Why Strategy Matters More Than
Ever…Building a Plan to Thrive

By Eric Kurjan

In my previous article – “Determining Your Go-Forward Business Strategy in a COVID-19 World” – CSCNetwork Magazine Q4, 2020, I shared a perspective of how organizations can get back on track. We examined the phases that independent laundries were experiencing and offered several different tools to consider beginning the steps toward recovery. Although much has changed since the article was first written, we are still faced with similar scenarios. There remains a focus on how to manage capacity, how to manage expenses against a shortfall in revenues, and how to manage efficiency and productivity. But with very little focus on what is next, staying in survival mode has been the only call to action for many.

We have seen an increase in the number of potential operator consolidations as a protracted economic slowdown has caused many businesses to move from surviving to closing. In a study conducted by The Economist Intelligence Unit, they predicted a move toward consolidation in the industry and we are seeing it firsthand. For those operators who have restarted, especially those in F&B and Hospitality, they have experienced a distinct reduction in weekly sales not only
due to reduced locations opening their doors but also in terms of the size of an order. It has a chilling ripple effect with
fewer customers to serve and smaller invoices at the same time. This has caused some operators to really call into question
their survivability.

There isn’t just gloom and doom. Many organizations have taken the right steps to begin their recovery. They are taking action to move forward. They have managed staffing to match capacity requirements. They have found ways to expand into new markets or add offerings, including a variety of PPE and Facility Services products and services. They have trimmed the “deadwood” of low or no profitability accounts. This deadwood examination of Profitability by Account (PBA) or other metrics, including revenue per mile, has been used to determine which customers are worth keeping based on the true profit generated by each dollar of revenue. Remember, adding top-line revenue does not mean anything if it costs you more to service them. If you bring in $1, but it costs you $1.25 to service them, then your customer is a cost center, not a profit center. These are tough decisions because no one likes to give up customers. Raising your price may be an answer, but if you cannot, then you cannot afford to keep them. As a colleague once told me, “revenue is vanity and profit are sanity.”

So, what can I do to survive and thrive? It starts with a solid strategy. Working from home and the COVID pandemic has caused many things – some positive and others not. In this case, the COVID pandemic caused me to rearrange my home office. After going through my large collection of business books, I came upon an old Harvard Business Review article “What is Strategy” by Michael Porter. Michael Porter served as a professor of Business Administration at the Harvard Business School in Boston. Re-reading this article showed me it was amazingly relevant even after being written nearly 24-years ago. The point that Porter made in the article is that businesses of all sizes have lost their way and have become so focused, enamored, and committed to operational effectiveness – productivity, quality, benchmarking, and speed but they failed to connect the dots back to strategy.

 

This is where I believe we are now. It is truly time to re-think how we reconnect to strategy. There is no better time than right now. Yes, unknowns remain rampant, but you must move. No more hand wringing; it is time to move. The first steps are to ask yourself these questions and get well-defined answers.

• What makes us unique – our products or services?
• What are we good at? (core competencies)
• Where does our profit come from – which products and services?
• Which of our customers/clients are most satisfied – why?
• Which customers are most profitable – why?

In answering these questions, we also need to look at our plant capacity/capability, staffing, funding sources, geographic coverage, and who are our competitors in those geographies. If you want to add a new sector to serve (ex. healthcare) or even a product to offer, you need to understand its impact on the business – what will it cost the organization to add new or different equipment, what staff will you need to run and manage the new offering, what vehicles will you need for delivery, what merchandise will you need to buy. And equally important, what is the selling price so that you can make a solid profit.

 

These fundamental questions raised in Porter’s article give us a basis for building or re-building the business. To be honest with yourself about your strengths and weaknesses is challenging work. It forces you to make tough decisions about how you used to run your business. It may push you out of your comfort zone, but it needs to be done and done now. You cannot afford to wait to see when the pandemic will end. If you take that approach, you will miss the start of the race, and you will still be putting on your shoes when the starting gun sounds. We have been working with multiple operators to look beyond today and prepare themselves to capture market share, customers, and position themselves for the long term. They will come out well ahead. I certainly understand that it is hard to ignore the feeling of being up to your elbows in alligators, but you have to define a plan to move beyond the current situation. 

 

Answer the questions above, download the Excel spreadsheet (Recovery Phase Worksheet Tools) from the CSC website or from ours. If you need help, ask for it. We are always happy to help. The long-term success of the industry and your family’s livelihood depend on it. As one of my favorite non-business quotes says; “Help will always be given at Hogwarts to those who ask for it.” ― J.K. Rowling, Harry Potter and the Deathly Hallows

Contact:
Eric Kurjan
ekurjan@SixDConsulting.com
(419)348-1897