Roger A. Formisano's inter-related concepts of strategies and business ideas


There are hundreds of books on Strategy. However, there are very few that make the concept so easy to read and understand. The book "Manager's Guide to Strategy" by Roger A. Formisano is one such. This article is an attempt to understand the basic concepts of Strategy and the allied idea of Business Idea from this book in some detail. Basic concepts of Goal setting are also discussed.

Introduction

The book "Manager's Guide to Strategy" by Roger A. Formisano, (published by Tata McGraw-Hill Publishing Company Limited, 2003 Edition) is a very useful and simple book. It has hundreds of useful ideas on Strategy. In this article, we will discuss the concept of Strategy and Business idea, both of which have been explained well in this book. The basic ideas of Goal setting are also sought to be discussed.

We shall take some quotes as they are given in the text and then extrapolate the ideas with well known Indian examples. When this anchoring in the Indian context takes place, there will be enough food for thought. since Management of any organization is a continuous process the ideas will be relevant at any point in time.

The discussion will focus on a) What is Strategy b) What is a business idea? c) What is Goal setting d) How are Strategy and Goal setting related d) Indian examples of effective strategy and business idea and e) The way forward in effective Strategy formulation

What is Strategy

The simplest definition of Strategy as given in the book refers to "A detailed plan for achieving success, the bundle of decisions and activities that we choose to achieve our long-term goals. A strategy is the path we choose. Every organization has to figure out what it wants to achieve and then how it is going to make it happen, with its products, customers, and operations." (page 2).

Firstly, Strategy is a detailed plan. It is not a one-shot exercise. It is not a "just-like-that" execution of some plan. Every strategy is for achieving results. The most important result for any business is increased profits and continued profits. Year on year.

Secondly, every single company can have its own strategy. For example, a company like Madras Cements is highly focused on its main business of cement. For a conglomerate such as the Aditya Birla group, cement is just one of the businesses. Madras Cements has world-class quality. And Ultratech cement is also world-class in quality. Their marketing strategies may be slightly different in terms of concentration of markets, but the emphasis on quality is one clear path of success. And the brand building has been done over several decades.

Catering to the tastes of different customers is possible in the service sector. Even this is a deliberate strategy and it is done consciously. For example, the Phoenix mall in Chennai has several multiplexes that draw crowds from a radius of ten kilometers in South Chennai. The customers are ready to spend Rs.150 to watch the movies in a good comfortable environment. Hence, this is also a strategy for success.

What is a business idea

Once again, this concept is made deceptively simple by the author. "There are a lot of ideas around, but they aren't business ideas. A business idea has two defining characteristics: it meets an unmet need and it drives transactions. In a way, both can be summed up in the simple question: "Do enough people want what you'd be offering enough to pay enough for it? Evaluating these "enoughs" is crucial."(page 4)

What is an unmet need? It is something for which a need is diagnosed and then a business idea is developed to ensure that there are thousands of takers for the service offered. The best example is the Sankara Nethralaya Hospital, Chennai, whose founders clearly identified a need for a world-class hospital offering quality eye care. Today, this is counted among the best in business in the whole of Asia.

What is Goal setting

Goals are long-term milestones that every organization would strive to reach. For example, Jindal Steel &Power had a goal of commissioning 6100 MW from hydro projects by 2020 ( Business India, May 27-June 9,2013) We must wait for 13 months to pass to check if this goal has been achieved by the organization. For every milestone, there will be actions that match the overall goals and these are called "objectives".

How are Strategy and Goal setting related

No strategy can work without a goal. All strategies are designed to reach goals and these are essentially spread out over a five or seven-year period. These goals will involve several crucial decisions such as coming out of non-core areas. L&T came out of its highly profitable cement business, as it wanted to be a globally-competitive engineering organization. It was proved right in the later years. Its core strengths in road construction and execution of giant civil projects are now world-class.

Indian examples of effective strategy and business idea

If an Indian organization is already powerful in one area of business and does have core competencies built over a long period of time, it can venture into products that are not technology-intensive but market-driven and customer-focused in a remarkable way. Mahindra & Mahindra has strengths in project management. It has now used this strength to enter into the real estate market in a big way.

HDFC Bank has systematically built a financial supermarket. It is one of the major players in the banking industry and in Mutual Funds. HDFC was already strong in the housing finance business. its logical extension into banking and then Mutual Funds has been a remarkable success.

The way forward in effective Strategy formulation

Wherever there has been a focus on identifying a felt need and then systematically building competencies around such felt needs the organization has been successful. This has been clearly explained in the aforesaid examples. However, we also do have examples of the Anil Ambani group and the Essar group that leveraged their strengths in too many areas and incurred huge debts. They are now trying to exit all their non-ore areas.

The future is likely to revolve around the key factor of whether a business organization can clearly identify a felt need and then build a viable business idea around it. Long term goals will then follow. Kishore Biyani of the Big Bazaar group is the best example of effective strategy formulation. He is now heavily focused only on organized retail and plans hundreds of small stores to tackle the competition from the Kirana stores guys spread nicely in the residential areas.

Conclusion

Whatever be the situation of any business, it is absolutely essential that it is driven by a clear demand for its products and the kind of strategy that it evolves to meet such a demand. The business idea that it needs to anchor its strategies on, should also be very clear. The short term objectives and the long term goals should also be crystal clear. The aforesaid discussion is a glimpse of what can be done in the Indian organizational contexts.


Comments

Author: Umesh24 Dec 2019 Member Level: Platinum   Points : 6

The purpose of any business is to add value to the shares and also expand the business operations. Growth is the most important thing for any business and naturally better strategies are to be worked out by the management to achieve that goal. One problem which comes in any business is competitions from the other similar business houses and another thing is fast obsolescence of things in the market. You do not know which innovator and entrepreneur will suddenly come out with a product which will make other similar products in the market obsolete and redundant. So in view of these threats to the businesses, it is imperative that newer and newer strategies are to be found out and applied in the real-time in the businesses where a lot of capital is already infused in the hope of earning from them. Foresight, long vision and foreseeing the business atmosphere at a later time are some attributes which a good manager has to acquire and practice if he is really serious to chalk out the new strategies dynamically for the organisation.



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