More on that push-back from a strategy expert, challenging my claim that the issues below are all unavoidable parts of managing an organisation’s strategy. Strategy – they say – is only about Formulation + consecutive one year Plans (the left-most item alone) …
Here’s the second story making my case (this may have come up before in a different context)
Trouble in pharma-land
A division of GSK had its annual strategic Plan put to bed the previous October and its year-1 plan and budget in place. In those plans and budget, 30% of the division’s cash flow would continue to come from a product which was the only licensed drug for a certain disease.
Out of the blue, its biggest rival announced the April launch of a breakthrough product for the same disease. Its sales force was large enough to get around all potential physicians in 10 weeks, and the competitor was known to fight on price, so the null hypothesis was that nearly all physicians would be lost, destroying most of that huge cash flow.
Just a one-time challenge, right? Nothing to do with “strategy”?
(Incidentally, this case raises another, often neglected issue – there is no ‘better’ outcome here. Future sales and cash flow will be lower. But the General Manager will be a hero if they keep those losses to 30% or less.)
The non-solution …
What will not work here is a price-driven response, with big discounts to keep physicians loyal. That would be hugely costly in lost margin, and just provoke the competitor into more discounting.
The real solution …
We don’t have space here to go into all the details but, first, GSK was able to undermine the credibility of competitor’s claims about the product. And since the product had to be kept cool, they made sure physicians’ fridges were full with pre-delivered orders.
As the rival’s sales people were challenged by physicians they tried to sell to, and failed to capture orders, their early sky-high motivation evaporated, and they turned their efforts to selling other products on their list.
Yes, GSK lost some customers and cash flow, but only a small fraction of what it might have feared.
Is this “strategy”?
- Just like the previous B2B SaaS story – it’s certainly of strategic importance since failure would make a huge impact on the division’s medium-to-long-term cash-flow. But it wasn’t in the latest business plan, or even the budget, because no-one could have spotted it coming. And the whole episode was over before the next strategic plan review!
- And GSK certainly needed a “strategy” for fixing the issue – what to do, when, how much, week-to-week, across all levers that it might pull.
- And it was the same people – the division’s leadership team, or ‘strategic managers’ – that had written the business plan and budget in the first place who then had to deal with this massive issue.
- And, they could use exactly the same tool to plan, test and manage their response – a weekly digital-twin business model – that could use to plan, test and manage their continuing strategic plan and budget.
Semantically defining this to be “not strategy” is helping no-one.
Using standard strategy methods. I have previously exposed the limitations of the standard strategy methods taught to our MBAs and execs – precisely because they have little to say about implementing strategy or tackling issues like this. But there is a way to exploit those tools and get to a sound and adaptable implementation plan, as you will find in this course (there is a short ‘essentials’ option) …