Austerity is not a strategy

Three clients, three strategy workshops, 8 days: intense.  Each client is at a different stage of the strategy life cycle (see my recent blog).  And each workshop highlighted a theme which reflected where that client sits on the strategy life cycle.

Mining services clients are clearly in the ‘rebuild’ phase.  For about two years now the mining sector has drawn up the moat bridge.  The more recent collapse of the oil price suggests the oil and gas sector is about twelve months behind the miners.  

Mining services companies have followed suit, with even more dramatic headcount cuts, many of them in survival mode.  Austerity became the main game.  

But let’s be clear: austerity is not a strategy.  So what is next?  

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The rule of three and four

Scanning the newspapers recently I noticed that the revenues of our three largest telecoms players – Telstra; Optus and Virgin – were respectively $16.4B; $9.4B and $5.3B.  Why did that capture my interest?  It looked like it might satisfy BCG’s rule of ‘three and four’

In the mid 70’s Bruce Henderson (BCG founder) hypothesised that a stable competitive industry will have no more than three substantive competitors, and will find equilibrium when their respective market shares are 4:2:1.  

BCG recently tested this hypothesis and found it prevailed in a number of industries.  But how well does it stack up in our local markets and what can we learn from it.  I suggest three actions you can take in response to the findings.  

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Want to grow – Deepen your position

Michael Porter famously remarked “the pressure to grow is among the greatest threats to business”.  And yet there are few executives who haven't felt that pressure.  So what are the best growth options?  Michael Porter would argue – “deepen your strategic position, don’t broaden it.  A company can usually grow faster – and far more profitably – by better penetrating needs and customers where it is distinctive than by slugging it out in potentially higher growth areas where the company lacks uniqueness”

What is your growth strategy?  Does it 'deepen your position?'  Or are you chasing opportunities where you lack distinctiveness?


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