How Do You Decide Between Strategic Options? Five Thoughts

Situation: A CEO is faced with three strategic options that the company could pursue. He seeks guidance on how the company should evaluate the three options. What signs should they be watching for in their marketplace? Are there steps that they should take while completing their evaluation? How do you decide between strategic options?

Advice from the CEOs:

  • Go with what sells! Listen to the market, and your key customers. Make sure that you have ears out there that will give you early signals.
  • Until there is a clear indication from the market place as to which is the stronger strategy, keep your options open. A hybrid strategy – maintaining your current strategy while evaluating the strongest strategic option – will allow you to do this and continue to drive revenue from your existing base while the market determines dominance among the new platforms.
  • Look at the cash flow from your current strategy and each of the new options that you are considering.
    • What difference is there in upfront payments versus ongoing residuals?
    • Look closely at your cash flow needs compared to the timing of receipts from each option.
    • Are there ways that you can strengthen your cash flow depending upon which strategy you select? How will you bridge the gap between current and future cash flows from each strategic option?
  • Consider hiring a full-time manager in business development.
    • This will help you to learn more about your customers and what they will buy.
    • Select someone who has relationships with the key people in your target markets, and who knows what the insiders are doing at important existing or target customers.
    • Select someone who can give you access to new opportunities and help steer your strategic development.
  • Consider a long-term strategic partnership with a leader in your market.

One thought on “How Do You Decide Between Strategic Options? Five Thoughts

  1. Robert Friesen

    If a CEO is looking at “strategic options,” it implies developing company strengths that will ensure long-term sustainability. This is in contrast to annual updates or a more superficial “business plan.” “Strategic options” should come from:
    • A better understanding of the market
    • Operational and financial strengths that create barriers for other companies
    • How the CEO’s company goes to market compared to competitors
    To that end, the C-level team needs to understand, at a minimum:
    • Customers’ priorities and, for B2B companies, “customers’ customers’” priorities.
    • How the market is evolving and which evolution points will have a lasting impact and offer competitive threats and opportunities.
    • Where disruption is happening, which may be inside or outside of the industry. Recall Blockbuster’s CEO’s smug 2008 statement, “Neither Redbox nor Netflix are on the radar screen. It’s more Walmart and Apple.” Two years later, Blockbuster filed for Chapter 11. Disruption is a fact of life, even for disruptors such as Amazon and Google.
    • Dynamics across Porter’s five forces of competition: traditional rivals, suppliers, customers, new entrants, substitutes. On what bases are competitors competing? How will those bases change in the next few years? Who can compete more effectively than the company?
    • Internal operations and where value is created, neutralized and destroyed in the organization.
    • Financials. This is beyond cash flow which is suitable but not really adequate for one-year performance evaluations.
    After honestly evaluating the situation and listening to outside perspectives on their conclusions, the C-level team will be ready to define the things that they need to do, the things that need to change and the things that they need to create to ensure strategic sustainability. And then they will be ready to consider strategic options.
    Small “lifestyle” businesses can plan by cash flow if long-term survival is not an issue. However, they are susceptible to short-term thinking. In retail, for example, lifestyle businesses have been disrupted over the years by the likes of the department store, the Sears catalogue, Walmart superstores and Amazon. If a CEO is managing by cash flow, then the impact of disruptions will be noticed too late. As Ernest Hemingway wrote in The Sun Also Rises:
    “How did you go bankrupt?”
    “Two ways, gradually and then suddenly.”
    Do the work; reap the rewards. Take shortcuts; end with your head in the sand and fingers pointing in every direction.

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