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MICHAEL STRATEGIC ANALYSIS
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MSA
Solutions to the Needs of Your Organization
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Strategic Planning: New Strategic Plans
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The
True Strategic Planning Process
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We use the international expert consensus eight-step process
in formulating and implementing strategic plans of our clients. Our firm has
contributed to the field of strategic planning with its particularly refined
scanning process, an especially useful means of linking scans with strategic
choice, and the MSA Product Preference Map, a powerful tool used in
evaluating the portfolio of products or services of an organization.
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The
Competitive Necessity of Strategic Planning
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Our research shows that the single most important determinant
of organizational success, as defined by market share and profitability, is having a strategic plan, and that, on
the average, firms with a strategic plan command prices 27 to 32 percent
higher, bring in nearly double the revenues, and gain 55 percent higher
market share compared to rivals without strategic plans.
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Our experience indicates that these advantages are as great
for public sector and non-profit organizations as they are for private-sector
firms. However, we predict that the competitive advantage of strategic
planning will become diluted over time as more and more organizations engage
in it. Therefore, organizations which are the innovators or early adopters of
strategic planning in their industries should be more competitive, grow more
rapidly and attain larger market share. Late adopters and laggards will
probably fall behind, be less competitive, and be more likely candidates for
industry shake-outs. Strong competitive advantage will remain for
organizations which began their strategic planning earliest.
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Client Example: The
Ministry of Health in a rapidly growing Asian nation experienced a budget freeze
imposed on the ministry by the national government. The ministry and the
government nevertheless wanted the National Family Planning Program, deemed
of utmost importance in this over-populated, resource-scant country, to continue
to meet its targets. There was nearly a complete absence of program planning
to pursue the targets. We used
several strategic planning tools including product portfolio analysis and
resource allocation to evaluate Program activities, and then developed Target
Setting, a first-of-its-kind application of linear programming, to reallocate
the national budget of the Program. In
the first year in which our work was implemented, the Program increased its
productivity, as reckoned in terms of the number of births averted, by 85
percent with no increase in the budget. Our Target Setting System was
published and later applied in at least nine other countries.
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Evaluation of Your Current Strategic
Planning
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What
Strategic Planning Is Not
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Lack of Credentials and Knowledge- Many
planning consultants or firms which purport to understand strategic planning
do not really know the body of knowledge of the field or the eight-step strategic
planning process which applies it, and can not deliver more than a cook-book
business plan, old-fashioned long-range plan, or worse. Meeting facilitators,
CPA firms and marketing firms which hold themselves out as strategic planners
usually have no one on staff who has studied or taught strategic planning,
and can not deliver true strategic planning. These weak stand-ins for
strategic planning are often harmful.
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Wrong Kind of Plan- Business
Plans typically address marketing, operations, financial projections, key
people, and risks of a business, but seldom employ modern strategic analysis
tools to identify optimal growth strategies for an organization. Long Range
Plans usually amount to just the last two or three of the eight steps of
strategic planning, omitting strategic analysis. These kinds of plans, goals
and objectives thus often become guesswork.
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Have
Us Take a Look at Your Strategic Planning
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Whether you have a strategic plan or plan more informally, a
well-qualified confidential independent evaluation of your planning always
leads to improvements.
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Strategic Planning: Competitor Analysis
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Michael Strategic Analysis research shows that high market
share and high profitability are attained from having a good strategic plan,
selling on value rather than price, operating with a convincing mission, and
using human resources efficiently. How do your customers fare with the value
proposition of your products or services?
Do you have a mission which enthuses you and your employees, or does
it too much resemble a palliative or cliché?
Are you producing your products or services as efficiently as your
competitors do, or have they slipped ahead with labor-saving innovation? How
sharp is the Generic Strategy of each of your products or services? Of the company as a whole? How much market share does each of your
competitors have in your industry? What are the key performance indicators in
your industry? What will they be in the future?
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These are a few of the considerations which we examine when
performing a competitor analysis for clients.
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Client Example:
Four years after its founding, a high technology firm
servicing computer manufacturers was repairing $4 billion worth of computers
and peripheral equipment annually for one of the largest computer
manufacturers. Our client was a captive company with only the one customer.
