Behavior Traits of Successful Businesses
August 29, 1999
Business Innovation Opportunities
Businesses are resource limited and must determine where and in what way to allocate resources to achieve business mission objectives. This translates to why it is so important for business to be creative and actively plan for innovation correctly.
Innovation is a change of direction and it alters investment policy so it is essential from the onset for the business planner to be clear about the current state of product portfolio. The planner must recognize how to balance the current products against possible policies for future development and their likely implications in terms of cash flow, market share, return on capital employed and other key components of company objectives.
A successful behavior trait taking hold for successful companies is to develop business models to assess a strategy. These models provide change models expanding on issues such as what, that provide a picture of the company now of analysis; and which, that suggest alternative action paths for the company to take. Both of these models provide information to build a more complete picture of events within the business and options for future development.
Managers should make use of these models and many dont. Those that do are more likely to be successful and have the ability to minimize risk of failure. Business managers who do are far more likely to survive. For planners and non-planners there is not a single universal technique that can be applied in all situations.
Use of strategic planning models can be a very important behavior trait for successful companies. Companies that do not use strategic planning models usually dont because the model does not offer what the customer wants. It may be inadequate because of its analysis of the relationship between company resources and markets. These result in advice about overall investment decisions rather than about the specifics of how to manage the alternatives in the market/business relationship can be shortsighted, since there are always alternatives in order to gain the maximum competitive advantage. Since change is so an important aspect of business continuity, many models dont necessarily provide assiduous suggestions for what type of change should be considered.
An example of modeling one such model in use by Boston Consulting Group (BCG) subdivides their profit centers into four main subdivisions. This breakdown does help in planning for strategic investment matters but it does not assist the planner in identifying a single product development proposal to investigate further from a number of alternatives. The matrix system comprises the following:
1) Stars, which are products generally with negative cash flow
2) Question marks, which are products with generally negative cash flows but with low relative market share in growing markets
3) Dogs, which are products unlikely to be generating substantial positive cash flows due to the fact that they are in slowly growing markets with low relative market shares
4) Cash cows, that are products that generating cash which have high relative market shares and are established in slowly growing markets.
BCG model like the previous statement in the above paragraph does not define the product enough and does not create opportunities to explore alternatives in which to improve profitability or market share.
The growth concept is divided into five separate levels one being dominant, strong, favorable, tenable and weak and relates this to the stages of market development. The stages are embryonic, growing, mature, and aging, which produce a series of strategic guidelines for company development. The market growth concept provides valuable guidance about broad policies, replacing the concept of market attractiveness in the GE matrix with stages of market growth.
A PLC (product life cycle) are frameworks for planning. It suggests that specific changes in product policy should be followed after the initial product introduction. A major problem is that few products follow typical PLC curves. This implies that the organization evaluates the likely progress of each facet of the products performance over the ensuing time scale to identify particular areas where investment should be concentrated without a clear indication as to whether that product will follow the predicated path of the PLC.
The Innovation Matrix
There are several other types