How the Full Potential Paradigm™ Can Help Ceos Achieve Long-Term Value
A good strategy starts with setting the right targets
Reaching your company’s full potential involves understanding the various paths to maximize value and starts with setting a data-driven strategy. One of your most important roles as a business leader is to establish realistic and achievable goals to guide decisions around choosing what markets to compete in and how. You need to identify and set these targets through a fact-based approach to analyzing what levels of profitable growth and sustainable margins are achievable. This effort employs certain universal concepts — such as business definition, relative market share (RMS) and competitive dynamics — that are relevant across industries and companies of all sizes.
FPP is a proprietary framework with four complementary elements that help illuminate part of the “Which targets should we set?” question:
1.Market context
- Have I properly defined my business, and do I understand the overall market and industry?
- Do I understand the drivers of growth and profitability?
2.Margin performance
- Is my current business performing at its full potential?
- Are the targets I am setting achievable and optimal for enabling the business to reach and sustain its full potential?
3.Growth opportunities
- Are our resources and targets aligned to maximize revenue and profit growth for the business?
4.Investor alignment
- Am I receiving appropriate recognition from investors for my company’s accomplishments? Are market value and intrinsic value-aligned?
- Do I understand the capital markets’ expectations for my business?
In today’s dynamic and disruptive competitive environment, what the CEO doesn’t need to know the answers to these questions? And what CEO has solid quantitative answers to these questions in which he or she has a high level of confidence?
To set the stage, it is important to understand that FPP is based on what we call “maniacal realism.” This term represents our commitment to questioning assumptions and conventional wisdom in search of driving insights about the business.
Defining market context
Defining market context is a critical first step to help ensure your strategic goals fit your business and industry. This exercise identifies the specific industry and competitors, as well as growth and profitability drivers, and answers these questions:
- Is the industry consolidated or fragmented? Is it consolidating, fragmenting or stable?
- What is the basis for competition?
- Where are the boundaries of your industry under attack?
- What are competitors’ market shares and how are they changing?
Defining your business is often not as straightforward as it sounds, given all the transformation and disruption in the world today. The business definition takes into account both your business today and where it is headed, starting with a clean slate and not relying on conventional assumptions. The analysis looks at customers, current competitors and costs to identify peers and competitors.