Seeking to grow and to diversify its customer base, the client wanted to gain
a clear understanding of the competition in its fledgling sub-industry, Outsourced
Repairs and Logistics, before choosing strategies. Michael Strategic Analysis
was retained to perform a competitor analysis for this client, a difficult
exercise because a fledgling industry typically has not yet been researched
much, and data are hard to find. Mainly through deep Internet intelligence
gathering, we identified and examined twelve direct competitors, determined
their relative performance, diagnosed their strategies or lack thereof, and
ranked competitors by strength. We also projected overall future market size,
and market share and rank for each competitor. We found a rapidly
consolidating industry already scrambling for an ever-smaller number of
manufacturing clients as that industry too consolidates. These findings
pointed clearly to certain best growth strategies for the client and to other
strategies to avoid.
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Strategic Planning: Product Portfolio
Analysis
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Six fundamental laws of system science, and an additional law
discovered by MSA, apply immutably to businesses and other organizations. One
of these laws, as stated in business terms, is that successful organizations
use resources efficiently. While this
might seem a truism, nearly all smaller organizations—businesses and
non-profits alike—misapply resources and thereby either perform well below
potential or fail. The MSA practice directly addresses how to optimize the
three key components of all types of organizations: what you sell, to whom
you sell it, and who you are, in other words, your products or services, your
markets, and your people. Product
portfolio analysis addresses products or services, starts with determining
the profit margin of every product or service offered, and then employs a battery
of strategic tests to assess the strategic fit, future and strength of
differentiation of each product or service. We use the term products generically
to mean physical products, services, zero-priced products and other sources
of firm revenue.
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Client Example:
A client selling 44 product lines had negative profitability
of minus two percent. We
determined for the client that 28 of its 44 products were losing money, that
13 were essentially breaking even, and that three large cash cows were
responsible for virtually all firm profit, propping up the losers. On our
recommendation, the client culled 14 products from its portfolio, fixed 14
others to make them profitable, and ended up with a pared portfolio of 30
profitable products. Company profitability was restored immediately.
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Client Example: As part
of our strategic planning for the second largest Chamber of Commerce in the
western states, the Chamber pared its product portfolio from 148 services, programs
and other claims on resources to 58, nearly a two-thirds reduction. What was
kept related directly to the Chamber's new mission, got rid of deadwood
activities, and turned this Chamber around financially.
Other Example: When
Peachtree Software pared its portfolio from 150 products to a core three, its
profits and profit margin jumped significantly even in the face of lower sales
from culling so many products. Company focus also was greatly improved.
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It is
time to weed and feed your product portfolio. Have us examine your products
or services to focus them and let you deliver more to your shareholders.
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MICHAEL STRATEGIC ANALYSIS
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Marketing Analysis: Marketing Plans
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Marketing is a specific process which prescribes which
products or services are sold at which prices in which markets, and how the
organization makes its chosen markets aware and desirous of its products. The
axiom of best products in best markets at best prices provides sustainable
competitive advantage, maximizes profit, and creates shareholder value.
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What
Is the Marketing Mix?
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Our Marketing Plans carefully address all four elements of the
classic marketing mix, careful implementation of the Marketing Plan, and the
institutionalization of excellent marketing within the organization. In the
marketing mix, we use the following standard considerations as the starting
points.
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Your
Products- What you sell: How and why the organization chooses to offer
its particular products or services.
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Your
Markets- To whom you offer your products: Why the organization targets
its particular markets.
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Your
Pricing- What you charge for your products: Whether prices are set by
cost, margin or competition, how prices are best modified by market segment, time
demand or other variables, and how prices are deliberately set to maximize
profit.
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Your
Promotion- How the firm makes its chosen markets aware
of its products and how markets are encouraged to buy the products. There are
two branches of promotion: personal selling and non-personal selling.
Non-personal selling consists of advertising, public relations, publicity and
education.
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Strategic marketing, branding, customer service, market
research, and, especially, marketing management are the other important
elements of an MSA Marketing Plan.
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Example: A
dynamic, well-qualified, young risk management and consulting firm needed to
begin operating by annual marketing plans. We established marketing
benchmarks for the client, performed all research for production of the first
marketing plan the client ever had, wrote the plan, interpreted it to the
client, and assisted the client in implementing it. Our work revealed that
the client needed to bolster its capabilities in product selection, supplier
research, branding of its premium product, certain aspects of pricing, and
market selection. The client systematically executed its marketing plan,
corrected its relatively few marketing weaknesses, and raised its overall
marketing performance to comprehensively excellent. Profits increased significantly from better
pricing and market selection.
