Strategic renewal for business units.

Abstract

Over the past decade, business units have increasingly taken the role of strategy formulation away from corporate headquarters. The change makes sense: business units are closer to customers, competitors, and costs. Nevertheless, business units can fail, just as headquarters once did, by losing their focus on the organization's priorities and capabilities. John Whitney--turnaround expert and professor of management at Columbia University--offers a method for refocusing companies that he calls the strategic-renewal process. The principles behind the process are straightforward, but its execution demands extensive data, rigorous analysis, and the judgment of key decision makers. However, when applied with diligence, it can produce a strategy that yields both growth and profit. To carry out the process, managers must analyze, one by one or in logical groupings, the company's customers, the products it sells, and the services it offers in light of three criteria: strategic importance, significance, and profitability. Does a given customer, product, or service mesh with the organization's goals? Is it significant in terms of current and future revenues? And is it truly profitable when all costs are care fully considered? Customers, products, and services that do not measure up, says the author, must be weeded out relentlessly. Although the process is a painstaking one, the article offers clear thinking on why-and how-to go about it. A series of exhibits takes managers through the questions they need to raise, and two matrices offer Whitney's concentrated wisdom on when to cultivate--and when to prune.

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