Saturday, 21 May 2016

THE GENERAL AS STRATEGIST ~ DR. JIMOH IBRAHIM, CFR

Barrister Dr. Jimoh Ibrahim, CFR
There are many roles for the ‘General as a Strategist’ in navigating organisational strategic road maps. The issue of general supervision cannot be taken for granted. It looks like the general will play the role of control tower for the other drivers of the strategy to navigate safely.

The problem of many organisations lies in the lack of intellectual capacity of the ‘General as a Strategist.’ This manifests in the form of weak knowledge of what the organisation needs, which is beyond the usual ‘as the spirit directs’ approach. The fact remains that basic sound knowledge of management principles cannot be compromised as a basic requirement. How does one explain a ‘General as a Strategist’ not knowing the market he intends to play in? For instance, you see a newspaper that is targeting the mass market publishing hard articles and devoting many pages to intellectual/academic concerns. Such issues do not add significant benefit to the mass market.

How will such a paper fare in the market? The newspaper will lose market share very quickly. The more poor people buy the newspaper, the more they will discover that the articles are of no benefit to them. With time, they will drop the newspaper. And when the intellectuals buy the newspaper, they are also not comfortable with it, as there are just a handful of articles in which they are interested.

The strategic direction is clear and all that the ‘General as a Strategist’ needs to do is to continue to upgrade his knowledge of the specific market and add value. Strategic alignment will be very difficult if he changes market focus.

There is no doubting the fact that First Bank of Nigeria Limited is a mass market bank. And for a century, they have been focusing on the mass market. First Bank never takes private banking as a priority over and above their market focus. They have gained a large share of the mass market. They develop products that the market will need and they move on with excellent results.

Most new generation banks do not know which of the markets they want to focus on. Many of them want to focus on the mass market, with large branches of the bank all over Nigeria. But in practice, they largely focus on private banking, which is the end market of the rich, a clear case of cross purpose in strategic direction. How does one explain a loan of more than the entire shareholders fund given to one individual, when it is expected that such large sum of money should have been given to many customers to support the idea of the mass market, if that is the strategic focus.

It is so sad that when you ask a CEO which market he is focusing on, he may often say, ‘I focus on anywhere money will come from!’ Regrettably, those short term benefits will not sustain the organisation. In a telephone hand set business, if the company is focusing on the mass market, it is very important to address the issue of price. For instance, of what significance is a telephone with features like YouTube, Facebook, or Internet connectivity to an illiterate market woman who wants a telephone? All of these will add to the price. And what a market woman needs is a cheap phone to make her calls!

The strategic direction for the ‘General as Strategist’ is to ensure adequate knowledge of the market. You cannot develop a market that you are not expected to focus on. The missing link therefore is the lack of appropriate understanding of the market for the products of the company or the alignment of cross markets. For instance, the Louis Vuitton brand is meant for the end market of the rich. Their products mean luxury! However, those behind the brand must think very fast, for the poor also love luxury! Their only obstacle is price. But makers of fake Louis Vuitton products can help the poor out of this dilemma. And once the rich begin to see Louis Vuitton products with the poor, the brand may lose the end market of the rich. Such an occurrence may create competitive advantage for the competitors of Louis Vuitton, as the fake products may sell more than the original.

The greatest challenge to any CEO today is the market. Market issues include price, quality, competitive advantage, market share, technology, people and change. Nothing is predictable in the technology market. Before you can conclude your strategic road map, a new product that could put you on permanent disadvantage is launched by the competitors. Oftentimes, you simply do not have an answer to a competitor’s challenge.

Customer loyalty cannot be taken for granted. The challenge for the ‘General as Strategist’ in respect of knowledge development cannot be taken for granted. To many customers, innovation is important for retention. In my view, if innovation must be relevant, it has to be an accelerated innovation. But the problem here is lack of knowledge of what to do on the part of the CEO.

How did the CEO of Blackberry react to the accelerated innovation introduced by Samsung? They had no answer! Blackberry was offered for sale! How did Nokia react to the same innovation of Samsung? They simply changed their market, moved to the emerging market of Nigeria and accepted low market share in developed countries of Europe and America, since they are at competitive disadvantage. And when Samsung penetrated the emerging market of Nigeria by increasing market share, what did Nokia do? Simply run away to no market!

In practice and more particularly in the financial service industry, when a CEO has no answer for a competitive innovation, he simply embarks on de-marketing of the competitor. Again this approach is not sustainable. The key issue in understanding where to play in the market is cost of operation. A CEO cannot charge a low price for products meant for the end market, so also will it be impossible to charge a higher price for products meant for the mass market. In the middle market, both high and low prices are acceptable.

The CEO of Range Rover almost sent the company into bankruptcy when he attempted to do a radical sales transformation of the product some years back. He introduced a new set of Range Rover for the mass market, while keeping the existing product for the end market, so that it will be possible to have a Range Rover of twenty thousand dollars for the mass market, while the superior Range Rover will remain for the end market as luxury!

Regrettably, he produced over one hundred thousand of such cars for the mass market. The end market reacted by shifting to the competitor, ‘The Lexus’ and in no time, the legacy of Range Rover was on the decline! The Board quickly met, sacked the CEO and destroyed the entire vehicles meant for the mass market, so as to retain the end market for the sustenance of their legacy.

The lesson here is not to jump over markets. Once a decision is taken about which market to operate in, the next thing is to keep that market. And how to do that largely depends on knowledge of how to earn customer loyalty. The ‘General as Strategist’ must be on top of such matters (NationalMirror)