a particularly busy season, I and a colleague noticed that queue to be seated at breakfast time had started to grow considerably longer. So instead of being seated quickly on arrival, guests were forced to stand in a queue for several minutes at a time.

As I said, this hotel has a good service ethic, and a few minutes later we noticed that they had place a table with fruit juice, fruit and croissants in the area where guests queued to be seated for breakfast (I took a picture of it).

An elegant solution to the problem, you may think. But this is a great example of failure demand: guests don't want a better waiting experience, they want a shorter waiting experience (or not to wait at all).

Failure demand is defined as 'demand caused by a failure to do something or do something right for the customer'.

In order to reduce or eliminate failure demand, you need to:

1. understand and focus on what the customer wants at each interaction (in this case, to be seated at breakfast quickly). In a more complex business, this usually requires you to document each customer interaction in the process and to describe for each 'what good looks like' from the customers' point of view.
2. invest in delivering this and only this, removing all other waste from the process.

Over the last few weeks I've noticed that the there is no longer a queue to be seated at breakfast. Either the conditions that caused the queues have gone away, or they have found some way to solve the queuing problem. The table of fruit, fruit juice and croissants is still there, but not longer enjoyed by anyone. This only serves to demonstrate how pernicious the effects of failure demand can be.

The Road Not Taken

Strategy is fundamentally about choice. Unfortunately, every choice we make requires us to forego something else. This is the nature of tradeoffs and what make choice so difficult. This poem by Robert Frost captures the essence of that dilemma - notice also how Robert Frost draws out the importance of differentiating rather than following the crowd in the final couplet:

The Road Not Taken

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
    I took the one less traveled by,
    And that has made all the difference.

Source
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What is your ecommerce business worth?

Ecommerce business models remain a fascination of mine - see my previous post and paper on eCommerce Business Models. They represent both a very visible forefront of innovation, as well as a rich graveyard of hubris triumphing over good strategy. And that is why I am featuring an infographic from Digital Exits today. Although the sale prices of businesses are not always a guarantee of how good their strategies are, on average, they do give a fairly good indication of how good the market thinks they are.

In my opinion, the relatively low average price/earnings multiples suggest that whilst value can be created relatively quickly in ecommerce, the markets recognise that it can be very hard to hold on to.

Paul Garcia provides the following introductory text to the infographic which appears below:

Have you ever thought about how much your ecommerce business is worth? If you have, you aren't the only one. Everyone will eventually think about whether they should just sell the business for a massive payday or continue to grow it. When thinking about these things, it is important to get an accurate figure to ensure you can make the right decisions.

You can easily get the most accurate figure by simply using professionals, such as Digital Exits, to get a free valuation. They are also the people who created this helpful infographic. If you aren't ready to get a professional valuation, the using this tool will help to give you a better idea of where your business stands.

In this infographic, you will be seeing 150 different ecommerce businesses that were sold from 2010 to 2013. By using these statistics, you can easily measure your business and see exactly where it stands to figure out how much it is potentially worth. The statistics came from bizbuysell.com and the businesses were all U.S. based... although not all of the buyers were within the U.S. Of course, each sale is different, so you may be able to get less or even more than what this infographic says, but it is a great way to easily get an approximate value.

The secret and subtle art of strategy

I am personally not a huge fan of strategies that are announced with a fanfare. Rather I much prefer strategies where competitors and customers look back years later and say "we never saw that coming" or "we can't believe we ever lived without that".

Indeed, Sun Tzu wrote that "All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved."

Of course, strategies can seldom be executed without the participation of many people. And communication with those people is almost always essential to the successful execution of that strategy. But the communication should focus on the work to be done and on the success that has been achieved. It should not announce the strategy before it is executed, or its success before it is achieved.

Some amount of secrecy is invariably required where strategy is concerned. However, this secrecy is often misplaced and overstated - for most businesses (but not all, of course), industrial espionage is not a real and present threat. Competitors often know quite a lot about your strategy anyway, as they hire staff away from you, to whom you have communicated it. But knowing what you've said your strategy is, and having the insight and means to execute it are two different things.

Is interest in "strategy" declining? [Updated August 2023]

I first started monitoring interest in the terms "strategy" and "business strategy" in 2014, and have just now (August 2023) reviewed and updated it.

I use a simple metric: Google Trends.

If you're not familiar with it, Google Trends shows how frequently a given search term is entered into Google’s search engine relative to the site’s total search volume over a given period of time.

As of August 2023, Google Trends shows that searches for the terms "strategy" have reduced, relatively, by more than 50% since they started tracking in 2004:

There is some evidence that this decline may have levelled off in the last few years.

What is perhaps more interesting is the anomalous spike in March 2022 when the lines just reaches 50 again for the first time since January of 2011. It is difficult to know what might have caused this. A sudden interest in strategy as a way out of COVID seems too simplistic an explanation. And whilst the interest since that spike appears marginally better than that immediately before, I am not sure it is strong enough to indicate a trend break.

The relative decline in searches for the term "business strategy" over the same period is almost as severe:

In this case, the decline was initially even steeper and definitely seems to have levelled off since about 2006. The spike in March 2022 is even more pronounced, reaching 80.

It is interesting to note how much more cyclical the trend in searches for "business strategy" is. This could suggest that interest in business strategy remains tightly coupled to annual business planning cycles, despite all the evidence suggesting that a more continuous attention to business strategy is better. Another reader has also suggested that it could also suggest an interest from students at the beginning of their business studies courses.

