Entrepreneurs and managers of successful companies possess an ability to see the company as a whole and to think about its development over the long term. They constantly seek new opportunities in related markets, products and services, where the firm’s distinctive strengths can be applied. They are also obsessed with competition.
They use strategic and operational planning to define and understand the business and how forces operating in the market influence it. They then use this understanding to analyze options and determine what must be done to achieve the company’s vision.
The result is a corporate strategy and a business plan that not only responds to current circumstances, but also anticipates the future. Together, they embody a vision of where the business is evolving. Without a vision, and the leadership to rally others around it, the organization is likely to be reactive, suffering the consequences as a result. By contrast:
Visions are inspiring—they challenge employees at all levels in the organization and motivate them with a clear sense of purpose.
Defining your business’s purpose
A vision statement is usually accompanied by a mission statement, which addresses the nature of the company’s business. The fundamental prerequisite for any corporate vision is a definition of its business. This means defining the area of activity in which it specializes, who it is trying to serve and how it is trying to serve them. This may seem like an obvious point but companies frequently misjudge the nature of their business.
A classic example is offered by the railways which experienced a steady decline over many decades, in part because they kept thinking of themselves exclusively in terms of the rail business and oriented their actions toward saving that industry. They did not realize that they had more to gain by thinking of themselves as being in the transportation business, with rail links as merely one of many means of pursuing that business.
By failing to broaden their perspective, railways failed to take advantage of emerging opportunities in bus, truck and air transportation. The use of multimodal transportation and inland container ports is a belated recognition by the railways that they really are in the transportation business.
However beautiful the strategy, you should occasionally look at the results.
One way of reaching a useful definition of a business is to determine which industries share the same customers and the same competitors. Do the products or services offered by these industries provide similar functions, styles, features and benefits? And do changes in the marketing strategies of firms in one industry affect the strategies of firms in the other industries? If the answer to these questions is yes, then the firms under consideration are really in the same business.
A prime example of this would be the telecommunications industry. Not too long ago, cable TV companies defined themselves as being in the entertainment industry. First they recognized that they could offer high-speed Internet service over the same cable as the TV signal – they redefined themselves as being in the information business. Then they realized that the voice component of the Internet can be used as a cheaper version of a telephone call.
Today they describe themselves as being in the telecommunications business which encompasses voice, video and text. This example highlights the need for a business vision that can project and anticipate developments not only in the company’s own industry but also in others.
Your customers’ business is your business
Zeroing in on the firm’s current customer base plays an important role in defining a company’s business. Knowing its customers, the firm can determine what they value today and anticipate what they will value tomorrow. It can then develop products or services in a way that meets the needs of customers.
This type of analysis can be quite an eye-opener. For example, it has led many high-tech manufacturers to realize that they are not just selling equipment but also the ability to link and integrate that equipment into comprehensive solutions. Indeed, the provision of total solutions has increasingly taken over what used to be the simple sale of electronic components. The classic example of this is IBM which no longer sells just business machines, but now it sells total office solutions that it installs and maintains.
A definition of your business should also distinguish between core competencies and peripheral activities.
In an era of intense global competition, businesses are now focusing their energies on what they do best and divesting themselves of non-core businesses. An example of this is Canadian Pacific Railways, which maintained railway operations, a mining company, a shipping company, a hotel company and several service companies. While all of these operations carried the CP logo, their core competencies were very different and they each had separate needs.
For this reason and several others, the main units of CP were split into separate stand-alone companies that make decisions independently of each other.