What is better than proactive?
Proactive vs Reactive business strategy | Nuances to Know
Strategy — How to Win?
Doing business is always a challenge. But, it ceases to be threatening if there is an effective business strategy at hand. This is a must-have element the absence of which may guarantee a chaotic movement instead of stability or growth.
How to become effective in strategic planning? What is a reactive business strategy, and why is it the opposite of proactive and less effective? What is the difference between being proactive and reactive? What benefits a proactive business strategy may guarantee to your business? Look through this article if you want to form a clear view on the matter and get tested examples.
Reactive Strategy: Features and Benefits of Alarm Effort
Reactive business strategies are aimed at providing a response to unexpected changes or events without any extra initiative and implementing strategic plans for sustainable growth. Reactive strategy is focused on control over existing policies and determines the change of a course in case of a crisis event only. This is the reactive approach definition in a nutshell.
A reactive strategy is sometimes helpful but it should never be dominant for a company. If this happens, a business sacrifices its future and growth to ensure control over the current state of things. At the same time, this type of strategy makes a company highly vulnerable. The behavior of a company is determined by external forces it can’t control — competition, government, global crisis, etc.
The main aim of any reactive business strategy is returning to at least the same state of things and course of operation that existed before the problematic event. This may require applying concrete actions, for instance, reducing the workloads, closing certain lines of operation, redirecting costs from some items to others, searching for loans and external funding — these all are widespread measures in this course of things. There are also certain red flags that signify that it is high time you thought about developing and applying a reactive strategy already.
Red Flags to Start Implementing Reactive Strategy
There are a number of cases of reactive change when a business needs to start thinking about applying a reactive business strategy:
- Unexpected events — this may be anything that impacts a local environment (broken machinery, accidents, natural disasters, and similar matters out of control) and those that have a global nature (pandemics, world economic crises, and similar events that impact the unlimited territory).
- Market shifts — any market changes that impact a company should be addressed in time. Otherwise, there may be substantial losses, including market positions.
- Need for occasional prosperity — a reactive business strategy may also be workable when a company needs to ensure business growth during a short period of time.
Background for Reactive Strategy
What issues have to be considered while developing a truly effective reactive strategy? All reactive strategy examples always deal with common questions aimed at reviewing precisely an internal situation:
- What were the causes of the situation?
- What issues had an impact on the situation?
- Who was involved?
- What resources are necessary (material, technical, and human) to restore the situation?
- How long will this approximately take?
Clarifying these points enables making steps ahead for solving troubles. There is a good tool that can facilitate making a clear picture in case of a reactive strategy. Create a mindmap using specialized software, even an open-source one. This approach can facilitate arranging ideas, information, and connections between different points. It is necessary to make a clear view of the business in the future and an effective strategy for it.
Workable Reactive Strategies
Reactive strategies are identified according to three major types. That is because reactive strategies are usually focused on addressing common troubles and trends a business may face:
- Emergency strategy — a plan designed to respond quickly to the consequences of an immediate and unexpected crisis. This plan ensures the state of survival for a company. The plan is usually implemented instantly after a problem has occurred and is realized until a crisis event passes entirely. For instance, a reactive strategy may quickly deal with possible R&D mistakes to eliminate such. This may be ensured through the revision of applied technical solutions that cause problems and thanks to adding extra technical means to support operational processes.
- Push strategy — a strategy that is frequently aggressive in its nature because it is aimed at a direct and active interaction with existing companies. This type of reactive strategy is quick to apply and pushes competitors out of the market. Usually, this is made through dumping — making the prices of a target company lower than the competitors’.
- Pull strategy — this strategy type has some signs of proactivity. It is focused on addressing the needs and preferences that are going to change. This strategy is associated with making extensive research. This strategy is focused on improving the quality of products or services.
Reactive Strategy Pitfalls and Consequences to Know
Applying a reactive strategy is a matter that may be good for emergency business situations but not as an ordinary course of business things. Why? It makes any long-term changes in the business environment impossible while keeping overfocus on short-term goals. It may be also easy to miss certain markets or explore those in a bit (or a lot) haphazard manner. Decision-making is more fragmented when this type of strategy is applied.
Competitive behavior also suffers a lot when this type of strategy is chosen. If a company manages to survive only, it becomes difficult or nearly impossible to gain any competitive advantages. Any reactive marketing corporation and endeavor always has a higher risk of failure. So, these hidden pitfalls may cause stagnation of a business. Even if it has faced some severe consequences that encourage applying reactive business strategies, it is still necessary to move to far more rewarding approaches to doing business.
Proactive Strategy: Level up for a Business
There is no explicit proactive strategy definition as its concept envisages a limitless number of opportunities and solutions. In brief, a proactive strategy is an approach that is aimed at resolving possible future situations and enjoying some opportunities in full. Spending a reasonable amount of resources for achieving business goals is another characteristic of this type of strategy.
It should be noted that a business that concentrates its effort on proactive strategies is more effective than the one focused on reactive ones. This may be a good answer to the question “is it better to be proactive or reactive?”
