I had the privileged in 2018 to visit ESADE University to learn more about corporate strategy. One of the areas we investigated was renewal strategy, concentrating on Road Service products that are in decline globally (but interestingly were in growth in South Australia). Renewal strategy also has merit for other industries, especially those that are in reforming markets or under pressure from new entrants and are being disrupted or disintermediated.
According to Pearson (2014) a Renewal Strategy is:
“…a corporate strategy designed to address declining performance.
· Retrenchment strategy – a short-run renewal strategy used for minor performance problems.
· Turnaround strategy – when an organisation’s problems are more serious, more drastic action is needed.”
Renewal Strategy
When considering whether your business is in the midst of the renewal strategy archetype the following model can help you determine where your organisation sits on the matrix. If your business is in need of renewal, the focus is to be viable in the short to medium term based on the harshness of the environment that you are operating in.
As an example, if an enhancement to a product is not getting the sales that you predicted, but there are no new entrants, the environment might be on the low scale. However, if you have a tech start up such as Uber competing with the Taxi Industry, it might be Hi and radical investment might be required for the incumbent industry players.
To achieve viability organisations need to relook at the customer, employees skill sets & culture, the operational effectiveness and ensure that the technology is optimised. Marketing plays a role to ensure operational effectiveness in order to drive new sales volume as well as representing the brand while the necessary turnaround strategies are put into place.
The strategic framework of the renewal archetype has been developed by ESADE university and is a simple three-part process – react to the situation, rationalise your business and implement the strategies then allow the business to grow. This may then allow the business to move out of renewal and into another archetype.
Some strategies that may be implemented to review, change and realign the business may include:
· Moving the business from product to service
· Invest in marketing to drive volume
· Organisational design
· Invest in systems
· New roles in income producing positions to handle the new volume
Turnarounds need more marketing leads and volume to drive new clients, sales, sell through of stock.
Investment
During the transition into turnaround and to pivot the business there is a need to invest in marketing:
· To sell through back inventory and to enable the change to the operation to be orderly
· Find new sustainable clients
· Tell the brand story – for internals as much as externals
In turnarounds the psychology of the business can lead to demotivation, lack of communication, looking out for oneself (no collaboration) leading to the organisation spiraling downwards. Investing in a new business model, marketing, systems, explaining the why; keeps those remaining connected and engaged. They can see that it’s not all about cost cutting and downsizing, it’s about investing in the turnaround and celebrating every small win.
Invest in marketing and systems and include it in every business plan as an enabler to drive marketing volume and increase sales generation – ensuring that it is measured and has sound KRAs.
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