How Can Intended Strategy Be Realized?

Firms invest precious time and energy in the development of strategic plans. Unfortunately, their intentions are often not fully realized. Why does this phenomenon occur and what can be done to prevent it?

First, strategic goals are sometimes too much of a “stretch” and not realistic. Plans based on these goals quickly become irrelevant or uninspiring. Strategic goals should be imperatives, not wishful thinking. They should drive performance and not be seen as optional.

Second, strategic goals are sometimes not communicated to the entire firm. Instead, they remain the exclusive concern of management. When this occurs, front-line team members are unable to contribute ideas or support strategic goals in any intentional manner. Strategic goals should be shared with everyone, not just management.

Third, strategic goals are sometimes not tied to performance. If these goals are truly imperatives of the firm, then not only should the goals be shared by all, but they should be a featured element of performance evaluations. This will promote commitment and significantly improve the odds of intended strategy being realized.

It is a tall order to realize strategic goals on a regular basis, for much can go wrong during a planning period. However, if we implement these management practices, we will dramatically increase the likelihood of achieving the intended strategic goals. 

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Gas Pricing: A Case Study in Economics

As prices rise, demand falls. This is basic economics. A gallon of gas sold for $1.99 not so long ago. Today, that same gallon of gas sells for $4.29. Gas mileage hasn’t improved, so, if economic laws are correct, we should be driving less than 50% fewer miles than we were when gas sold for $1.99 per gallon. Now let me ask you this: Who do you know that drives any differently, despite gas prices continuing to climb faster than our income? Exactly!

 

So what is going on here? Was our Econ 101 textbook written by Martians? Are we just stupid and can’t do the math? Of course not! We know what the reason is: We have to drive and we want to drive. There’s no mass transit in my state, with the exception of a bunch of busses that drive around empty.  The windows of these busses are painted over with ads just so that the taxpayers won’t go ballistic about seeing their hard earned money being wasted on a useless bus system.

 

The reality is that we really don’t care that much about gas prices. Sure, we may leave the gas station disgusted as we prepare to embark on a string of unnecessary errands, visiting with friends, and going on weekend jaunts, and we gasp in horror at the price on the screen, but we promptly forget about the pain as soon as our tires leave the gas station parking lot.

 

Even worse, the gas guzzlers are having babies. Every parking lot is jammed full of monster vehicles: vans, crossovers, trucks, SUV’s, and battleground vehicles with leather interiors and Bose sound systems. My little sedan feels like a bug crawling around looking for a spot between these mammoth creatures.

 

Let’s recap. Gas prices go up and we don’t change our driving habits. In other words, demand stays flat. This is where we have to look twice at our Econ 101 textbook and perhaps turn to chapter 2. The relationship between price and demand (sales volume) is called the “price elasticity of demand.” Demand is said to be “elastic” if it changes a lot with an increase in price. On the other hand, demand is said to be “inelastic” if it changes very little with an increase in price.

 

Gas prices have risen dramatically and demand has not changed much, so we really just have a simple case of inelastic demand. Of course, the economists and engineers among us would like convert everything to formulas and plot the results on graphs. They want to discuss “demand curves” and calculate mathematical models for optimizing prices and profitability. I have to admit that I’m in this group. However, for most of us, it is enough just to know that our beloved economic principles are not wrong after all.

 

For the business owner or marketing manager, this brings up an interesting point to consider. If the demand for gas is inelastic, is it possible that the demand for your product or service is also inelastic? Maybe not to the degree that gas is, but how inelastic is your demand? Wouldn’t you love to know how much you could raise prices and know exactly how it would affect your sales volume and profitability?

 

How would it impact your sales volume and bottom line if you could raise prices by 10%? What about 5%? What about 2%? These are easy calculations to make once a demand curve and operating costs have been established.

 

Just as the gas demand mystery was solved by the knowledge and application of macro-economics, profitability mysteries may be solved through the knowledge and application of micro-economics. Pricing is only one element of the Marketing Mix, but it is a very important one, as it directly affects sales volume and profitability.

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Who is Driving the Bus?

Much has been written about “the bus.” We’re told that we need to get the right people on the bus (hire the right people) and get them in the right seats on the bus (put them in the right positions). In this visual, the organization is the bus. My question is this: “Who is driving the bus?”

 

Our first response may be that the driver is the president of the organization, its owners, or perhaps its investors. After all, they provide leadership, direction, and control. But I don’t see any of these people as the driver. They may be on the bus, but they’re not in the driver’s seat.

 

Another response may be that the driver of the bus is the customer. While I don’t disagree with this, I think there is a more precise answer to the question. When I look at the driver’s seat, I see the consumer, the end-user of the organization’s products or services. This is the person who is steering the bus, changing lanes, making u-turns, and hitting the accelator and the brake.

 

Unfortunately, many well-intending organizations fail to focus on the consumer and are blind-sided by unforeseen changes. The people of these organizations focus on internal issues, such as saving their jobs, direct reports, bosses, deadlines, etc. They may be focused on the supply-side of the value chain–materials, suppliers, vendors, etc. They may even focus on their immediate customer- a broker, distributor, dealer, or other channel partner. This is all fine, but who’s driving the bus?

 

The consumer is the ultimate judge and jury. Whatever they decide to do affects the entire market, including all channel partners, suppliers, and producers. Everything is riding on the satisfaction of the consumer. If this is true, why is it that the consumer is often ignored by everyone but the final selling entity? After all, they are driving the bus!

 

We need to wake up and refocus our organizations. We need to realize that we aren’t driving the bus. Neither is our president, or our channel partners. We need to focus on the consumer. We need to understand them, survey them, study them, anticipate their needs, and continue to reinvent ourselves to bring to the market innovative products and services that solve the consumer’s problems.

 

This is what’s at the heart of marketing: identifying needs and solving them. Whose needs specifically? The person driving the bus!

 

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