Small Firm Strategy in Turbulent Times

ABSTRACT The purpose of this paper is to suggest an approach to modifying firm strategy and tactics to cope with the demands of the current economic downturn and resulting challenges to profitability and growth. The approach is, broadly, becoming a focused differentiator, adopting Hersey's Situational leadership Model and adopting a Lean Management philosophy. The target audience for this paper is Small and Medium Sized Enterprises (SMEs) - frequently privately held and often with fewer than 100 employees. These firms, in most cases, do not have sufficient resources to hire traditional management consulting firms but the reality is that what is described herein can be learned and applied at a very low cost. This paper benefits from the work we have done with Jay Arthur (LifeStar) and Warren Miller (Beckmill Research). In the aggregate we have well over 75 years of experience working with and advising SMEs. We don't claim to be strategy experts but we have over the years seen the mistakes made by SMEs and we'd like to help you avoid some of those mistakes. INTRODUCTION Triggered by the burst of the housing bubble in late 2007, the United States entered the worst recession since the 1930s. Unemployment is currently at a twenty seven year high. Erosion of revenue and profits has plagued many firms and the very structure of a variety of industries has been impacted. The old strategy approach of positioning a firm within its industry is no longer completely adequate because of profound structural changes in many industries. What is needed for survival and some measure of success in a small firm is the appropriate positioning of the firm and an emphasis on operations excellence (Porter, 1996) under the guidance of Situational Leadership® (Hersey, 1997). One definition of strategy is "A plan of action resulting from strategy or intended to accomplish a specific goal" (American Heritage, 1993). This general definition alludes to an important point and that is that the purpose of strategy is to accomplish an important goal or goals. The word "strategy" has as its root the Greek word "strategos" and that word is loosely translated in English (from Greek) as "the art of the generals". One of the first books describing the formulation and implementation of strategy was Sun Tzu's classic "The Art of Strategy" published some time during the Warring States Period (480-221 BC) (Wing, 1998). The Art of Strategy is really a series of tactical recommendations for conducting war. Although somewhat dated, it is interesting to note that this book is used as a strategy text at hundreds of schools around the world including the US Army's Command and General Staff College at Fort Leavenworth, Kansas. It is difficult to estimate how many books, articles and monographs have been published about strategy over the last 2500 years, but it is safe to say that the number is well into the thousands. In "Strategy Safari", written by Mintzberg, Allstrand and Lampel in 1998, the authors comment that they reviewed more than 2000 published studies on strategic management. Most of the published work on strategic management addresses the strategy problems (opportunities? ) facing larger organizations. This is appropriate from a pedagogical perspective but it is not always helpful to the very small organizations that populate the business landscape. According to the Bureau of the Census, in 2002 more than 97% of all business firms in the United States had fewer than 100 employees. It is to the leaders and employees of these very small firms that this paper is addressed. Although some would argue that very small firms (fewer than 100 employees) don't really need to concern themselves with strategy as normally understood, I disagree - vehemently. If one "buys" the fundamental assumption that there is an important relationship between strategy and firm performance, then it's obvious that small firms need effective strategic management as much as large firms. …