Companies today face turbulent times, as they seem to have entered the era of crises: not only are companies still dealing with the aftermath of the COVID-19 pandemic, which is still disrupting supply chains today, they also need to simultaneously address challenges arising from the energy crisis and resulting transition, historically high inflation, as well as new geopolitical tensions.
Now more than ever, a company’s long-term sustainability is being challenged. The crises only comprise one aspect of the challenge. There are additional ones, brought on when:
- Customers demand ever-increasing value and are changing their consumption patterns.
- Competitors move aggressively in your industries to capture market share and improve much needed cost advantage.
- Regulators display increased activism and introduce new rules and constraints to conducting business, including the ability to change profit dynamics.
- Disruptors redefine value propositions, create new markets and converge previously unrelated sectors, thereby radically changing operating models.
Therefore, a carefully planned strategy is essential across all business issues including:
- Growth: top and bottom-line focus
- Cost optimization: managing the cost base
- Digital: leveraging new and emerging technologies to transform future business and operating models
- Deal assessment: focus on buying or selling businesses and implementing strategic alliances
- Enterprise-wide transformation and portfolio evaluation: focus on end-to-end corporate strategy and portfolio optimization
- ESG: in which fields of play to make an impact on society
A well-planned strategy is essential in navigating this complex, challenging and dynamic environment. It determines how and where to compete, guides investment of resources and enables a clear focus on day-to-day activities by providing answers to questions on: ambition (“what is our purpose and what do we aim for” business model (where to play) and operating model (how to win).
More specifically, management should tackle the following key questions, and board members should be aware of it.
On ambition:
- What is our purpose and what role do we intend to play in society?
- What (financial) goals does the company want to achieve, over what timeframe?
- What do investors and shareholders want?
- What is the appetite for investment and risk?
On business model:
- Which markets are the most important or attractive to serve?
- How should the competitive position be bolstered?
- What is the optimal product/service portfolio to serve customer demand, now and in the foreseeable future?
- What are the most attractive customer segments, and how can we attract, convert and retain them?
- How do we digitally transform future business models?
On operating model:
- Which business processes are core to delivering the value proposition?
- How can these processes be made more efficient?
- How can new and emerging technologies be utilized?
- How can governance and risk controls be made (more) effective?
- How does the organization achieve the full potential of its people? Are they properly measured and incentivized? What would we like our corporate culture to be?
Of the Executive Team:
Board members can keep abreast of the success and relevance of the company’s strategy by constructively challenging the Executive team with a set of questions:
- Historically, how well have we achieved our stated goals of leading to investor confidence?
- How well is the current strategy performing, regarding commitments to investors?
- What does the business of the future look like? Who will we serve? Who will we compete against?
- Are leadership and management aligned in terms of strategic priorities and resulting initiatives?
- What are the lessons learned from the current strategy execution?
- How ready are we for disruption and evolving macro trends?
- Do we have the necessary talent to successfully implement our strategy throughout the organization?
- Are there sufficient resources to implement new ideas while running the business profitably?
- Call for an in-depth review of the current strategy, assessing its relevance to the business environment and organizational reality.
- Examine the business model’s opportunities and threats arising from the macro trends, business environment and organization’s capabilities.
- Stress test the current strategy against different scenarios, including competitive threats and market disruption.
- Examine the performance gap against your company’s potential and existing commitments to the investors.
- Develop, with the Executive team, robust and pragmatic strategies to enable long-term sustainable growth.
- Engage with senior management to improve, develop and adjust strategies on an ongoing basis.
- Consider whether your existing management has the capacity to deliver on the stated ambition.
- Design the Board agenda to maintain an ongoing focus on strategy development, execution and regular recalibration.
- Decide on how the board can assume its role in the strategy process: either by setting up a strategy committee in the board or by other means.
About the BLC
The Board Leadership Center offers non-executive and executive board members and those working closely with them (including CROs and Heads of Internal Audit) a place within a community of board-level peers. It also offers access to topical seminars and more technical Board Academy sessions, invaluable resources, thought leadership and lively and engaging networking opportunities.
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