Proactive companies think about the perspective of the development inside their company and outside — the market. Being a proactive company means being focused on growth. While reactive companies are usually concentrated on resolving current issues nearly all the time, they very often have no time for developing plans to grow.
Still, to be fair, occasionally reactive strategies may be applied in the operation of proactive companies too. All companies periodically face unpredictable situations. The same thing happens with reactive companies — sometimes they may develop proactive strategies to grow. But, when we conditionally claim some companies as “proactive” or “reactive” we speak about a predominant type of behavior and attitude to one’s growth. And if the company permanently develops and applies reactive strategies, it has either failed to plan well beforehand or is operating in a crisis.
Being proactive always requires thorough and extensive preparation. This approach is focused on identifying and promptly addressing issues that may occur. It is also focused on identifying trends and “catching the wave.”Even if a proactive approach is associated with innovations and more purposeful effort, it is also related to quality control — whether the final outcome of the strategy application is the exact one as it was expected to be first.
Models of Proactive Business Strategies
If you need to have proactive business strategies which are easy to apply at hand, there are good examples to look through:
- Dealing with the same products/services but through various channels — if you have stores, including small ones, it is an easy thing to sell your products through online channels also. Instead of investing funds in renting extra retail spaces for stores, you may easily implement extra technical means for your business and arrange online sales. It is even possible to make the customer experience amazing. For instance, if you have a store, there are AI-based technologies that enable matching a video with a customer’s appearance and clothes or cosmetics available in a store. In this way, it will be easy to say whether a certain thing will suit a customer well and save one’s time instead of visiting a shop. The same thing is with services — think about how you can adapt your service options for selling those online. In this way, you may reach a greater number of customers.
- Working with the same infrastructure but with different products — this is an active business strategy that is keen on the market shifts. Under certain conditions, some products may become less popular. But, other products may become in demand. If this is possible to do at minimal cost, it is a worthy thing to use the same infrastructure for producing products in demand. For instance, during the start of the COVID pandemic perfume producers had losses. But, those who managed to use their facilities for making sanitizers even gained more during the challenging times.
- Working with the same products but different infrastructure — proactive companies frequently need to increase the volumes of their products or service supplies but the existing infrastructure may have limited capacities for that. There is no need in refusing the business plans and goals. It may be not easy but very much possible to involve external partners who can provide facilities. Also, nearly always there are companies that cease their businesses. It may be a good solution to search for such companies and buy their assets for expanding your own business infrastructure.
Becoming Proactive: Primary Points to Cover
Developing and implementing a proactive business strategy requires passing a couple of interrelated stages. These points will greatly determine the future results of business planning:
- Identifying core values of your business. To cover this point, think about the aspects you personally appreciate and things your target audience expects to see. Somewhere in the middle will be the right solutions beneficial for both parties. You will see solutions (products) that will be both pleasant to produce and will be popular among consumers. These core values will ensure the freedom of expression in business and attract the same kind of employees and customers. Eliminating circumstances for possible obstacles will automatically help with redirecting effort to development and growth. What examples of values are good for business and attractive to customers? These values are innovativeness, humanism, saving the environment, etc.
- Paying attention to data analytics. Accurate and complete information is crucial for doing business. If you want to form a workable proactive business strategy, assess accurately the current state of things. What information matters at this point? Take into account customer needs and preferences, the major areas of concern, info about competitors, regulations, trends of development, and other info that may be valuable occasionally (like time of response to customer’s requests). Identifying some trends and patterns will facilitate developing an effective proactive strategy. An important point while dealing with this data is to arrange its effective procession, storage, analysis, and utilization. You will need to track the progress further and probably detect spots where you experienced some problems.
- Ensuring open communication. Building any truly effective strategy is impossible without effective communication both inside and outside the company. Any business is human-focused more or less. So, a businessman strongly needs to identify the main concerns of employees and customers. Be open to feedback and new ideas. It frequently turns out that there is no need in investing vast amounts in research or reinventing something new. Workable solutions may lie on the surface and your employees may bring those to you easily. In this way, it is an easy thing to detect the so-called hidden resources of a company. What instruments can help you in this course apart from being attentive and demonstrating interest? Create questionnaires, use emails and social media accounts. There is an important point here. Start with your employees first. Where is the trick? There is no need to specifically train your employees to communicate with the clients in a dedicated manner. If you communicate with your employees in this way during the surveys and later on a day-to-day basis, they start automatically retranslating the same attitude to your customers. Care for your “internal client” before moving to the clients from outside. This is the easiest and shortest way to have open communication and lots of useful information in return.
- Expanding the borders of the market. Think about how your expertise can be adapted to solving internal problems a customer may have. This is a truly proactive effort that can add extra bonuses to you. Customers don’t need to devote time and resources to resolving some portion of their troubles. You can do this with your tested approaches and for less. For instance, if you are a distributor of some goods, think about how your expertise in managing flows of goods may be implemented for better management of the assortment your customers may have. Investigate the new and hidden needs of your clients and you fulfill these needs thanks to adapting your expertise to their internal problems. It is an easy and rewarding path. And that is always appreciated a lot.
