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CEOs

2 Proven Ways to Transform Your Business for Good

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Business loves its buzzwords.  A popular term today is “transformation.”  CEO X plans on a “transformative acquisition” that will propel his company to a higher share price.  CEO Y seeks to transform his business by permeating social networks and elevating his brand in the mind of the consumer.  CEO Z avidly launches a new product which she anticipates will transform her business into a market leader.

Today, many companies large and small struggle with the challenges of today’s volatile, evolving economy.

How can CEOs develop a game-changing transformation strategy that’s proven to work? Here are two ways.

Transformation Strategy #1 – Create a Blue Ocean

Transforming a company’s organic growth path while retaining the fundamentals of the business can be an effective and relatively inexpensive means to shift into high gear.

First published in the Harvard Business Review, Blue Ocean Strategy, written by professors W. Chan Kim and Renée Mauborgne, portrays an extraordinary outside-of-the-box business development mindset. This is a powerful approach which explains how many companies have successfully reinvented their businesses and gone on to glory.

The foundation principal is that most companies compete in a “red ocean.”  Their products and services are constantly under attack. Prices and margins get driven lower; market share is driven down. Blood flows, coloring the ocean these companies swim into a pool of red.

What if the captain could put the ship of business onto a course to steer into a “blue ocean?” In a blue ocean there would be little or no competition. Margins and prices would be high, and opportunities for market share abundant.

The trick for the captain is he doesn’t get a new ship, or even a new crew. Great strategic thinking is called for. Existing resources must be retooled to power the trip into that blue sea.

The authors point to Cirque du Soleil as one successful case study of the strategy.

 “Despite a long-term decline in the circus industry, Cirque du Soleil profitably increased revenue 22-fold over the last ten years by reinventing the circus. Rather than competing within the confines of the existing industry or trying to steal customers from rivals, Cirque developed uncontested market space that made the competition irrelevant.

“Cirque created a blue ocean, a previously unknown market space. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In red oceans—that is, in all the industries already existing—companies compete by grabbing for a greater share of limited demand. As the market space gets more crowded, prospects for profits and growth decline. Products turn into commodities, and increasing competition turns the water bloody.”

Numerous examples exist where even slight course changes take a company into a blue ocean.  An IT solutions business gets bloody in a battle to win over IT directors and CFOs who traditionally buy their product. They figure out the users of the product (say salespeople) are the real public to go after. The software and approach are revised and a program to market directly to sales managers is created.

Transformation Strategy #2 – M&A

In a quest for synergy, size, or sizzle (preferably all three), corporate development departments prowl the world seeking a target that will in part or in total transform a business and breathe new life into it, resulting in increased value and happy investors.

Transformational transactions need to have the capacity to shift the existing business into new markets, channels, products or processes.

Technology has created “convergence” across many industries. Yesterday’s security alarm installer is today’s IT expert. The perpetual license software developer becomes a SaaS (Software as a Service) provider. Brick and mortar shopping tackles online selling.

Each of these changes required smart M&A to gain a knowledge base, overcome institutional thinking, and transform operations and the company.

As this article written by partners from from PwC’s M&A and Integration Practice explains, “Transformational deals need not be big; their hallmark is that they fundamentally reinvent operations and maybe even change the dynamics of the industry. In healthcare, for example, payors are buying providers and creating new shared risk–bearing health networks. In telecommunications, mergers between major Internet and cable television companies could create new, innovative models of content creation and distribution.”

Conclusion

Generally a brilliant transformational strategy becomes valuable only when it has gained full ownership by every member of the management team. Patience, lots of communication and ultimately achieving active engagement by all is the foundation of successful strategy execution.

Avoid “paralysis by analysis.” Formulate the plan, get buy-in, and then set a rigorous timetable for execution. Debug along the way as needed.

Here’s to your success!

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