process, followed by justification and explanation to the group. This, in turn, is followed by another breakout ses- sion and more presentations, this time using different groupings. The iterative nature of the process is important to achieve buy-in by all involved. Most annual reports of publicly traded companies, as well as most educational and government institutions, have publicly stated their missions.
You would be well served to review a number of these as part of the mission creation session in order to familiarize your team with the many ways it can be stated. To limit frustration at this stage it is important to remember that the mission statement created here is just a draft.
In summary, by combining all of the above elements, your organization has crafted a mission with vision-inspired purposes to provide focus to its strategies and actions and values spelling out the organization’s code of conduct pro- viding control even when the leaders are miles away.
Because the mission is designed to be timeless (or for at least ten years for those with a fear of commitment), some meat needs to be put on its bones. The niche identification process, discussed next, begins this process.
and distinctive, while goals deal with areas critical to the organization’s operation, but more internal and basic.
Consider a bath soap company—its niche might be a creamy, pink, sweet-smelling foam, but its goal is to have the foam clean effectively whatever it comes in contact with.
Niche Positions
A niche is generally defined as, “a place or position suitable or appropriate for a person or organization.” For example, professionals or organizations are often spoken of as, “find- ing their niche,” usually after reflecting on the successes they have enjoyed. The trick in strategic framework devel- opment is to build on the strengths of the organization in such a way that niche positions are created or enhanced that can sustain the success of the organization over time.
Success in the context of the strategic framework is a rel- ative concept. That means that your organization must ulti- mately be compared to the competition. In that comparison, you will have achieved success if your organization is able to achieve results that are higher and more stable than com- parable entities. But do not higher rewards involve less sta- bility and more risk? After all, we have been told for decades by stockbrokers that in order to achieve higher returns we must be willing to accept higher risk—more volatility.
However, the sailboat with the higher mast catches more wind, applying more force to the keel, thereby increasing the boat’s stability. The same principle can also hold true for organizations. Consider an abbreviated income statement for two firms making the same product:
Determine Niche Positions and Goals 89
Company X Company Y
Product sales price $1.00 $1.00
Cost of goods sold .60 .80
Profit $.40 $.20
Profit margin 40% 20%
Both Company X and Company Y sell the same product at the same price—$1.00. However, Company X’s cost of goods sold is lower than Company Y’s, resulting in a higher profit margin or result. Now consider the same two firms, except at a different point in time, after the price for the product has fallen 15%.
Company X Company Y
Product sales price $.85 $.85
Cost of goods sold .60 .80
Profit $.25 $.05
Profit margin 29% 6%
Company X’s profit margin is reduced from 40% to about 29%, a reduction of less than 28%, while Company Y’s profit margin is reduced from 20% to about 6%, a 70%
reduction. So, in this example, Company X has achieved both a higher result and more stable result than its competitor, Company Y. Investors and purchasers of businesses generally like this type of performance and reward organizations that are able to achieve it with considerably higher values.
Determine Niche Positions and Goals 91
How does an organization achieve better and more sta- ble results than competition? Certainly, close attention to cash flow is part of it. But, from a strategic point of view, the niche is created when the organization achieves a posi- tion in its market that draws customers and clients and other stakeholders of importance to its doors. In practice, such positions generally require an organization to develop and focus a number of its capabilities in one or more areas of the market that are strategically significant (i.e., that determine the outcome of competition in the marketplace).
Determining appropriate niche positions requires an orga- nization and management team that not only understands its own strengths and limitations, but also has a strong working knowledge of the external environment, including customer motivations and loyalties and competitive strategies. Once these are assembled (see, for example, the output from the exercises in Chapter 3, “Define Factors for Success” and
“Identify Barriers to Success”), the strategic framework development task force can assess various aspects of the orga- nization to discover competitive advantages that can possibly be brought together to create potential niches in which to establish or enhance positions over time. The most common way this is accomplished is by segmenting the organization into its several value-added phases and contrasting each one with what is known about these phases in similar organiza- tions. Depending on the nature of the organization, typical value-added phases might include:
■ Product research
■ Process research
■ Raw material procurement
■ Component procurement
■ Manufacturing
■ Marketing
■ Distribution
■ Retailing
■ Service
■ Back room operations
■ Management information systems
Usually, after a fairly thorough review of these areas, the task force is able to identify a number of competitive advan- tages. After some discussion, those which actually taken together would have a strategic impact in the marketplace and create a sustainable niche are agreed upon.
It is worthwhile to remember some common-sense guidelines when engaging in this part of the framework development process:
■ The more functional areas that are involved in a niche, the stronger it is.
■ The more resources applied toward a niche, the stronger it is.
■ Building on existing strengths shortens the niche creation time.
■ The value of niches changes over time.
Because it takes a fair amount of time and money to develop and maintain a niche, only a limited number (one to three) should be sought by an organization. Also, because the benefit of the niche is enhanced the more wide- spread it is, attention to communicating and developing a consistent organizational culture is important to facilitating inter-departmental cooperation.
Goals
Key areas in which to develop goal statements tend to be dri- ven by the content of the mission. In the review of value-added areas in the search for niches, many organizations identify areas they consider critical to their success, but not worthy of inclusion in a niche. Accordingly, the list of typical value- added phases might be useful as a checklist in goal creation.
To a very great extent, the stratification of goals depends on how the framework development task force visualizes the company. For example, a CEO might look at the vari- ous parts of the organization in terms of how they con- tribute to the “Ps” learned in school (e.g., product, position, people, profit, etc.). Another might simply think of the organization chart and decide that each functional area should become a goal area and use this as a starting point for discussions among the team members.
Regardless of how the discussions begin, or the initial format goals take, the final test is simple. Collectively, with the niches, they must completely describe a state and time when the achievement of the mission (out in the future four to ten years) is complete.
This principle continues to hold true throughout the framework development process. That is, the boxes in the level below that are connected by lines to the one above it, describe the achievement of the box above in its entirety for the time period in question.