I did a little more digging around. I won't bore you with the charts each time, but in summary:

• relative search interest in "business" itself has also declined by about 50% but with greater signs of levelling off or even rebounding. The March 2022 spike is again evident. Perhaps web-searches have broadened out into more non-commercial topics over the period.
• relative searches for "SWOT" have also declined, but by much less, whilst relative searches for "PESTEL" have more than doubled. Perhaps people are increasingly aware that strategy is a complex an multi-faceted challenge, and so are resorting to more specific rather than more generic searches.
• following on that theme, I expected to see that relative searches for "business model" would also have increased, owing to the recent popularity of talking about firms competing on this basis. Interestingly, relative searches for "business model" actually declined by nearly 30% from 2004 to a low in 2008. The recovered to their 2004 levels by about 2017 and have held that level ever since. The only exception is that same spike in March 2022, this time extending to April 2022.
• relative searches for "operating model", another recently popular term, also declined from 2004 to 2007. Thereafter, it has gained in popularity at a steady but modest rate. For "operating model", the anomalous peak occurs a month earlier in February 2022.
• relative searches for "Target Operating Model" have shown a steady increase from almost nothing in 2004 to a high in 2019. Thereafter there was a slightly decline in interest which then seemed to recover for another peak in March 2022.

Has business strategy as a pursuit really declined by more than 50% in the last 15 years compared to other interests? This seems to be a worrying trend.

I'd be interested in hearing your thoughts on what it might mean and/or on what other terms I should look at as part of my review. Please feel to let me know in the comments below.

Strategic goals versus operational objectives

I recently received an email from a Strategic Coffee reader asking for help in understanding the difference between strategic goals and operational objectives.

I think it is easy to get so wrapped up in the definitions of words that we lose sight of our real objective: designing and implementing better strategies! However, I think there are a couple of interesting ideas behind this question which are worth exploring.

I think of goals as broad statements of direction, and of objectives as being Specific, Measurable, Achievable, Relevant and Timebound (that is, SMART). Goals bring a vision alive, whilst objectives translate the goals into actionable units. In an ideal world, I would translate my vision into goals, then break my goals down into more specific SMART objectives, and then design actions and activities to achieve my objectives. That way I can clearly measure progress towards my vision and make adjustments to my activities if I need to.

I think of operational objectives as describing the desired internal state and/or performance of an organisation. Typically, they might relate to the efficiency and/or effectiveness of the business, or some other performance criteria. Strategic objectives, on the other hand relate to progress towards the organisation's goals. They may overlap: for example your strategy may require a certain standard of operational performance. This could lead to goals and objectives which are both strategic and operational. In the Balanced Scorecard framework, the internal business process perspective would typically contain objectives which are both strategic and operational.

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Can you simply buy talent?

Shortly after Marissa Mayer stepped into the breach at Yahoo, she stoked controversy by cancelling the company's  'work from home' policy. At the time many predicted that this clamp-down would result in a mass exodus of talent to competitors such as Facebook and Google or any of the many startups it shared Silicon Valley with.

Last week, Ken Goldman, Yahoo's chief financial officer declared that Yahoo had won the war for talent (speaking at a Morgan Stanley investor conference in San Francisco).

However, tellingly, they had done so by simply buying talent. Yahoo bought 37 companies, and their staff, since Mayer took over. And although Yahoo received an impressive 340,000 job applications in 2013, career site Glassdoor reported that it had to pay the 3rd highest wages in Silicon Valley in order to do so.

However, it is not clear to me that simply buying talent is a sustainable strategy. Despite its proclaimed victory, Yahoo failed to join the 15 other Silicon Valley firms on Glassdoor's 50 best places to work list. Most of the companies acquired were early stage startups whose engineers might be more interested in moving on to their next projects as soon as their earn-out periods expire. And whilst high salaries might attract large numbers of job applicants research suggests pay is a hygiene factor which is seldom able to overcome more fundamental dissatisfaction with working conditions and culture.

My personal view is that attracting and retaining top talent requires more than deep pockets - it requires visionary leadership and a strategy that people can get behind. As Yahoo's revenues continue to decline, it remains far from clear that Mayer has delivered that yet.

Implementing strategy is hard work - but you can get out of it

I've been involved in strategy for long enough to know that formulating and implementing it is almost always hard work. (Although hard work which is so rewarding never seems quite that onerous!)

Over the years I've seen a large number of people avoid the hard work of strategy implementation by employing a simple little trick. When presented with a new strategy and asked to commit to delivering it, They simply say:

That's a really great strategy and I'm totally behind it. Even better, what I'm already doing is already totally aligned with the new strategy.

It's a great get out because you get to appear to be enthusiastic, part of the team and forward-looking. But you don't actually have to do or change anything.

The catch is, of course, that it's a dangerous fallacy. Albeit an extremely seductive and perversely comforting one.

There are three ways in which it could be true:

1. What you do is not impacted by the strategy, nor does it impact the strategy. That may be true, but it's probably not a good omen for your continued job security!
2. Previously, you were actually doing something which did not support the old strategy, but which by some extraordinary coincidence actually completely supports the new strategy. I guess such an extreme coincidence is at least theoretically possible. But you've just admitted you hadn't been a supporter of the previous strategy. And you've just attributed the fact that you are supporting this one to blind luck. That's probably not the impression you thought you were creating.
3. You don't really understand the new strategy and how it is different from the old one. (Or perhaps it isn't - but that's a problem for another day.) Sooner or later, you will be found out!

No. The only way to deliver strategy is to take a long hard look at everything you currently do, and consider how at least some of it should change. Hard work that may be, but it's also what make strategy so exciting.

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Which social media post is your favorite?

I really enjoyed this Google+ post from Nespresso:

Which sip is your favourite: the first or the last?

