Leave it to management consultants to whittle down strategy to a simple, two-by-two matrix. The most famous is the Ansoff Matrix. Simply put, the horizontal axis measures one parameter, while the vertical axis measures a completely different one, ultimately creating four quadrants that compartmentalize decisions. It is a simplified illustration to compare every part of a company, from its strategic perspective to its employee capabilities and attitudes. True strategic planning involves connecting a firm’s competencies and leveraging them appropriately with a fact-based thesis. The Ansoff Matrix is one vehicle that helps provide clarity around where a firm will place its bets. Even with this simplification, what are the ramifications of the quadrants, and why should leaders care?
The classic Ansoff Matrix that is taught to business students around the world is illustrated in Figure 1. It tends to focus more on classic, manufactured product lines, but the theory is the same. A firm can simply stay in the same market and deliver projects the same way, but the prevailing strategy is to penetrate deeper and gain more market share.
The complete opposite perspective is the upper right hand quadrant, which states that a firm considering entering a new market with a new project delivery is truly diversifying. The red box should be considered a new endeavor, which enables the firm to innovate and hedge against market fluctuations. Figure 2 is a variation on this theme and is bent more toward a construction organization. Each quadrant represents a strategic decision a firm makes. In some cases, leaders make these decisions based on “gut feel,” rather than some deep understanding of the climate, competitive landscape, customer group or even their own business. The quadrants represent opportunity, but they also signify new risk to the business that require investigation, ownership and leadership.
Same Game, Same Playbook
It is easy to sound snarky when describing this quadrant. Firms have lived here for decades, and it is highly likely that they have been profitable. The questions that should come up include:
- How efficient are you?—Are you doing the same thing, using the same systems and have they become dated? The same execution does not mean your firm stays static, but sharpens each year to avoid complacency.
- How much of the market do you have?—What is the long-term prognosis? You may have 50 percent of the market share, but over 5 to 10 years, does that market flatten or tail off?
- What’s your score?—Be sure you are always looking at the scoreboard to ensure the other team is not breathing down your neck, or worse, courting your customers.
New Market, Same Playbook
If it works in City A, why not City B? It could also be replicating success in a new niche, such as migrating from the commercial sector to the medical sector. This is the modus operandi of many contractors that look out and see a new city or new niche. Why not us? One of the first questions that needs to be answered is this: Are you the lead dog, or are you simply following the crowd? There are plenty of hot, new markets, but the sands are always shifting. At what stage are you entering this new venture? Additionally, it is important to consider other facets, including:
- Who will lead this new market initiative?—Are you willing to put your best person on this? Whatever you do, do not give this to a leader that is half interested. His/her lack of commitment will only lead to failure.
- How much market share do you have in your current market?—Of course, City B looks ripe for the picking, but have you maximized your capabilities already? The grass is not always greener, and may simply open the company up to more risk.
- How strong of an operator are you already?—Keep in mind, you are now taking this show on the road. Is the playbook strong enough and capable of working in a new environment?
Same Market, New Playbook
Staying within your sector or market is always a safe play. In some cases, customers bring new opportunities, and in a desire to appear customer-centric, you graciously accept.
For instance, a firm is still building schools in its metropolitan area, but now has the opportunity to provide design-assist services. There are many operational and structural questions that should be considered prior to engagement:
- How well equipped are your people?—Will you execute with the same talent you already have or find experts? Sometimes even the smartest managers, superintendents and estimators cannot change their spots. Processes are one thing, but behavioral tendencies and how they are hardwired is something that may never change.
- Is your playbook up to date?—While it is prudent to ensure operations is in tune with the delivery style, are you trying to build hard bid projects with a design build playbook? Is this the right time to customize operations?
- Is your organizational structure ready?—Are you too lean to support a project that will require new types of resources that were never considered before?
New Market, New Playbook
Maybe it’s a proprietary service or product. Maybe it’s some ancillary service that a customer values and can expand your brand. Either way, this will take resources, and what opportunity cost is the firm willing to accept? True pioneers in our industry began with this model, creating some of the greatest innovations in the construction industry. At a minimum, it is important to consider some of the following items:
- Is there strategic alignment?—Don’t forget the vision—this is a classic checks and balances game. Is this new venture a complementary service that will only help the brand, or could it become a distraction in the long term?
- Are you really serious?—New initiatives for some firms are given skeleton budgets and next to nothing in the way of support.
- How will you measure success?—Often measuring success by the same standards a firm currently uses is incorrect.
Business models abound and strategies don’t always have to fit into a tidy, two-by-two matrix. However a firm looks at its strategy, there should be careful consideration toward the hows, whys and whos. No one has an economic chessboard, but at least we can develop and control the plan.