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Marketing Analysis: Evaluation of Your
Current Marketing Practices and Marketing Plan
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What
Marketing Is Not
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Just
Advertising and Promotion- It is misleading that many firms
which hold themselves out as marketing firms can not go beyond advertising
and public relations. Advertising and PR are parts of one part of marketing,
namely promotion.
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Lack of
Credentials and Knowledge- Many marketing firms or marketing
consultants who purport to understand marketing do not really know the body
of knowledge of the field or the marketing planning process, and can not
deliver more than a cook-book marketing plan or worse. There is no control
over who may proffer to be expert in marketing, and many purporting to be are
familiar only with promotion.
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Our
Marketing Analysis Practice
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MSA marketing advice delivers expert application of a large,
increasingly sophisticated body of specific knowledge involving all four
parts of the marketing mix and the expert application of established
protocols for the application of this knowledge to the diagnosis of the
marketing needs of an organization: the prescription of product selection, market
selection, price optimization, promotion, and the implementation of the marketing
plan.
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Marketing Analysis: Survey Research
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Sound decision making rests on accurate current information
obtained from a variety of sources often including original survey research.
Modern survey research is a highly complex discipline in which the
practitioner needs deep knowledge of statistics, survey instrument design,
sample selection, and how to interpret data. Michael Strategic Analysis
performs local and nationwide surveys at virtually any sample size. Our
Principal Consultant, who has taught applied statistics at the graduate
level, personally guides all MSA survey research work.
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Client Example: A city
needed to understand consumer knowledge, attitudes and practices regarding a
public service which it made available. It also needed to measure the effectiveness
of an advertising campaign which it had launched to publicize the service. We
formulated and administered a survey to a scientifically selected
cross-section of 400 adult consumers, tabulated and statistically analyzed
the results using proprietary MSA statistical analysis software, and
interpreted the results to the client. In the same survey, we measured the
degree of recall of the advertising campaign. Knowledge of its markets for
this particular service increased manifold for the city. As a result, the
city had a much clearer view of the competition and how to compete against
it. This allowed a strategic shift of emphasis away from promotion of some of
the specific features of the service and toward promotion of overall product
recognition and encouragement of use. The advertising campaign proved to have
had much longer lasting power than had been supposed, and reinforced the new
promotion.
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Marketing Analysis: Market Segmentation
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Just as product portfolios can hide products which are hurting
you, so can your markets if they are inefficient. Here, the tool is market
segmentation analysis which sorts out your markets for profitability and
strategic fit.
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Client Example: MSA market segmentation analysis showed that 22 of the 57 market
segments of an MSA bank client produced $6,777,000 in profit while the other
35 produced $3,629,000 in loss. The
resulting $3,148,000 net profit was therefore only 46 percent of what it
should have been. This client weeded out losing market segments and customers,
repriced certain products, redeployed assets to profitable products, and saw
its profits leap while actually using less resources.
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Other Example: Adrian
Slywotzky, the brilliant analyst and author at Mercer Management Consulting,
points out in his book Profit Patterns
that, for the typical community bank, 30 percent of the customer base
generates 130 percent of the profit, another 30 percent breaks even, and the
bottom 40 percent generates losses equal to 30 percent of bank profit. This amounts to an overall breakeven
situation with zero profitability because of the losing markets draining off
profit generated by the profitable markets.
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Other Example: Kanthal,
a Swedish electrical manufacturer, saw 40 percent of customers provide 150 percent
of profit and the other 60 percent generate losses equal to 50 percent of
profit. This amounted to another
zero-profitability situation.
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If you
have yet to analyze your markets, how much longer do you care to sacrifice
the profits now surely drained off by your worst markets? If you have not
done this analysis, it is time to call us.
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Marketing Analysis: Pricing
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Pricing
is the most overlooked marketing opportunity. For all
but the largest businesses, which usually have in-house pricing analysis
capability, pricing is usually performed by guesswork resulting in lost
profits or actual losses. Pricing is a well developed discipline which, when
used correctly, maximizes profit. In our practice, we examine whether a particular
product or service should be priced according to costs, desired profit margin
or competitor prices, and then we set pricing modifications which permit the
product or service to bring in revenues and therefore profits that it would
not otherwise be able to gain. For organizations which have never engaged in
formal pricing analysis and price determination, gains are usually great and
practically costless in doing so the first time.