Why? you may ask. Well, for a number of reasons:

1. Its simple and direct. No airs and graces.
2. It contains a neat little NLP auto-suggestion. It sets in motion a thought pattern in which it is assumed that you already like Nespresso. It gets you thinking about another question before you've had a chance to question: "Hang on, who says I even like Nespresso at all?" Clearly, someone who consciously strongly dislikes Nespresso may be able to override this suggestion, but then they are almost certainly not the target of this little promotion.
3. There is clearly no right or wrong answer, and no sense that anyone is any more or less qualified to answer it than anyone else is. As a result, everyone feels equally entitle to express a view and become engaged. But whatever view you express, even if your view is to challenge the question itself (see the comment below the post itself), you're still most likely doing so within the overall context of liking Nespresso.
4. Anyone who reads the question will immediately and subconsciously start to think about enjoying Nespresso, whether they've ever done so before or not - that's the only way to engage with the question! Perfect marketing.

And, as a coffee lover (the clue is in the title of my blog!) and an owner of a Nespresso machine, that last reason alone was enough. Time for a cuppa, I think...

British Airways just made my day

Someone made my day today. Who was he? The cabin steward on my British Airways flight home this evening. What did he do? He recognized me, remembered my name, greeted me by name and asked me if I was happy with the service I was getting from BA.

Did he really remember my name or had some computer system flagged me up as a regular on that route and prompted him with my name and seat number? It's possible, maybe even probable. But even if it's true, it didn't feel like that. It felt like he was just a genuinely nice guy who wanted to make sure I was happy with the service I got.

If I thought I could bottle that level of customer care and service, I'd be a wealthy man - it blew me away.

It was only a week earlier that I'd received a survey from British Airways, asking me if I felt recognized on flights as a regular traveler. So it is obviously something they think is important and are working on. Well, with this particular cabin steward, at least, that strategy is working. I only wish I'd be sent that customer survey a week later. (If anyone from British Airways is reading this, DM me @chriscfox or contact me via my website, and I'll be happy to share his name with you - if you have an employee of the month wall, this gentleman deserves to be plastered all over it!)

It strikes me that many years ago every customer services experience might have felt that way. Customers dealt with local merchants and traders they knew and who knew them. They passed pleasantries and the small talk of the day. Today we deal with impersonal shop assistants and call centre operators and have lost that personal touch. Well done British Airways from bringing a little of that back into the world.

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Structure follows strategy

Change is like Brussels sprouts, you either like them or you don't, but they are good for you either way. For people who don't like change, organizational restructures are amongst the hardest kinds of change to deal with. But they are both necessary and good for organisations. This blog is an attempt to explain why.

There is an old maxim that structure follows strategy. This means that whenever you launch a new strategy, or evolve an existing one you should be considering a new organisation structure to deliver it. Whilst people are by no means machines, you should no more expect an old machine to produce a new product than you should expect an old organisation structure to deliver a new strategy.

Along a similar vein, I was once advised that, if you want something done, you should put someone in charge of doing it. So if you want a new strategy delivered, your new structure should reflect the new roles responsible for delivering its constituent parts.

So whilst organizational restructures may seem daunting to some, it is worth bearing in mind that trying to deliver a new strategy with an old structure is even more difficult, and unlikely to succeed.

If you were looking for something to make Brussels sprouts more palatable, on the other hand, I am afraid you're on your own - I can't stand them.

Related: organisation Structure is one of the 7 S-es of the McKinsey 7S Framework.

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How organizational hierarchies deliver strategy

In an organisational hierarchy, each person must be able to deal with the level clarity and specificity (or lack thereof), ambiguity and conceptual thinking they will get from their boss, whilst adding the detail they need in order to provide their subordinates with the level of clarity and specificity they need in order to be able to do their jobs.

Each layer in the hierarchy must add just the right amount of detail. The exact amount of detail each layer must add depends on factors such as the complexity of the business and it's environment, the depth and breadth of the organizational hierarchy, and the complexity and intellectual content of the activities which must eventually be performed.

In this way, leaders are able to work in terms of visions, strategies, high level plans, principles policies and other abstract concepts, trading of competing and subtle agendas, whilst workers are able to deliver very specific, tangible activities.

If any layer in the hierarchy adds too little detail, their subordinates will find it difficult to understand the organisation's strategy and what they are expected to do to deliver it. On the other hand if any layer provides too much detail, then the layers below it may feel disempowered and disengaged.

Sun Tzu advises that we should manage many as we manage few. Organizational hierarchy is an important tool in achieving this. Whilst many people consider middle management to be an an obstacle to effective communication between leadership and the workforce, I think they must play a vital role in translating strategy into implementation.

Strategic evaluation

Strategic options can be evaluated by a variety of formal or informal procedures.

The criteria used are of three types:

1. Suitability - how well does the strategy address the circumstances identified by strategic analysis? SWOT analysis can be used as a basis of assessing suitability.
2. Acceptability - how well do the expected outcomes of the strategy meet stakeholders' expectations? Acceptability can be assessed against the expectations of key stakeholders and their likely reactions. These include expectations of financial performance, risk, security, environmental, and ethical issues. Acceptability can be easier to assess for entities with a strong sense of mission.
3. Feasibility - how likely is the entity to be able to implement the strategy successfully in practice? Feasibility can be assessed against the entity's resources and capabilities, the time it would take to implement, the power of opposing stakeholders and likely competitor responses.

Such criteria can be applied in a variety of ways. For example, qualitative tests of suitability and acceptability might be used to screen out inappropriate options. Quantitative feasibility assessments, including detailed financial appraisal and resource planning, might then be used to select the best option.

Reference source: Johnson G. and Scholes K. (1997) "Exploring Corporate Strategy", Prentice Hall

Strategic Processes

Strategy is often closely associated with formal planning processes, which were widely used by organisations in the 1960s and 1970s. Currently, there is greater recognition that strategy does not necessarily result from such deliberate plans or intentions, and that in many organisations effective strategy emerges from more informal processes. This view sees strategy as a coherent pattern of actions with a consistent strategic purpose.

