One of the middle steps in strategy mapping is to choose the financial strategies that align with the value proposition and overriding objective. Financial strategies tend to fall into three categories:
1. Revenue growth
2. Productivity
3. Asset utilization
Revenue growth
This one seems fairly self-explanatory: it still merits some discussion given the number of ways there are to grow revenues. Some examples:
1. Sell more of your existing offerings to current customers;
2. Sell to migrated customers (that is, customers that have moved from a competitor over to you);
3. Sell offerings to new market entrants; and,
4. Sell brand new product and service offerings at a premium.
Price leaders will want to grow revenues by selling more of their existing offerings to current and new customers (volume is the name of the game). Product leaders and companies focused on customer intimacy will focus more on revenue growth through premiums for specialized features in addition to volumes.
Productivity
Financial strategies around productivity relate to control of the variable costs that can be tightened or loosened as the value proposition requires. For example, price leaders need to put very tight controls on variable costs since they cannot be passed on to the customer.
Product leaders and companies pursuing customer intimacy will want to control variable cost but not to the extent that it may erode customer value, since their customers are seeking specialized features and are willing to pay a premium price for them. This can be referred to as optimizing your variable costs.
Asset utilization
Fixed costs (such as buildings, machinery, and salaries of permanent or core staff) are the main focus when it comes to asset utilization. By and large these are committed costs, so it’s important to utilize them as best as possible to drive the most revenue (and profits) from them. All organizations would tend to approach this in a more or less similar fashion; price leaders of course tend to have a more watchful eye than the others.
Strategy mapping can be very powerful and providing guidance for the step involved with choosing financial strategies. Ensuring alignment with the value proposition is critical; strategy mapping is a major boon in this context. This short video quickly walks you through all of the steps involved in building a strategy map.
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