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Client Example: When we
examined the product portfolio of an investment advisory firm, we discovered
a zero-priced product, which is a product or service being offered at no
charge for which charging is feasible. Competitors of the client all charged
for this particular service. On our recommendation, the client began charging
for the service, and this single repricing accounted for 28 percent of client
profit growth the following year, with virtually no cost or effort. This was
a frequently encountered case of unseen lost profit.
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MICHAEL STRATEGIC ANALYSIS
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Litigation Support: Economic Damages
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Why does a firm which practices Strategic Planning and
Marketing Analysis also have a Litigation Support practice which engages in
calculation of economic damages? The answer is that all three disciplines
rely heavily on superior analytical ability and quantitative analysis skill.
Economic damages can occur to organizations in cases of breach of contract,
illegal competition, or injury to intellectual property rights among other
causes; and to individuals in cases of personal injury, fraud and defamation
among other causes. Our clients have
never lost a case in which we were engaged to calculate economic damages.
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Client Example: Four energy companies were each considering
building very large power plants in a small historically important rural area
of a state. The companies were attracted
by proximity of a picturesque river which they would have used for plant cooling,
an electricity transmission grid, and a gas fuel source. Any one of the proposed plants would have
amounted to a major disruption of the area of rolling farm land where the
plants were proposed, with two of the four companies having proposed their
power plants on agriculturally-zoned land directly adjacent to homes, farms
and small businesses. Michael
Strategic Analysis calculated the economic damages, benefits and net economic
impact of each of the four plants, and found that two would have resulted in
local net economic damages of $64,000,000 and $94,000,000. Our analysis was furnished to the state
government cabinet which then removed plant approval authority from the
pro-industry state agency which likely would have authorized one or more
plants. The cabinet then revised state
power plant siting procedures, causing the energy companies to withdraw their
applications, preserving the homes and property values of over 700 families.
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Client
Example: The
client of a law firm had suffered permanent diminution of mental faculties as
the result of a traffic accident caused by others. This made him unable to operate
his two businesses and forced the sale of one business. We identified fifteen
separate kinds of economic loss stemming from the accident, made conservative
trial-proof projections of the amount of each kind of loss, and calculated
the net present value of total loss exceeding $2.1 million. Our work was
deeply substantiated, employed sophisticated analysis of the businesses, and
brought in key internet-sourced statistics. After our deposition, settlement
discussions commenced rapidly. This case settled handsomely in favor of the law
firm's client.
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Litigation Support: Expert Witness
Testimony
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Usually in our cases involving calculation of economic
damages, we are called on to provide expert witness testimony in deposition
and, if the case goes that far, in trial. In most of our cases, settlement
was reached soon after we presented expert witness testimony in deposition.
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Client Example: A tenant
of the State of California sued the State on grounds of dealing in bad faith
when the state refused to change the terms of a lease. Our Principal Consultant
was appointed as Expert Witness to examine the plaintiff claim and supporting
documents, to calculate the dollar amount of damages to the plaintiff, and to
assist the Deputy State Attorney General in rebutting opposing expert
testimony. Our work showed that the plaintiff had suffered no monetary
damages, and had actually benefited economically for not having had the lease
renegotiated. Our client, the State, prevailed on all counts and had all case
costs reimbursed by the plaintiff.
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Client Example: The
client of a law firm, a land holding company, had been sued by a developer
which had promised to develop the parcel owned by the client, but had not.
When the client sold the land, the developer sued to recover sunk costs and
would-be profits had the land been developed. The land holding company
cross-complained on grounds that the developer had damaged it by persuading
it not to sell during a good sellers' market. We calculated damages caused by
the delay in sale totaling more than $3.3 million. In crucial ways, our work
supported the arguments of our client at trial that our client had not caused
damages but had suffered them. Our client prevailed on all counts in the
trial, and the developer was awarded no damages. Our economic damages
analysis shown in support of the cross complaint our client became the
subject of successful settlement talks.
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MICHAEL STRATEGIC ANALYSIS
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Transition Management: Feasibility
Analysis
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The leading service in our transition management practice is feasibility
analysis which Michael Strategic Analysis has been performing for its clients
since the 1980s. Our feasibility analysis clientele include private firms,
government agencies and non-profits. Feasibility analysis is an application
of the broader field of strategic planning.
