Best Practices

As your company may be discussing strategic options for the next decade, I suggest you think as broadly as possible about your core competencies and how to leverage them. In addition, if you believe you lack certain competencies that are necessary for longer-term success in new areas, consider how you might acquire these competencies through training, hiring and acquisition.

Consider the case of Walmart, which recognized in 2015 that it lacked an e-commerce capability that was necessary to compete with Amazon and others. Walmart embarked on a series of purchases of e-commerce-capable companies like Jet.com (2016), Bonobos (2017) and others. It is notable that Walmart’s third quarter 2020 e-commerce sales were up 79%, and Walmart is now the second largest e-commerce retailer in the United States. Some of the businesses they purchased have since been sold or deprioritized, but Walmart clearly gained know-how and talent through these acquisitions.

Consider too the situation of Amazon Web Services, the cloud infrastructure arm of Amazon with an estimated worth over $500 billion and more than 30% market position that did not even exist until 2006. Andy Jassy, CEO of AWS, recently discussed that the origins of the company began out of an internal Amazon need for a common set of infrastructure services to accelerate the speed at which it could complete various internal company projects. 

At an executive retreat in 2003, the company conducted an exercise identifying its core competencies. Of course, it identified competencies such as fulfillment and shipping of products, but it also realized that it had become quite good at running infrastructure services like computing, storage and database management. It also identified skills at running reliable, scalable, cost-effective data centers. This recognition of perhaps non-obvious core competencies made it consider whether it had the foundation for a new business at Amazon.

As you conduct your strategy reviews during 2021, I urge you to consider your core competencies in the broadest possible fashion, as the Amazon folks did, and whether these competencies can be leveraged into new business areas. For example, you may have expertise as a global company managing global supply chains and widely distributing products meeting strict product quality requirements. That expertise could perhaps be utilized in other areas besides lubricants or additives, such as various sorts of specialty chemicals or even pharmaceuticals. Perhaps you have expertise servicing retail customers through a network of gas stations, which could be reimagined into vehicle service and electric charging stations. 

Consider the “sweet spot” that may exist at the intersection of your core competencies (in their widest possible interpretation) and emerging green energy areas, including wind, solar, electric vehicles, cleaner power generation, hydrogen-powered vehicles, plastics recycling and green alternatives, and the like.

I would also suggest taking a hard look at all of the various startups and Special Purpose Acquisition Companies in the green energy arena, of which there are many. It strikes me that many of these companies would benefit from the established expertise in the oil, lubricants and additives businesses in the following aspects: 

• Safety management philosophy and execution
• Risk assessment and mitigation
• Quality processes and quality control 
• Establishment and management of globally or nationally distributed supply chains
• “Gate” processes for introduction of new products
• Use of statistical tools for product testing and establishment of specifications

Perhaps acquisitions or partnerships with some of these new companies would result in better technology coming to market, faster commercialization and reduced risks.

While our industries possess numerous strengths and capabilities such as those listed above, you may find that it is hard to carry out these strategic, big-picture exercises. I suggest that such an exercise requires the assistance of a consultant who is practiced in the areas of strategy and M&A activity. I suggest also that you seek to involve those in your company who are most creative and innovative, as well as a cross-section of people across the various functions of your company. Such a diverse group is more likely to result in step-out opportunities for the future.

Another way to unleash creativity and strategic options is to consider the current state as well as a few potential future states circa 2035. Brainstorm around these questions:

• What does that future state look like with regard to your business stakeholders?
• What are the issues that need to be dealt with during the transition to the future state?
• What are the possible unmet needs in that future state? 

This way of looking at the future may offer your company unique, longer-term business opportunities, especially when coupled with your re-examined core competencies.  

Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. Contact her at saralefcourt@gmail.com  or (908) 400-5210.