- Mapping the process — create a detailed map of all business processes in the company, both operational and administrative. Primary aspects that have to be taken into account are the flows of information, defining responsible people for exact segments of work, covering the process of approval, dependencies, and other related matters. Mindmaps can serve you well at this point again. These are charts with all relevant elements. They can be easily created for the convenience of reviewing and showing all links between the elements. Having this map at hand may facilitate brainstorming and looking at certain matters from different sides.
- Learning to address issues as they come. Develop this skill from the start of implementing your proactive business strategy. Be flexible and prompt with addressing new issues. Don’t handle any matter for a long time being lost among the endless negotiations and considerations. Avoid this at any cost! Always form a clear view of what the problem looks like and what actions have to be taken to address it. Apply such actions as soon as possible after an issue has appeared. This is especially important while dealing with certain issues customers refer to.
Extra Hacks for a Workable Proactive Strategy
A proactive strategy is a plan you can tune maximally to your needs and business ambitions. In this course, you are limited only by your imagination. But, even among the variety of all options introduced, there are good things you should not neglect under any circumstances:
- Setting clear goals. Developing proactive strategies and operating effectively for implementing those is impossible without clear and measurable goals. Perfectly, the strategies for proactive demand management do not include goals that cannot be measured, like enhancing the company’s appearance in the market. In fact, it is possible to measure nearly any parameter of the company’s operation. For instance, if a company wants to have a better position in the market, it should think about how to increase the number of customers and sales, decrease costs, develop competitive advantages, etc. There are always concrete figures attributed to these parameters. Taking realistic indicators to solve an issue is also important. It is always better to assess the indicators of the previous period and pick options that may serve well for the future, like increasing by an extra 10%. Defining core trends a company wishes to address is an important point here also. Are there any trends your company can create, like service-related, for instance? There is a simple question at this point. How is your industry going to change in the nearest future? Catch this trend or even create a new one. Why not?
- Emphasizing service more instead of a product. It is a common belief that a company likely needs to invest maximum amounts of resources in the product it has (to its research, testing, promotion, etc.). The quality of a product is important without a doubt. But, far more results get companies that have a good quality product but invest more in customer service. The economics of impressions always work and customers will more likely remember the attentive attitude and emotions any other brand cannot bring. Another example of a service-oriented approach is working till making a client’s problem solved (that is a point that will be remembered and told.
- Adding more trust to interaction. This is an essential element for long-term and comfortable planning. In this case, clear policies should exist, of course. One of the most important rules in such policies is more trust and less control. This creates a comfortable atmosphere for work and increases the chances of an organization being more productive. Why this is important? For instance, if a manager inserts camera control devices on the computers of employees, it is surely better to change such a manager, for instance. Employees should know about a concrete deadline prior to which they have to complete the work and the rest of the process should be left after them. This is the right approach for proactive business effort and good results. Strict time management facilitates implementing proactive plans or at least not breaking those. Responsibility instead of control adds more to creating a comfortable working environment based on trust.
- Redesigning the internal processes. This should be made with an emphasis on making these processes more effective, for instance, thanks to the elimination of paperwork. Digitalization can decrease the dependence on certain methodologies and work routines. It helps with arranging processes more cost-effectively. Applying different software for remote teamwork and communication is another approach that can ensure better results. Digital ecosystems are good solutions for more complicated business cases with ambitious goals and plans. AI technologies are suitable for application to enhance the performance in many aspects, like these most widespread ones: It is an easy thing to notice how many companies apply AI. This aspect is gradually becoming a must-have one nowadays. Why so? It not only makes the life of ordinary companies easier but also ensures higher revenues. According to the insights from the McKinsey survey, more than 60% of companies that have implemented AI systems increased their revenues in return. So, currently, AI is the #1 priority in applying proactive business efforts among companies worldwide.
- Addressing security issues. Prevent cyberattacks and the possible negative consequences of broken plans. Using password managers and VPN tools is essential in this course. More advanced cases, like dealing with personal or confidential information, need encryption (including using encrypted emails), backup copies, and other advanced IT security measures. Addressing security issues properly may also become a part of your customer care strategy in certain cases. This is another example of proactive effort.
Running a business is surely not some kind of steady thing. It is nearly always a challenge that has to be addressed well. Both proactive and reactive examples of strategies are equally important for the operational processes. Reactive strategies are more effective for dealing with unpredictable situations. But, the number of cases of reactive strategies application should be limited to the maximum extent possible. Reactive not proactive — even the best reactive strategy can’t ensure sustainable growth and success as expected in the case with a proactive strategy. Still, it is always possible to switch from a reactive strategy to a proactive one. This will surely lead to higher results for a company.
Focusing on proactive strategies should become a primary goal for a company that wants to grow and raise funds. Proactive strategies are more interesting and deal with future prospects. In the battle of proactive vs reactive scenarios, the first ones always win.
Originally published at https://jelvix.com.