Don’t Let Risk Factors Hinder Strategic Outcomes

by Ken Goldberg

Businesses have a continual challenge to stay relevant – no matter the size of the operation. We live in a fast-paced world where consumers seek better ways to fulfil their requirements and unmet needs. To that end, organisations must persistently re-examine their business models and existing structures to ensure a winning value proposition. This can be difficult for companies that need to balance ongoing operations with innovative practices. It can also be demanding for businesses dealing with compliance measures and an ever-changing environment while having growth aspirations.
 
A typical strategy development process tends to deal with outcomes based on insights following a diagnostic process. Risk factors that can derail these outcomes should be part of the discourse. When organisational changes are necessary, it is worth considering the impact that risk factors have on strategic outcomes. This will help determine whether implementing the business leaders’ desired objectives to survive, adapt and flourish will succeed.
 
Although not exhaustive, five distinct risk factors have been highlighted below and should be considered as part of the strategic process. These elements may seem obvious but are common risks that can hinder organisational initiatives:
 
1. Employee relations
When considering strategic initiatives, evaluate whether employees are on board with the changes or will potentially cost the business in productivity - or worse.

• Example – The business needs to be downsized in order to deal with significant industry transformations.
• Considerations – Employee morale and productivity may be affected because decreases to the workforce may be required to streamline the business. Organisations insensitive to employee perceptions during the downsizing process can experience productivity losses and diminished employee confidence leading to a loss in competitive advantage.[1] 

2. Corporate knowledge
Assess whether knowledge assets such as process, skills or other information which help to run operations more efficiently are applicable to any new strategic initiatives. Furthermore, an assessment of whether that corporate knowledge will be properly captured moving forward, should also be conducted as part of the strategic process. Otherwise, there could be adverse consequences related to security, productivity, market value and other areas of corporate knowledge.

• Example – The business has long-standing proprietary technical expertise and/or processes that are becoming less relevant but, with revision, could fit a new strategic direction.
• Considerations – Developing and sharing ideas and concepts required for process change can be difficult because processes are not always codified or easily specified, especially if they require tacit knowledge.[2] Consequently, as part of the strategic process, there is a need to review, potentially transform and codify requisite capabilities or processes to ensure competitive differentiation in new markets.

3. Branding
Understand the gap between the organisation’s market realities and desired image versus current branding. As part of the strategic process, make the appropriate changes so that targeted consumers can easily identify the offering and feel a connection to the business.

• Example – An organisation rethinks its offering and value proposition as the business situation changes due to competitive, economic, political and other forces.
• Considerations – Many times, there are underlying forces which drive business activities towards strategy which gets incorporated into existing plans. As this occurs, there may be misalignments between current branding and the new environment so organisations need to continually review their brand strategy. The company is at risk of losing its market position and brand loyalty if it cannot clearly communicate key differentiators and benefits.[3]

 
4. Internal systems and structure
Recognise that existing internal systems have many dependencies across areas such as culture, structure, information systems, and other domains. These form a core part of prevailing operations and whilst they can be difficult to alter in times of change, they should be re-assessed and aligned with any new strategic direction.

• Example – A company decides that there are greater strategic benefits to terminate underperforming channel partners and seek enhanced revenue streams in overseas markets with a direct model.
• Considerations – Expansion into offshore markets coupled with forward integration may require new strategic information systems that could challenge an organisation’s deep structure. This could involve dealing with a number of attributes such as company core values, technology, organisational structure and control systems.[4]

 
5. Skillsets
Evaluate the range of abilities within the organisation that will be required to holistically pursue and deliver the strategy. This may be based on functional areas such as sales, marketing, HR, finance to name a few. It is vital that the composition of skills reflects the overall approach and new skills may need to be acquired as part of the process.

• Example – A new market innovation is pursued and operations commence all while the organisation is unaware that it lacks certain expertise. An example might be a bricks-and-mortar retailer attempting to “bolt-on” an e-commerce platform.
• Considerations – If the organisation has little to no experience in e-commerce or modern retailing, then the company will be challenged to discover that these areas require more than just technological skillsets. Physical retail formats and digital services are converging and retailers must be able to provide an end-to-end personal buying experience and obtain the requisite skillsets if they are not already in-house.[5]

 
Conclusion 
In order to successfully execute strategy, it is vital for organisations to ensure there are few to no impediments during the implementation phase. Common key risk factors such as the items described above, as well as some other critical factors, must be considered prior to the commencement of initiatives. Organisations and business leaders need to be proactive to deal with these factors so that strategic outcomes have the best chance to succeed.
 
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 Additional Sources

1. Iverson, RD & Zatzick, CD 2011, 'The effects of downsizing on labor productivity: The value of showing consideration for employees' morale and welfare in high-performance work systems', Human Resource Management.
2. Armistead, C & Meakins, M 2007, 'Managing knowledge in times of organisational change and restructuring', Knowledge & Process Management.
3. Laurent, C 2012, 'Branding - Why bother?', DEMM: Engineering & Manufacturing.
4. Silva, L & Hirschheim, R 2007, 'Fighting against windmills: Strategic information systems and organizational deep structures', MIS Quarterly.
5. BĂLĂȘEscu, M 2013, 'The influence of innovations and technology on the future of retail', Bulletin of the Transilvania University of Brasov. Series V: Economic Sciences.

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