Case Study: Strategy Development
Creating a strategy process for a complex geographically dispersed business
Large ($1,000,000,000 annual revenue)
Industrial construction/oil & gas maintenance
Creating a Strategy Process for a Complex Geographically Dispersed Business
Situation: A large industrial construction company headquartered in the Southwest had grown opportunistically without regard to creating an overall business strategy. This company had major business entities throughout the United States and had also grown through the acquisition of companies in adjacent businesses. As a result, the company had over 15 “profit-centers” in various industries across the South, Midwest, Southwest, and Western United States. Each profit-center was run relatively independently and was given significant autonomy with regard to the work they pursued and how they undertook its completion. The corporate entity began to see patterns that were troubling, including hoarding of resources and more competition than collaboration between profit-centers. Profit-centers were also frequently unwilling to work together on client acquisition, competing against each other to acquire client work, thereby often driving down profit margins and confusing the client. Directors of profit-centers took pride in being called “mavericks,” not conforming to corporate recommendations and using the annual revenues their profit-centers generated as a rationale for their independence. The corporate executives came to realize that profit margins were beginning to erode and that the type of culture they wanted across the company was being threatened. In addition, the desires of the individual profit-centers were taking precedence over what was in the best interest of the organization as a whole. Although the company focused regularly on a revenue goal during their annual planning, they had not developed a long-term business strategy that included how each profit-center would align with corporate objectives. In order to address this issue, the company contracted with Myron Beard Executive Consulting (MBEC) to assist in the creation of a company strategy.
Process: All strategy processes have the following goals in common:
The MBEC Difference
MBEC helped a large company overcome a widely dispersed geography and competing profit-center interests to work with a collaborative, synergistic—and more profitable—approach.
- Clarify a desired end state
- Identify the current state (data acquisition)
- Understand the gap between the desired end state and the current state (data interpretation)
- Make recommendations to close the gap
- Secure key employee ownership of the recommendations
- Implement the recommendations
1. Clarifying of Company Objective: Sun Tzu in The Art of War said, “Tactics without strategy is the noise before the defeat.” The corporate executives recognized that, without a unifying strategy in place, the company ran the risk of either imploding as a result of not being able to effectively manage all of its business entities, or exploding as result of the profit-center “mavericks” becoming more isolated from the larger company and breaking away. The corporate executives wanted to create a clear, simple, cohesive, and comprehensive business strategy that would drive processes and business practices throughout the organization. This business strategy would serve the purpose of creating a uniform corporate identity by driving consistency, reliability, control, and, ultimately, increased leveraging of company capabilities, without adding unnecessary bureaucracy. In addition, corporate executives wanted leadership to internalize this strategy development process so the company would not require external consultation and facilitation to continue this process in the future.
2. Discovery of Current State Analysis: MBEC began rigorous data discovery work to understand both the client’s current status and to put together a clear picture of what gaps existed. This discovery process consisted of intensive interviews with corporate and profit-center executives and key employees, as well as a review of the documents and processes that the organization had been using to that point.
3. Presentation of Conclusions: As expected, the data indicated a fragmented approach to business that included focusing on short-term “wins” at the expense of corporate-wide benefits; a lack of consistent practices and processes in the execution of the work across the company; an inability of the corporate office to effectively impact change because of the random manner in which corporate worked with profit-centers; an erosion of both revenue and profit margins; and, finally, the increasing competition from other companies that had already created a more uniform and sophisticated approach to the marketplace.
4. Recommendations: As a result of these conclusions, MBEC suggested that the organization undertake the following recommendations:
- Unification: In order for the business to become a “one-company company,” it was clear that all the profit-centers needed to be on board with this new corporate initiative of strategy development. MBEC recommended that all profit-center managing directors be assembled to review and discuss this new unified, collaborative, systematic, standardized, consistent, and long-term strategy development. Further, it was recommended that all profit-center managing directors both understood and agreed with this new corporate direction.
- Ownership: MBEC recommended that the organization identify key individuals who would be involved in the creation of the initial strategy development. This included identification of an individual or small group to manage the process over time.
- Creation: MBEC worked with the new strategy team to develop a process for creating a company-wide strategy, including tools and methods required to maintain this strategy development over time. This work resulted in the creation of company-wide Mission, Vision, Values, and Strategies statement to improve the key elements of sustained success in the industry. Each strategy had sub-strategies, including annual goals and expectations in the framework of a five-year outlook. Metrics were identified to measure whether the strategies and sub-strategies were accomplished.
- Implementation: MBEC worked with the strategy team to take this work to each of the profit-centers and align their work with the corporate strategy. Each profit-center revised its own mission to align with that of the corporation. In addition, profit-centers began the process of working more collaboratively with other profit-centers. The organization was restructured from 15 profit-centers to three areas (geographically), in order to drive consistency and standardization throughout the organization. This simpler structure allowed the company to implement change more quickly and with fewer obstacles than before.
Outcome: This strategy development planning became a standard annual process. It included the three area managers working with the corporate strategy team to revise, as necessary, the rolling five-year strategy. After some bumps in the road with expected early resistance to the process, the “maverick” mentality quickly dissipated and a much more collaborative and synergistic approach developed to win client work. Five years after the initiation of the strategy-development process, the company was purchased by a larger company at a 250% premium!