This framework is taken from David Ohrvall’s book on strategic consulting with some minor adaptations.
STRATEGY
1. Scope evaluation: does it make sense to expand into new products/categories, or divest existing activities?
2. Direction: should you enter new markets or exit an existing market to re-focus? Should you develop new products and services, or reposition your existing brand image?
MARKETING
1. Price optimization. Most businesses spend a lot of time on driving unit volume or reducing costs, more than on price optimization. Yet, a 1% increase in price (holding volume fixed) has a much greater impact on operating profit than a 1% increase in volume or a 1% decrease in cost.
2. CRM. Increase retention, increase share of wallet (buy more of the same product, buy new products from us), or change the mix of volume sold (promote products with higher margins).
3. Acquire new customers. Change sales tacticts to reach a broader set of the market or invest more in advertising/marketing.
OPERATIONS
1. Cost reduction. Evaluate cutbacks against service level or quality measurements. Minimum KPI need to be achieved or cost savings will be offset by revenue losses. Evaluate internal / external costs (outsourcing): where is it cheaper to perform the activities?
2. Processes. Quality measurements, internal efficiency, capabilities.
ORGANIZATION
1. People. Skills, compensation schemes, organization architecture.
2. Information systems. Quality of reporting, data. Automation of non-value added activities to focus your people on what is truly important to the business.
3. Measurements. Track the most important activities (15-20 max), consistently throughout the company, and gather/review them often. Despite all the talk about measuring results, most companies are very weak in this area. Compare metrics YOY.
FINANCE
1. Reduce inventory
2. Reduce receivables
3. Increase payables
4. Balance debt and equity
EXTERNAL FORCES: Porter’s 5 forces analysis.