Mintzberg and Waters have drawn a distinction between deliberate strategies and emergent strategies. In practice, strategies are partly deliberate and partly emergent, in a mix determined by:

• how precise, concrete and explicit the intentions of the organisation's leadership and other groups are, and how widely they are shared
• how pervasive and firm central control over organisational actions is
• how benign, controllable and predictable the organisation's external environment is.

These factors affect both strategy formation and implementation. Minzberg and Waters describe eight types of strategies with different origins, lying on a continuum from most deliberate to most emergent. They are:

1. planned - precise intentions backed by formal implementation controls
2. entrepreneurial - originating in the personal vision of a single leader
3. ideological - originating in shared beliefs and collective vision
4. umbrella - leadership defines strategic boundaries or targets within which others respond
5. process - leadership controls process aspects of strategy leaving content to others
6. unconnected - strategies originate in enclaves
7. consensus - mutual adjustment produces converging patterns that become pervasive
8. imposed - strategies originate in the environment, producing limited organisational choice, possibly becoming internalised

This view of strategic processes, rather than content, helps redress the balance between strategy formation through analysis and the practical constraints and behaviour that exist in all organisations. It also helps us to understand some of the ways in which the formation and implementation of strategy are linked, and the contribution that organisational learning makes to strategy.
Reference source: Mintzberg, H. and Waters, J. A. (1985) "Of Strategies, Deliberate and Emergent", Strategic Management Journal, Vol. 6, p. 257-72

Evolution provides a good example of emergent strategy. There is no active design process or designer, yet evolution has bee an extraordinarily effective strategy for those species that have survived.

Strategic Styles

Strategies are developed in different ways in different organisations. Bailey and Johnson identified six strategy drivers that are used in combination when strategies are developed, producing distinctive strategic styles or profiles for different organisations.

• Incremental - step by step development of strategy.
• Visionary - influenced by the personal vision of a strong leader.
• Planning - developing strategies from structured planning approaches.
• Political - strategy developing from bargaining and negotiation between stakeholders.
• Cultural - strategies arising from shared views and experience.
• External - strategies imposed by changes in the external environment.

In the profile, the degree to which each of these factors is present is assessed relative to the others. Some drivers may be completely absent while others dominate, though at least three or four are usually present to some extent.

Analysis of the strategic style of an organisation helps us to understand the processes by which strategy is formed and hence increases our ability to influence it. Strategy styles tend to evolve in response to external and internal pressures, including institutional structures, stakeholder pressures and individual personalities. A major change in any of these can leave an organisation with an inappropriate strategic style that can become an important weakness.

Reference source: Bailey A. and Johnson G. (1995) "The processes of strategy development", in J. L.Thompson (ed.) "The CIMA Handbook of Strategic Management", Oxford, Butterworth Heinemann

How to use a RAID log

Most of the projects I work on use some form of RAID log.

RAID stands for Risks, Actions, Issues and Decisions. The RAID log is a simple tool to keep track of all of these, which can be very useful in regular project meetings as well as for audit purposes.

• Risks represent those things that could go wrong, either in the execution of the project (project risks) or in the underlying business being changed or created (business risks). For each risk we normally estimate the probability and impact of it happening, and also any actions we are taking to mitigate against it. We also normally assign an owner, who is responsible for monitoring and mitigating against the risks, and set a future review date on which it will next be assessed.
• Actions represent all the things that need to be done. These are typically actions that arise during project meetings and don't necessarily include all of the actions already on the project plan. Each action should have an owner, a due date, and eventually a date on which the action was completed. Each project meeting should review actions, to mark off those completed and review progress against those not yet completed.
• Issues are known problems within the project or the business being changed or created. Many people think of issues are risks which have already happened. Issues are typically notified up the management chain, for example to a project steering committee or business executive team. For each issue, you should identify what you intend to do about it, who should do this, and when it should next be reviewed. Issues should be marked as resolved once the problem is sorted out or the project moves past or around the obstacle.
• Decisions are simply a list of decisions made in a project. They are simply listed as a record of decisions made. You can also record when the decision was made, and by whom it was made.

The secret to a good RAID log is to record the right risks, issues and decisions at the right level of detail. Too many and in too much detail simply creates unnecessary bureaucracy. Too few in too little details does not provide a sufficient record of the state and progress of the business. For example, I have often seen risk logs populated with boilerplate risks: these are generic project risks, such as 'we may not get sufficient executive sponsorship' which don't really add any insight to the project. (If you genuinely think that is a risk, you be better of identifying the underlying reasons which might cause this, and then expressing the risk in those terms.)

RAID logs are an excellent governance mechanism, and worth keeping even if for no other reason than so that you have all of the information to hand if the internal audit department or some other stakeholder decides to audit your project. But don't forget that projects are fundamentally about doing things. So identifying risks and issues without also identifying actions to mitigate them, and making decisions to resolve them will not get you very far.

Resources: You can create and manage your own RAID logs with your team in our secure and collaborative online tool at StratNavApp.com - simply register and select "Control".

What is Strategy?

What is strategy? This is a question which comes up surprisingly often. Sometimes it is in isolation. Other times it is in comparison to something else. (See, for example, my recent post "Brand Strategy is NOT the same thing as Business Strategy").

If we are to engage in strategy with any measure of success, it is important that we are able to answer this question.

What is strategy?

A strategy is a plan to achieve a goal within a given context (tweet this).

Strategy (as an activity) is the development and execution of such plans.

Strategy is often boiled down to three simple questions:

• Where are we now?
• Where do we want to get to? (This is the goal.)
• What is the best way to get there?

What is business strategy?

In business strategy:

• the goal is usually defined in terms of growth, profit, sustainable value creation or something similar. It can also be expressed as a corporate mission or vision statement, or as a value proposition.
• the context is:
• the ever-changing environment in which the business operates. This includes the competitive, regulatory, technological, customer, supply chain, etc. environment,
  and
• the businesses internal capabilities, resources, strengths and weaknesses. 
• the plan is how you allocate resources (typically people and money).

