STRATEGIES FOR DEPARTMENT MANAGERS 119
Strategies for department managers
For the sake of argument, call the strategies outlined above business strategies. Once you
have decided on a business strategy, the next logical step is to expand it by developing
a series of departmental strategies – one for each functional area – research and develop-
ment, production, marketing, and so on. This gives the next level of detail. For example, if
your business strategy is to increase market share, your marketing strategy could include
a strategy for attacking your competitors.
Marketing people – who generally want to wrest control of the whole shooting match
– will protest that most of the strategies already outlined are themselves marketing
strategies. This is true, but in an operating context I think that it makes sense to define
departmental marketing and sales strategies at a sufficient level of detail to guide the
department manager.
You should of course revisit your organisation chart in the light of your latest think-
ing (see the value ladder in Chapter 4). Building a business plan is similar to assembling
a jigsaw with identically shaped pieces. You might think that you have one part right, but
you will want to keep looking back as the picture builds up to make sure that all the com-
ponents fit together properly.
PRODUCT STRATEGIES
In the process of evolving departmental strategies, you might like to think about an over-
all product strategy. Take a look at Figure 6.2. It illustrates a simple two-step technique.
Step one invites you to select a competitive approach – with the extremes represented
by differentiating your product or being the lowest-cost producer. Step two suggests that
you define your areas of focus. You then know exactly where you are going.
Departmental strategies map directly on to your organisation chart. By
delegating execution of these strategies to department managers you are
halfway to having a smooth-running organisation working towards clear
common objectives.
120 CHAPTER 6 THE CORE OF YOUR PLAN
Incidentally, when thinking about your product strategy, take into account where you are
in the product life cycle. This is such an obvious point that I almost forgot to mention it
here. The cycle is illustrated in Chapter 8 because it is useful to discuss it in detail when
forecasting sales. Essentially, sales growth is slow when new products are introduced,
it accelerates rapidly as market awareness increases, but eventually levels off and then
declines when the market is saturated. The trick is to keep revitalising products to extend
their life cycle.
Differentiated products
Product line depth and breadth
Quality durability, appearance, reliability
Design changes/enhancements
Features fulfils users’ needs
Brand recognition
Low-cost producer
Simplicity basic product
Volume economies of scale
Skills efficiency, automation,
experience
Synergy pooling costs with other units
Integration vertical (supplies to sales)
Step 1. Select approach Step 2. Identify focus
Focus
Industry specific competitors
Product specific niche products
Market specific niche segments
Territory specific localities
Figure 6.2 Two steps to a winning product strategy
A product strategy is an excellent bridge between business and
departmental strategies. It helps you develop R&D, production and
marketing strategies that are fully integrated.
It might seem obvious to us that everyone should be pulling in the same
direction, but inspection of many companies suggests that this is not always clear.
All too often, marketing, production and R&D are all doing – and promising –
different things. Sad but true.
STRATEGIES FOR DEPARTMENT MANAGERS 121
R&D STRATEGIES
If you’ve got it, exploit it
It is very fashionable to claim to be market-led, to develop products that your
customers want. However, superior profits can result from a well-executed asset-
push strategy. In essence, you review your assets (both tangible and intangible)
and decide what you can produce that will sell. You should already have a good
understanding of your assets, given that you have conducted a full internal audit
(see Chapter 4) and identified your competencies, strengths, opportunities and
competitive advantages. You will, I hope, understand your market, given the review
that is outlined in Chapter 5. This is the classic way that entrepreneurs get started
– making profitable use of what they do have, rather than spending on something
new. Of course, if asset-push and market-pull coincide, you will be very happy.
t
Asset-push strategy
What can we produce that will sell?
Lower investment, lower risk,
shorter payback time
Market-pull strategy
What does the market want that we can deliver?
Higher investment, higher risk,
longer payback time
Your business
Your market
Figure 6.3 Marketing strategy
As soon as – or even before – you introduce a new product or service, you
should be looking for ways to make it obsolete. Your competitors will be.
Failure to keep products up to date is usually the major factor that tumbles
brand leaders. Another way of looking at the same issue is that new products
(introduced within the past five years) often account for up to a quarter of profits.
122 CHAPTER 6 THE CORE OF YOUR PLAN
To some extent, your R&D strategy will fall out of your product strategy. In particular,
you will know by now the extent to which you intend to focus on:
product enhancements; or
new products.
Your business and product strategies may also have indicated where you need to pay
attention to:
products; or
processes (the mechanics of production).
The big question, perhaps, is how will you take this forward? Six ways to conduct R&D are
shown below. The extent to which you will want to conduct your own research depends
partly on your industry.
If technology in your industry is changing slowly but the market is expanding and
there are barriers to entry, carrying out your own R&D can give you substantial competi-
tive advantages. Your R&D should try to create some trade secret or even a patent that
gives you clear competitive advantage (but remember that only about 3% of patents are
ever exploited commercially).
At the other extreme, the more rapidly that technology is changing, the greater the
risks of spending your own money on R&D. In these circumstances, you might prefer to
borrow technology from others – perhaps licensing it from an overseas partner or watch-
ing and imitating (legally and ethically) other companies. This approach allows you to
reduce the costs and risks associated with developing new products.
Six approaches to R&D
1 Minimal R&D budget or big spender?
2 Do your own research or copy others?
3 Run your own R&D team or outsource to specialist companies?
4 Employ R&D professionals or team up with a local university?
5 Focus on pure or applied research?
6 Have formalised R&D or skunk works (unregulated ‘creative’ research)?
STRATEGIES FOR DEPARTMENT MANAGERS 123
PRODUCTION STRATEGIES
At first glance, this part of the book might appear to be focused on traditional manufac-
turing. But the discussion here actually covers any processes that you need to create a
product or service. The processes could involve writing software or management reports,
conducting biotechnology research for other users, designing educational courses,
preparing meals, or providing any other service. Your business and product strategies
determine (or result from) a good part of your production strategy. You have already
answered questions such as the following.
1 Are you aiming to be a low-cost producer, or are you targeting specific product
features, quality, etc.?
2 Will you manufacture or outsource?
3 Are you looking for vertical integration (or disintegration)?
4 Can you exploit strengths related to production capability?
At the next level of detail, some areas of production management activities to consider
when developing a production strategy are listed below. Other critical issues worth
emphasising include:
time-to-market when introducing product modifications or new products;
the ability to run small production volumes to meet specific needs;
the provision of appropriate customer support.
Five considerations when setting production strategy
Activity Strategy includes consideration of:
Quality quality control, sampling, testing, assurance; compliance with ISO quality
and environmental standards; compliance with other relevant standards
such as US FCC and European CE marking
Process production methods and technology; location and design of production
facilities; requirements for plant, equipment and machinery; automation;
process balancing, flow and control; logistics
Capacity
minimum, optimum and maximum capacity levels; actual utilisation; seasonal
and cyclical spikes; flexibility and scheduling; effects of future demand
Inventory optimal levels of raw materials, work in progress and finished goods;
purchasing; just-in-time techniques; supplier linkages; materials handling;
order processing
Workforce
availability of skills, unskilled workers, and other support staff; job descriptions;
performance measurement; training and development; motivation
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