How Does Strategic Planning Deal with Seismic Changes in an Industry?
By Denise Harrison, Vice President
It is often argued that strategic planning processes miss industry shifts due to a myopic focus on existing customers and market segments, as well as existing products and product lines – but is this correct? NO! While market analysis and customer segmentation are important to any strategic plan, it is paramount for the process to look outside the existing business for opportunities and changes that will have significant impact on your business. In addition, it is essential for your team to develop a scenario for your industry looking out beyond the planning horizon; looking for trends that will emerge 5-10 years in the future. This allows the team to identify industry shifts – disruptive drivers (e.g. technology, demographics, regulations, lifestyle changes) which might transform your industry. How does this work? Let’s look how Wyeth Pharmaceuticals addressed a structural shift in the pharmaceuticals market. Next we will look at how Clorox used trends to identify new growth opportunities.
Wyeth: Traditional Pharma vs. Bio Tech
During the mid-1990s Wyeth developed a vision of the pharmaceutical industry. In their scenario they saw that traditional pharmaceutical development would be less fertile for growth opportunities than the emerging biotech approach. Understanding that this new technology would foster significant future growth, Wyeth faced the decision to build from scratch or buy. The Wyeth team decided that acquisition would be faster than building from scratch and they acquired two companies: Genetics Institute and American Cyanamid (now Wyeth Biotech) which had the intellectual capital that Wyeth did not have resident inside its own company. Wyeth did not hesitate; they jumped in with both feet with a significant investment to fund these acquisitions.
Wyeth correctly anticipated the benefit of the biotech approach to developing drugs and now WyethBiotech is 45% of their business. A decade later, Wyeth is still reaping the benefits of its investment decision – the biotech industry is blooming and profits at Wyeth (2008) are up 12%. Many other pharmaceutical companies dabbled in biotech but dabbling did not position their companies for success. Now, these companies are playing catch-up: Eli Lilly purchased ImClone in 2008 and Roche is purchasing the rest of Genetech. Recently, Pfizer made the decision to purchase Wyeth so that it, too, can get into the biotech and enhance its pipeline.
Clorox Capitalizes on Mega-trends to Fuel Growth Strategy
Clorox identified two key trends when it defined its growth strategy: consumer focus on health and wellness, and environmentally friendly products. The recognition of these trends resulted in the acquisition of Burt’s Bees® natural personal care products, the launch of Green Works® natural cleaners, and repositioning the Brita® brand as an alternative to bottled water, thus positioning Clorox as a more environmentally friendly company. It took an acquisition and new product line launch along with product repositioning in order for Clorox to capitalize on these trends. Like Wyeth, Clorox made significant moves rather than taking a “wait and see” attitude.
Challenging the Status Quo
Is your strategic planning process allowing you to challenge the status quo? Do you look for opportunities outside of the box? Do you look out beyond your planning horizon to evaluate industry shifts or new competitors? If you are able to see trends before your competitors, you will leapfrog the competition by positioning yourself to meet the needs of emerging markets. Remember, what made you successful today may not be the key to success tomorrow – it is important to anticipate future industry shifts. It is essential to look five to ten years in the future and develop an Industry Scenario and Winner’s Profile as part of your strategic planning process. These two steps will enable your team to identify shifts that will significantly impact your business and allow your team to develop a strategy to meet these changing industry conditions.
Denise Harrison is Vice President of the Center for Simplified Strategic Planning, Inc. She can be reached at email@example.com.