In business, resources and executive attention are usually limited. So business strategies are often as much about defining what a business will do to achieve its goals as it is about defining what the business will NOT do in order to achieve sufficient focus. This is why Michael Porter declared that "The essence of strategy is choosing what not to do."

What is competitive strategy?

Competitive strategy adds to this by recognising that there may be other players/businesses on the field. These may have similar or competing goals. They need to be out-manoeuvred in order to achieve the business's goal.

What is marketing strategy?

Marketing strategy is a variant of business strategy. It starts from the position that the goal is to satisfy customers' needs.

That is technically a narrower definition than business strategy. But in practical terms, it is difficult to separate the satisfaction of customer needs from the sustainable achievement of just about any other business objective. For this reason, the lines between business, competitive and marketing strategy are often blurred.

However, the broader definition of business strategy recognises that there are courses of action that can be pursued to make a business more successful which have little or no direct impact on what the customer experiences (at least in the short term).

Business strategy encompasses and binds together not just marketing strategy, but also operational strategy, financial strategy, etc. However, in this video, Michael Porter cautions against have multiple sub-strategies in this manner. From this, it follows that an organisation should not have 'a marketing strategy' but rather that marketing should be a consideration within a business strategy.

For the reasons described above, business strategy invariably incorporates both competitive and marketing strategy.

Other types of strategy

There are, of course, lots of other types of strategy. Military strategy, for example, is a form of competitive strategy unrelated to either business or marketing strategy. So too are the strategies one might employ to win a game of chess or cricket. One might also have a weight loss or fitness strategy with no element of competitive, business or marketing strategy.

In all but the simplest contexts, successful strategies must recognize that the context is changing rather than static. Strategy must, therefore, be able to respond to, if not anticipate or even shape, such changes in the context.

Strategies, which are 'clever' are often considered more strategic than those that rely on brute force (size, amount of spend and effort, etc.). Complexity should not be mistaken for cleverness, and great strategies are often deceptively simple.

For example, consider the film 'A beautiful mind'. In it, John Nash famously advised his friends to always ask the second prettiest girl in a group out for a date. He argued that she was more likely to appreciate the attention and accept. A very simple strategy, indeed. Although I have always wondered if he shared this strategy with his friends so that they'd all pursue the second prettiest girls leaving him free to pursue the prettiest girls himself. That would be a neat feat of competitive strategy!

Strategies can be good, that is, likely to achieve the goal even as the environment changes around it, or poor, that is, unlikely to achieve the goal and/or too static in the face of the changing environment.

Good strategy is usually based on a thorough analysis of the context and capabilities. See, for example, my post on how to Analyse the Business and its environment.

Strategies can be subdivided into sub-strategies. For example:

• short, medium and long-term strategies,
• brand, IT, HR, financial, etc. strategies.

Ideally, such sub-strategies should all remain aligned as part of an overarching strategy. However, my experience is that such alignment is not always achieved. (See Michael Porter's comments in the video included under the Marketing Strategy heading above.)

What are tactics?

Tactics are related and yet different to strategies.

Tactics are rules of behaviour which apply regardless of context and strategy.

We can think of strategies as "given these unique circumstances and this goal, the best course of action is to ..." whilst tactics are "whenever this happens, we respond with that." In this way, strategy is contextual and unique, whilst tactics are generally repeatable.

For example, when walking through the woods, your should always be on the lookout for and avoid snakes. The things you do to look out for and avoid snakes are tactics. It doesn't matter why you're walking through the woods, you should just do them whenever you are. On the other hand, if the best method to get from here to the lake is to walk in a straight line in a Northerly direction. Walking in a straight line in a northerly direction and any steps you take to stay on that course are strategy. If that route take you through the woods, you're back to avoiding snakes - but those actions are still tactics.

Strategy provides a context for the long-term, big-picture thinking required in order to make trade-offs and sacrifices. Think, for example, of a chess player sacrificing a pawn in order to achieve some greater advantage.

A strategy is what makes all the tactics through which it is implemented add up to more than the sum of the individual parts.

Sun Tzu wrote: "All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved." Tactics are the individual actions which we can see an organisation take. Strategy is the unseen, behind-the-scenes logic which makes those tactics appropriate and effective.

Strategy itself is a relatively simple concept. The methods of achieving strategy may be complex and varied. But at the end of the day, the objective is very simple: a plan to achieve a goal within a given context.

Context

The context for a strategy is everything about the situation in which the strategy must operate.

In business strategy, this includes the internal state of the organisation (strengths, weaknesses, resources, capabilities, etc.) and the external environment (customers, distributors, suppliers, competitors, substitutes, owners, regulators, etc.)

The context for a strategy may impose a number of constraints (barriers, challenges, bottlenecks) as well as confer advantages.

A strategy must either operate within such constraints, or find a way to break out of them. And a strategy will be easier to the extent it exploits any advantages conferred by the context.

Post-script: Some other definitions of strategy

• The authors of Playing to Win, A.G. Lafley and Roger L. Martin, describe business strategy as “a set of choices about winning” or, more specifically, “an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.” (Source)
• Peter Compo devotes an entire chapter to unpicking different definitions of strategy in his book "The Emergent Approach to Strategy". It is well worth a read.

Brand Strategy is NOT the same thing as Business Strategy

I don't often write rebuttals. However, after a recent debate on Linked with the author of a post entitled 'brand strategy is business strategy' I feel compelled to do so. I would have been happy with brand strategy is a component of business strategy, or even brand strategy is a form of business strategy, but the the author went too far by claiming that brand strategy (as well as marketing strategy) are synonyms for business strategy. And that is a step too far.

