Winning with Strategic Options

You’ve got to be very careful if you don’t know where you are going, because you might not get there,” Yogi Berra, the former New York Yankees baseball player and manager, once said. His maxim suggests that without a sense of direction, we are lost and randomly wandering.

I’m afraid that’s the state of many companies right now, as we’ve all been hit hard with an economic knuckleball. If that feels familiar, perhaps you should explore your strategic options with a methodology that quantifies and qualifies the likely outcome of each option. If your strategic planning sessions are akin to throwing darts at a dartboard, the strategic-options analysis I propose will allow you to make informed decisions about your company’s organic growth, acquisitions, divestitures, or downsizing.

The best time to explore and assess strategic options is when the company is performing well. In other words, conduct a proactive study initiated by the board or management, instead of being forced to do so by a lender, investor group, or unfriendly acquirer. How many times have you read about a business in financial trouble that has hired an investment banking firm to help the company “explore its strategic options?” The truth is that it’s not really exploring strategic options, but is in a process to see how much the company can fetch in a distressed sale or a liquidation.

Different Planning Styles

Determining which strategy to use might depend in part on your leadership style. Business leaders create strategy, looking into the future and creating a map that shows where they are and where they want to be. But that’s when more knuckleballs are thrown at them. In competitive markets, no one can expect to formulate a detailed long-term plan and follow it mindlessly to the end.

Some business leaders seek to shape the future of their company with high-stakes bets, such as large acquisitions that will either make or break the company. I’m talking about a real toss of the dice—like Bank of America’s acquisition of Countrywide Financial. Only time will tell if that transaction will provide Bank of America with a robust mortgage banking and distribution channel, or a millstone around its neck.

Other business leaders who are more risk-averse may hedge their bets by making a few smaller acquisitions or investments. For example, to capitalize on growth opportunities in some emerging foreign markets, consumer-product companies have forged limited operational or distribution alliances.

Still other business leaders favor investments in flexibility that allow their companies to be nimble and adapt quickly as markets evolve. Unfortunately, the costs of establishing such flexibility can be high. Also, a wait-and-see strategy can turn into a fell-asleep-at-the-switch strategy, creating a window of opportunity for competitors.