BSL06 LEARNING LOG: STRATEGY FOR GOOD TIMES

The Kuala Lumpur Stock Exchange is already up by more than 30% since 6 months ago and less than 20% off its all time high achieved in late 2007. Since most Malaysians participate in providing services such as power distribution, food cultivation and distributions and transportation by having equity participation in companies that provide those services, this means most if not all of millions of Malaysians have either recouped their investments or increasing their wealth. More wealth means Malaysians will want and afford better lifestyle which then require better services from all providers. The importance of strategy in steering organizations through these changing time to provide better services cannot be overemphasized and the challenge prior to the crisis proves it. For example prior to the crises the cost of oil was more than 200% than it is now due to high demand of gasoline to power vehicles for travelling.

The role of business leaders is fundamental in strategy development and execution and a key contributor to a successful strategy implementation. While one of the main roles of business leaders is to set and communicate vision, mission and strategic objectives, many fail in the execution process as they forgot to account for inflationary price of their inputs. For example many countries embark on infrastructure projects for their stimulus package. Infrastructure normally takes about 3 years from tender to completion. If due to high demand, cost of machineries inflate by 50% than what was tendered, the providers may face crises of their own. With the "big-picture" view, the leadership is able to view the ever-changing environment and decide on how the organization needs to respond and to steer the organization toward longer-term objectives. While the strategic vision remains the same, the route to reach the destination may follow different tactics and game plans.

Strategy is all about clarity, and if the strategy is simple, clear and well-understood, it will be accomplished. It represents the organization's main direction and prime focus and defines the way to get there. For expressway companies it might just be additional lane kilometer by a certain time. It can only be executed if everyone involved, from business development to operations knows what is expected of them and their purpose is totally aligned with its direction. Strategy is a real differentiator, often seen as the secret for long-term success and one of the characteristics of leadership. It unites the whole work force, nurtures and develops opportunities and ensures endurance during crises or good times. Often when managing the good times we must make provisions when credit for example may dried up. In times of crises the strategy could be full expansion to enjoy low cost credit and other inputs.

Thus, although strategy represents a solid and firm direction, current environment dictates that it should be adaptable to reflect changes in the environment, whether political, economic, social, technological or legally related especially if the strategy is to expand in Indonesia, India and Middle East. Business leaders must have clear business goals and be flexible and brave to continuously recalibrate their strategy. When times are tough and visibility is not so clear, leaders must have the buoyancy to be pragmatic and adaptable, as in the midst of chaos come huge opportunities even exit and cut loss. Unsuccessful companies are those which do not embrace new ideas, broaden their thinking or are totally unaware of changes in their environment and hanging on to hope. Changing circumstances may necessitate a change in direction and stubbornness and fixed ideas can frequently be the enemy of business leaders.

Business strategy is all about developing a viable plan for sustained business growth, possibly diversifying into new markets or cross selling to existing customers. Adequately qualified senior executives tend to have clear views of what their business strategy means, nonetheless if a business really hit a concrete wall due to legislative constraint or fallible assumptions like house prices in America will increase 8% forever, utilizing the exit strategy like Lehman Brothers may be the only option.

The strategy can be viewed as the story of how a business plans to develop in the next few years; investments to make, markets to address, products to develop, territories to compete in, partnerships and alliances, etc. A good strategy is simple, clear, credible, motivating and reflects the distinctive features of the business. While strategies may end up looking the same, the brands and the culture of the organizations will be different. The real test to establish whether a strategy is good or not can be seen during difficult times e.g. the recent global credit crunch, as business leaders are tempted under such conditions to lose their sense of direction and seek ways to cut costs and maintain margins. The leadership's thinking should be focused mainly on the strategy and nothing else. Companies are encouraged to continually health-check their strategy against various potential scenarios for example the recent bank stress test conducted in America and emulated by many banks here in Malaysia.

During changes in the working environment or tough times, the leadership should review its business strategy to assess whether it is still prudent and acceptable to adopt a more flexible approach to the execution process, for example accelerate making an investment or divesting an existing business segment. Business leaders should continuously be working on the company's strategy, since the business environment is changing all the time.