I accept that language evolves, but I think that every time you take two distinct words and make them synonyms for each other, you lose something. For example, the words 'hill' and 'mountain' describe two overlapping yet distinct concepts. Sure, we could rename The Rocky Mountains as The Rocky Hills, and described them as big hills to set them apart from smaller hills, but we'd have lost something in our ability to describe and understand the world.

So it is with management concepts. Strategy, marketing, brand, marketing strategy, brand strategy, etc, are all perfectly good terms describing related but distinct concepts. If we start treating them as synonyms for each other we will lose something of our ability to describe and understand the different facets of organisations.

So what are the differences between marketing strategy, brand strategy and business strategy?

Strategy involves trading off short term tactical considerations against longer term, bigger picture objectives. Business strategy involves making such trade-offs in any and all aspects of running a business.

Marketing involves matching what customers want (or can be persuaded to think they want) to what the firm does or can provide.

Brand is the mark a firm uses to symbolise and communicate the meaning it attaches to itself, it's products and it's services. (The word derives from old English 'to burn' and was first used by farmers who literally burnt their mark onto their livestock, but it is now used more generally than that.) In a modern context, brand provides a rich vehicle for building and communicating expectations of an organisation, product or service.

It is as possible to engage in tactical marketing as it is possible to engage in strategic marketing. The same is true of branding.

Similarly, there are many forms of strategy other than marketing strategy: think of HR strategy, IT strategy, even partnering strategy, operational strategy, procurement strategy, innovation strategy, etc, not to mention the overall alignment of business strategy.

These are related but distinct ideas - not synonyms.

If we allow marketing strategy to become a synonym for business strategy, then how would we justify not promoting HR strategy as a synonym for business strategy. That would make marketing strategy a synonym for HR strategy, not to mention IT strategy, etc. Before you know it everything would be a synonym for everything else. That way lies madness!

I frequently encounter people from various disciplines arguing that their discipline is the acme of business strategy, but branding people seem to do so more often and more strongly than most. In my experience this seems to stem from one of two causes: either

1. they are so wrapped up in the importance of branding that they simply fail to be able to conceive of the idea that anything else could be important,
   or
2. they actually are doing business strategy but for some reason are determined to call it something else.

To those people, I say: let's own our disciplines. Value branding and marketing for what they are. Value business strategy for what it is. Understand the similarities and differences between these disciplines, and how they can be combined where needed to achieved desired objectives. But let's not get lazy and try to pretend that they're all the same thing.

I thought I'd finish with an example: imagine a hypothetical European manufacturer of specialised industrial components. It has a strong innovation pipeline and its products are well protected by international patents. Its products are bought locally and globally by large manufacturers whose engineers value its products superiority quality and performance.  The problem is that it can't keep up with rapid growth in demand in the USA, and increasing shipping costs and trade restrictions are cutting into its profits. So it decides to start manufacturing in the USA for the first time. Where should it locate its factory(ies)? How and where will it find staff with the right kinds of skills? How will it train local staff and transfer expertise from Europe whilst maintaining tight control of its Intellectual property? How will it need to adapt to USA labour laws? How quickly should it bring capacity online? How will it distribute the product it manufacturers in the US? In answering all of these questions, the firm develops a perfectly valid business strategy with little, if any, reference to brand or marketing.

To describe such a business strategy as being the same thing as branding strategy is completely unhelpful.

Porter's 5 Forces: John Lewis defends it supplier rebate demand

John Lewis' recent defense of its new policy of charging suppliers a 'rebate' for increased sales through its stores (see John Lewis defends supplier rebate demand) provides a great example of Porter's 5 Forces at work.

Suppliers are seeing big retail distributors like John Lewis and the large supermarkets becoming more and more powerful and able to dictate the terms of business. In Porter's terms, the Bargaining Power of Distributors is increasing. This ultimately makes it harder for the suppliers to turn a profit (a fact many bemoan) unless there are other compensating changes in any of the other 4 Forces.

For example, big retailers' control of the industry could reduce the Threat of New Entrants by imposing barriers to entry in the form of established relationships, supply chain integrations or other conditions of doing business. Similarly, if the suppliers own suppliers don't have a lot of bargaining power, the burden of the demands imposed by the big retailers could simply be passed down the chain.

Porter's 5 Forces also suggests that if the big retailers become too powerful and demanding, then the drive for suppliers to find alternative means of distribution will increase. In this way, the free market should ultimately limit the amount of power these distributors can acquire. The market will either stabilise with all parties in the value chain able to extract their fair share of the profit, or some innovation disrupting the existing value chain.

Using Porter's Five Forces model in this way is a valuable tool in helping each supplier decide how to respond to John Lewis's new policy.

photo credit: kenjonbro via photopin cc

How to use Porter's Value Chain Analysis

The value chain is a simple graphical method for

• identifying and describing a firm's main functions,
• understanding how they add value, and
• pinpointing a firm's sources of competitive advantage and differentiation

The sample diagram below shows a generic value chain originally described by Porter:

Of course, this value chain describes a typical business dealing in physical goods. For example, manufacturing or distribution. The value chain for a service organisation might look completely different. See, for example, An investment management Value Chain.

To get the most out of value chain analysis it is important to identify the processes that best describe each operation. Each business should be unique. Therefore, each value chain, even at this high level, could be different.

Once you've mapped out the core functions within the organisation, you can then consider each function in more detail. Consider factors, depending on your purpose, such as:

• people,
• processes,
• technology,
• costs,
• strengths,
• weaknesses, etc.

There are many uses for a Value Chain analysis, for example:

1. Create a general yet holistic and shared level of awareness of the basic functions of a firm and how it creates and consumes value.
   
   This is a useful underpin for many other forms of strategic analysis. For example, you could create a matrix with the 7-Ss of the McKinsey 7S model along one axis and the processes from the Value Chain along the other axis. This will give you a more thorough and detailed analysis.
   
