Small firm strategy in turbulent times.

Author:Box, Thomas M.
 
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INTRODUCTION

Triggered by the burst of the housing bubble in late 2007, the United States entered the worst recession since the 1930s. Unemployment is currently at a twenty seven year high. Erosion of revenue and profits has plagued many firms and the very structure of a variety of industries has been impacted. The old strategy approach of positioning a firm within its industry is no longer completely adequate because of profound structural changes in many industries. What is needed for survival and some measure of success in a small firm is the appropriate positioning of the firm and an emphasis on operations excellence (Porter, 1996) under the guidance of Situational Leadership[R] (Hersey, 1997).

One definition of strategy is "A plan of action resulting from strategy or intended to accomplish a specific goal" (American Heritage, 1993). This general definition alludes to an important point and that is that the purpose of strategy is to accomplish an important goal or goals. The word "strategy" has as its root the Greek word "strategos" and that word is loosely translated in English (from Greek) as "the art of the generals". One of the first books describing the formulation and implementation of strategy was Sun Tzu's classic "The Art of Strategy" published some time during the Warring States Period (480-221 BC) (Wing, 1998). The Art of Strategy is really a series of tactical recommendations for conducting war. Although somewhat dated, it is interesting to note that this book is used as a strategy text at hundreds of schools around the world including the US Army's Command and General Staff College at Fort Leavenworth, Kansas.

It is difficult to estimate how many books, articles and monographs have been published about strategy over the last 2500 years, but it is safe to say that the number is well into the thousands. In "Strategy Safari", written by Mintzberg, Allstrand and Lampel in 1998, the authors comment that they reviewed more than 2000 published studies on strategic management. Most of the published work on strategic management addresses the strategy problems (opportunities?) facing larger organizations. This is appropriate from a pedagogical perspective but it is not always helpful to the very small organizations that populate the business landscape. According to the Bureau of the Census, in 2002 more than 97% of all business firms in the United States had fewer than 100 employees. It is to the leaders and employees of these very small firms that this paper is addressed. Although some would argue that very small firms (fewer than 100 employees) don't really need to concern themselves with strategy as normally understood, I disagree--vehemently. If one "buys" the fundamental assumption that there is an important relationship between strategy and firm performance, then it's obvious that small firms need effective strategic management as much as large firms.

STRATEGY AND TACTICS

Pick up any strategic management textbook and you will find that strategy, in its most general sense, is visualized as a series of decisions resulting in plans that must be implemented to achieve whatever the organization's goals are. Many authors suggest that the starting point for the process is the articulation of a vision statement. Presumably, a vision statement defines, in fairly general terms, where the business organization wants to go in the future. In other words, the vision defines (loosely, in most cases) expectations regarding future markets to be served, products or services to be developed and some idea about the target customers.

Related to the vision is the idea of a mission statement. A mission is an articulation of what the company does currently in terms of products and services, markets and customers served. Some authors (and experts) see the vision and mission statements as "two sides of the same coin" and others see the vision and mission as distinct and quite different. The distinction is fairly unimportant from the small firm perspective.

I ascribe to a slightly different viewpoint regarding prescriptions about how to "do" strategy in a small organization. Jack Welch, in his recent book "Winning", talks about starting strategic management with a very careful decision about what he calls the "Big Aha"--a smart, realistic, relatively fast way to gain a competitive advantage (Welch, 2005). There are two fundamentally important considerations in this straightforward recommendation--the time dimension and something called competitive advantage. The time dimension is important and becoming more so all the time. Consider that Tom Peters in his groundbreaking book--"Thriving on Chaos"--back in 1988 talked about the critical importance of hustle. Successful firms tend to "out hustle" less successful firms in their industries by considerable margins. And this doesn't mean just compressing the delivery cycle. It means substantively shortening the time required to perform most operations--order placement, conflict resolution, billing, customer responses and new product development.

A competitive advantage means, essentially, what the label suggests--valuable and rare core competencies (Thompson, Strickland & Gamble, 2010). Core competencies that lead to significant competitive...

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