Gaining competitive advantage through business strategy
Whether you’re a business owner, entrepreneur, or private equity backed management team, having a business strategy is key to supporting the growth plan of turning a business generating £10 million of revenue into a business generating over £100m of revenue, writes Nick Gomer, head of EY in Cambridge.
If you asked the majority of business owners across the East, most would say they are looking to grow their business. However, many miss one simple thing – a ‘business strategy’ to support the growth plan on which the management team and company are aligned, i.e. how do I get from where I am now to where I want to be? And most importantly, how do I measure and track this strategy?
With any business strategy, having a competitive advantage gives the business a head start. But to continue growing, this competitive advantage needs to be maintained.
As such, businesses need to be prepared to be a disruptor in their sector, always pushing new ideas, and innovating their offering whatever the product or service.
Typically businesses generating revenue of £10m will have already overcome past challenges and therefore understand their capabilities, competitors and customers. However, they often don’t consider the importance of creating and fostering an effective business strategy; starting at the board and management level, and filtering through the company.
EY’s 7 Drivers of Growth is a framework designed to help companies align their capabilities with their growth strategies. These drivers help leaders of aspiring companies to think differently, by assessing where they are today and planning the right path forward to accelerate growth.
1 People management
A business is only as good as the people working for it. How can a business stand out to attract and win the war for talent? Leading businesses build an environment that values diversity and attracts and retains the right people to help them grow – this is becoming increasingly important and starts from the top. A desired company culture that is implemented at the top quickly perforates into the whole business and can deliver incredible results.
2 Getting the right customers
Leading companies make customers their focal point and consistently invest to build and develop these relationships. After all, businesses are providing a solution to a customer’s issue or problem. Business leaders should use customer feedback to drive innovation; thinking like their customers and understanding what really drives their decision-making will help to achieve competitive advantage.
3 Digital, technology and analytics
Digital technologies are fundamentally changing the ways consumers interact with each other, while also opening up new business models. Organisations harnessing the power of IT can create a strategic and competitive advantage. However, this must be balanced with direct face-to-face meetings with customers to preserve the original relationship.
4 Streamlined operational model
An operating model is the link between the business strategy and the ability of the organisation to deliver on that strategy. Having a clear approach that aligns operations with strategy will increase the ability to achieve success. Market leaders understand that every aspect of their business must hold up to scrutiny and be constantly improved to stay ahead of the pack.
5 Funding and cash flow management
How a business manages its money and investors determines its course for the future. Leading companies determine the best mix of finance for them and derive maximum benefits from their management of available funds. Decision-makers should be open to different sources of finance and understand the benefits of each.
6 Growth by acquisition vs. organic growth
Market-leading companies rarely evolve by organic growth alone. To rise to the top they seek successful partnerships and strategic acquisitions capable of enhancing their growth, competitiveness and profitability. Leading businesses make a concerted effort to remain alert to transactions, including those of their competitors, to build a profile in their markets and to ensure that they are well positioned to seize an opportunity as soon as it arises to help the company grow.
7 Embracing yet minimising risk
Fast growing businesses often struggle to keep their risk management processes up to the same speed as the exciting growth they are experiencing. Having a risk management strategy that allows you to scale confidently and quickly will save untold time, expense and worry later down the line. This can be most clearly seen in the back office functions – inadequate accounting systems can mean no access to timely and bespoke management information, delaying strategic decisions being made on the basis of unreliable data.
• EY supports businesses in the East to realise their growth potential through our Entrepreneur Of The Year programme.