   This is also an important step when working with functional teams from within a business. People from different functional areas tend to have incomplete or skewed views of the organisation as a whole. For example, salespeople tend to have a sales-orientated view. They may underestimate the importance of inbound logistics. A value chain can help you to identify and correct this.
   
   
2. Design a Target Operating Model (TOM).
   
   See also How to design a Target Operating Model (TOM).
   
   The Value Chain is a useful model for ensuring you've designed the Operating Model of an entire organisation. That is including both the core operating functions as well as the supporting functions.
   
   
3. Do a gap analysis and design a strategy to close that gap.
   
   Using the same framework for describing both your existing operation (1 above) and your Target Operating Model (2 above) makes it easier to identify the gaps between the two. Then you can put plans in place to close those gaps. This alone can be sufficient to create a transformation strategy. However, I'd always advise also taking some external factors into consideration before getting too far down this track.
   
   
4. Ensure complete coverage in major change programmes.
   
   A value chain model provides a useful checklist for major change programmes. This will ensure you've considered the impact and implications for all functions within the organisation. For increased consistency, you could create your project's work breakdown structure along the same lines as the value chain.
   
   
5. Facilitate post-acquisition integration.
   
   A  post-acquisition integration is one kind of a major change programme. For an integration exercise, you'd first need to describe both organisations using the same value chain. This, in itself, could increase your understanding of the fit between the two organisations.

Use a Porter's Value Chain template

The diagram shown above was drawn with StratNavApp.com, the free online collaborative tool for strategists - try it now for free. It includes and integrates templates for the value chain and many other popular strategy models.

See also:

• Essential Strategy Analysis Tools

Strategy Implementation: The Weakest Link

If you've ever watched the British TV Game Show "The Weakest Link" (or one of its numerous international spinoffs) you've probably learned some of the most important lessons of strategy implementation.

First, a quick overview of the rules. The contestants are asked questions one at a time. Each time a contestant gets a question right, an amount of money is added to the prize pot. The objective is to chain as many correct answers together in a sequence as possible. Each correct answer in a chain of correct answers is worth more than the one before it. The chain is broken when a contestant gets a question wrong or says "bank" just before their turn. If the chain is broken because a contestant gets a question wrong, then the money in the pot is lost. If the chain is broken because a contestant says "bank" then the pot is added to the prize purse and cannot subsequently be lost. In either case, the value which can be won be answering the next question correctly is set back to the initial amount and must be gradually built up again.

It follows from this that the most amount of money that can be won in a round is won by answering all the questions correctly and never saying "bank". However, if the contestant answers just the very last question incorrectly, then the whole group gets nothing for the round even if they'd answered all the other questions correctly. The reward and risk are maximised by following this strategy.

Alternatively, if each contestant says "bank" before every question, then the purse will be increased for each correct answer. But the amount by which it is increased will never increase, limiting the total amount that can be won.

The key to success in "The Weakest Link" is to bank at the right times. Don't bank often enough and the risk becomes to high; bank too often, and the rewards are limited. It is the same in strategy execution.

Lesson 1: Bank often to reduce risk. In strategy execution, banking means delivering a change into an operating business. Documents, plans, blue prints, strategies are all well and fine, but they are not bankable until the are effected as changes to the operation. Similarly, programme code is fine, but it is not banked until it is launched into production. Strategies are worthless until they are executed.

This can be likened to work-in-progress (WIP) in manufacturing terms. WIP is treated as an asset on the balance sheet in accounting terms. But in financial terms, it remains a cost until the work is completed and the product is sold. Just as firms should reduce work in progress, so to should they aim to reduce plans not yet executed to completion.

The way to achieve this is to break big changes into smaller changes. This is not the same as breaking projects into phases, such as analysis, design, implementation and testing. This means breaking changes into smaller changes which can be implemented and each of which improve the operating business.

Lesson 2: Banking too often reduces returns. It is a fine balancing act. If you change too often the organisation will start to suffer from change fatigue, and the operation will never become stable enough as a platform for future changes. For example, where change is implemented through computer systems, each change needs to be fully testing, data needs to be converted and operating procedures need to be changed. All of this costs money and so cannot be undertaken too often.

Every operation requires a natural rhythm of change. If change is infrequent and irregular it will be hard to analyse and control. However, unlike in "The Weakest Link", the rules are not cast in stone. Once you have established a natural rhythm, you should aim to speed it up, achieving higher rewards at lower levels of risk.

See also: Big business appears to favour big change

photo credit: rickh710 via photopin cc

'Big data' is a big opportunity, not a big error

In an article on Wired entitled Beware the Big Errors of 'Big Data', Nassim Taleb is fairly disparaging of 'big data'.

His main point appears to be that you can do bad research with small amounts of data, and that you can still do bad research whilst sounding more convincing with large amounts of data. (However, he uses much more complicated words than that to make his point sound more profound.)

What he fails to mention is that you can do very good research with small amounts of data, and even better research with large amounts of data. (See, for example, More Data Usually Beats Better Algorithms.)

In doing so, he makes the same mistake that he so often criticises others for making - that is, he presents data which support his preconceptions whilst ignoring data which refute them.

Big data provides organisations with a potential resource. As with all resources, organisations can choose to use it, or leave it alone. If they choose to use it, they can either use it well, or use it poorly. Undoubtedly we will hear many stories in the future of organisations that used 'big data' poorly, and the naysayers like Mr Taleb will jump on these instances as some form of proof that 'big data' is somehow a bad thing. In the meantime, the organisations which have invested in understanding how to use 'big data' successfully will simply ignore them and carry on benefiting from the advantages they achieve.

I believe that big data offers tremendous potential and will give firms that get it right yet one more advantage over those that don't.

Big business appears to favour big change

Big business appears to favour big change - that is, big initiatives, organising lots of people with large budgets, culminating in big announcements. I think that this is partly because bigger initiatives with bigger budgets look better on CVs.