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Client Example: A High
Sierra resort and entertainment complex contemplated the purchase and development
of an existing resort and several coterminous parcels. Executives had
identified three main lines of business of hospitality, recreation and entertainment
to which they would devote these possible acquisitions. In addition, we
identified services and logging as two additional possible products. We
examined the product portfolio of these five sources of income; the adequacy
of venture management including skill gaps; the strengths, weaknesses,
opportunities and threats of the concept; financial requirements and
feasibility including expected return on investment and payback periods; the
effects of seasonality on cash flow; and the strategic feasibility of the concept
and its five offerings. Our work showed one of the five intended offerings to
be highly attractive, two to be feasible, one to be marginal, one to be very
risky, and the overall venture, modified to reduce or eliminate the unattractive
offerings, to be of moderate attractiveness. The group launched the one most
attractive offering.
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Client Example: For what
became the University of California Mondavi Performing Arts Center, Lincoln
Center West as it is often called, the university needed a market feasibility
analysis to determine if sufficient demand existed in northern California to
support a major new performing arts center, and to discern which amenities of
a new center held the most attraction to the public. Our feasibility analysis
involved formal surveying and analysis of the general public and of
subscribers of the university's performing arts series; defining market
boundaries, future market size, and optimum capacity for the new performing
arts center; and determining public desires for amenities at the center. Our
work revealed consumer needs and tastes, market size and expected market
penetration, best target markets, and optimum seating capacity. The
University accepted our recommendations in toto including the exact recommended seating capacity
of the main hall of the Center. The Mondavi Center for the Arts opened in
August, 2002, and became an immediate and continuing success.
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Transition Management: Turnarounds
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In non-recessionary times, about 25 percent of all companies
and non-profit corporations are retrenching. There are four classical
retrenchment strategies, the most common of which is turnaround. The four
most common causes for needing a turnaround, in order of frequency, are
failure to keep pace with changes in the marketplace, lack of operating
controls, over-expansion or excessive growth, and excessive leverage. The
four most common causes for failure to successfully complete a turnaround, in
order of frequency, are failure to reform management, inadequate planning,
failure to install adequate operating controls, and excessive leverage. All turnarounds guided by Michael
Strategic Analysis have been successful.
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Client Example: A
diversified company involved in wood products, electronics and retail suffered
central problems of no planning, poor controls, lack of cost accounting, a
weak board, and internal strife. As results of our analysis and
recommendations, the client instituted regular cost accounting by product,
contract, and division; eliminated losing products and divisions; launched
new products in new markets; and recruited new blood to the board. These
changes raised revenues by 71 percent in six months, increased the profit
rate from -2 percent to +13 percent in a year, and finished other aspects of
the turnaround in 15 months.
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Client Example: Two
related scientific companies experienced poor controls, no cost accounting,
poor planning, cramped quarters, a stretched staff, and indecision. The city
and county in which these two scientific firms are located were important stakeholders
by having provided financial incentives to the companies. The city and county
had MSA diagnose the lack of profitability of the firms and prescribe
changes. We performed product portfolio analysis showing that 28 of the 44 products of the firm were unprofitable,
and that operations were being propped up by three cash cows. We performed industry
comparisons which identified strengths and weaknesses of the companies. Our
recommendations to improve controls and cost accounting, prune the product
line, reprice, begin strategic planning, promote promising products, and
relocate the company were presented to the mayor and the County Commissioners
chair. The two firms merged, had management realigned, instituted our recommendations,
moved, grew and became profitable.
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Transition Management: Interim
Management
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In some cases, Michael Strategic Analysis Principal Consultant
Peter H. Michael, serves as chief executive officer or chief operating
officer of client companies, and runs a client company directly. This can
happen in cases of clients undergoing a turnaround, or when the position of
CEO is temporarily vacant. These MSA engagements typically last three to six
months, and we take them on only after careful screening of client needs at
the time.
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Client Example: A health
care company suffered central problems of rapid growth which had outrun management
ability and financing ability; difficult creditors; failure to keep pace with
new, aggressive, low-cost competition; and unprofitable operations. Our Principal Consultant was
authorized full executive authority including all hiring, firing, and
disbursements. He shrank operations until the corporation was profitable
again, instituted controls, replaced problematical members of the medical
staff, got the cooperation of creditors, and successfully shepherded the
company through a reorganization. He also provided court testimony. All personally pledged security, 500
patient relationships, and 40 jobs were saved. The firm reorganized and today
operates successfully.
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