But smaller incremental changes may produce better results:

1. They start to earn a return sooner.
2. The get customer feedback sooner - allowing you to change, speed up, slow down or even abandon programmes of change.
3. They needs less, if any, financing.
4. They are easier to project manage.
5. They allow you to try more alternatives, abandoning directions that don't seem promising and continuing with those that deliver results.

Success can then be measured in terms of outcomes, not initiatives - in terms of measures like customer acquisition, satisfaction and retention rates, operational efficiency, costs and revenues, rather than in terms of projects delivered (whether or not they delivered any actual benefits).

I think it is time big business started seeing change as a continuous process, an element of culture, rather than a series of events. Almost any project can be broken up into a series of smaller changes. As a rule of thumb, I believe that, projects should be broken up into the smallest separately deliverable changes possible.

We do it every day, but do we do it well?

Strategy is something we all engage in every day. We set goals, and we decide what to do to achieve them. We may do it consciously or unconsciously. Our resulting strategy may be to sit back and see what happens, or it may be to proactively take actions we think will get us what we want. We may reason our actions through carefully, or we may make decisions on the fly. Our decision and actions may take us closer to our goals or they may not.

All of this is in the nature of doing strategy.

However we do it, there is no way to avoid it. So the only choice we have is about how well we do it.

The maxim:

An unexamined life is not worth living

might have been written about strategy. In a commercial context we might paraphrase this as "an unexamined business is not worth leading".

If we are going to do strategy well, we must think about 

1. how we examine our circumstances - are we truthful with ourselves or do we foster comfortable and familiar delusions,
2. how we make decisions - are we rational or do we let negative emotions and whims get in the way,
3. how we act - do we prepare appropriately and are we willing to make the effort and persevere, and
4. how we reflect - do we take the time to reflect on how we'll we've done on steps (1) to (3) and whether we're in fact achieving our goals and that they're satisfying us?

Strategy Risk: The Importance - Attention Matrix

One of the biggest strategy problems is to fail to pay attention to the right things.

If you map the relative importance of issues to your strategy against the relative amount of attention they receive in the organisation, as shown to the right, you get three outcomes:

1. Risk arises where issues which are strategically important receive inadequate attention
2. Waste arises where issues which are not strategically important receive too much attention
3. Performance occurs where all aspects of your strategy receive the right amount of attention, be that a lot or a little.

Consider the situation encountered in many mature organisations. The accountants take over, and financial matters get more attention than they need (sometime resulting in financial over-engineering problems and financial risks). In the meantime, in those organisations, customer issues often get very little attention, even as the organisation's customers' start to look elsewhere, exposing the business to strategic risk.

On the other hand, in entrepreneurial startup organisations, the organisation often focuses overly much on customer related issues, with inadequate attention to financial issues, and so runs into cash flow or debt issues. Alternatively they fail to pay sufficient attention to process, and run into problems with scalability once the business takes off.

Part of a strategists role is draw people's attention to the right balance of what requires attention. Unfortunately this often means calling attention to future challenges while the present seems very rosy. This can lead to the Cassandra effect - where your attempts to look to what is important for the future are doomed to be ignored in favour of what is currently attracting attention. In these circumstances, careful stakeholder management is required to take key stakeholders on a journey from what they're currently paying attention to to what they should be paying attention to.

The World Economic Forum's Global Risk 2013 report

photo credit: World Economic Forum via photopin cc

The World Economic Forum released their 8th Annual Global Risks report this week.

The executive summary outlines 3 key global risk scenarios, which I've paraphrased here:

1. Testing Economic and Environmental Resilience: We continue to push our economic systems and the environment to its limits. A simultaneous shock to both could create the perfect storm and overwhelm both.
2. Digital Wildfires in a Hyperconnected World: The rapid and widespread dissemination  of misinformation could result in a global panic - the dark side of the rapid growth of social media and the democratisation of mass communications.
3. The Dangers of Hubris on Human Health: Recent advances in healthcare may have lulled us into a false sense of security, even as we approach the limits of our existing approaches to combating ever mutating threats.

How much attention you should pay to global threats of this nature depends on what kind of organisation you are. Clearly, if you're a global bank, insurer or health care concern, these should be near the top of your agenda. However, if you're a corner fish and chip shop, there is probably not much you can do about these issues and so there is not point in wasting too much time worrying about them. For most of us, the challenge is working out where we fit between those two extremes.

How could Jessops have avoided administration?

UK high street camera retailer Jessops became the first high profile UK business to go into administration during 2013.

Fundamentally, what happened was its customers' habits changed, leaving the retailer stranded: the lower end of its market abandoned the stand-alone camera as the cameras bundled into their mobile phones became more than adequate for their needs in terms of quality, and much more convenient, whilst the higher end of their market found they could get larger product ranges at cheaper prices from a large number of niche online retailers.

What could Jessops have done? I think there are broadly three strategies it could have considered:

1. It could have followed the lower end of its market into the mobile phone market. This would have taken it directly into the existing and cut throat mobile phone retailing market and it is questionable whether its retail foot print would have been big enough to succeed in this strategy.
2. It could have followed its high end customers into the specialist arena. To succeed here it would have had to identify an edge it had over the many niche providers. Probably it would have had to rely more on online distribution and to close all but a few flagship physical retail outlets.
3. It could have moved beyond product (i.e. cameras) to purpose (e.g. images), perhaps by providing facilities for in-store novelty gift creation directly off customer's mobile phones. I am thinking of small runs or even single items of key-rings, mugs, phone covers, etc. with customers photographs and mess ages printed on them.

Perhaps Jessops had considered these options and had been unable to get any of them to work. I don't know. What I do know is that sticking to its existing strategy while its customers' behaviours changed had clearly not worked, and now it is for the administrators rather than management to find a solution.

What else do you think they could have considered? Please leave your comments below.