Every CEO is invested in creating the most effective, powerful business management strategy for their organization. But what is “strategy,” in this context, exactly? And how can you make refine it in a way that serves your company in unique, but pragmatic ways?
People use the word strategy in different ways. Google “definition of strategy” and you’ll get over 350 million hits.
Here is a simple definition from the dictionary:
A strategy is a plan of action or policy designed to achieve a major or overall aim.
True enough, but this definition is so broad, and in my view overly simplified. This could be applied to a Work Breakdown Structure (WBT) or a Gantt Chart, amongst many other things.
I recently sat in on two different organizations’ strategic planning meetings, and I observed a lack of useful strategic thinking as the groups worked to break down their goals into action steps.
They were using this overly simplistic definition of strategy. These groups had a goal – to increase revenue – and that was fine. Then, they spent several days breaking down the goal into key objectives (which were smaller goals to achieve the goal). This, too, is reasonable, and quite typical of strategy sessions. From there, broke down the objectives into projects and tasks. Again, there’s nothing wrong with this.
The problem was that, as they created their business strategy, there was little to no consideration regarding who their customers are and what they care about, or how they’re going to serve their customers better and offer something different than their competitors. It wasn’t specific enough, which undermines the purpose of doing this in the first place.
Michael Porter defines strategy as “the way a company pursues competitive advantage across its chosen market scope.” This definition includes the core idea that we must choose a market focus, and then we must figure out how we can serve that market need better than other organizations. We must use our creativity to find something others have not found before, or to combine ideas in a new way.
Business management strategy is all about making tough choices
Strategy is all about choices and tradeoffs. You need to be just as clear about what you are NOT going to do as what you WILL do. You want to be very, very good at a limited number of things, not mediocre at many things. Strategy is all about what makes you UNIQUE, and not all-inclusive.
The more clearly you limit your market, the more likely you are to attract customers and clients who are seeking your specific product or service.
As you can see above, there are four different cars. You can see how each car is meeting the needs of four totally different types of customer. Rolls Royce does not try to compete in the economical car sector. Rolls Royce has specifically chosen to serve customers who place a high priority on luxury and status, and not on things like how many miles per gallon of gasoline the car provides.
The smart car, on the other hand, is serving a totally different set of customer values: economy, ease of parking, care about the environment. This is product strategy in action. Seems simple, right?
Choose a set of customers, learn what they care about, and set out to serve them in a way that will have you stand out from the competition. So many entrepreneurs find making the choice to focus their offering on a specific set of customers one of the most difficult things to do – myself included – but it’s a necessity.
Please don’t think that strategy is only about product design. I have just used this as an example. I do think, though, that good strategy does start with the product or service offering, because that is what the customer is buying. A good strategy is customer focused. Think for a minute about some of the most successful companies in the world today – Amazon, Google, Apple. What do you think are some components of their strategy?
Here are some questions that will help you focus on what is unique about your business:
- What is our market?
- Who is our competition?
- What needs are currently going unmet in this market? How can we meet them?
- What is special about us, and what we offer?
Setting a goal
Most businesses want one or more of the following basic things: to grow and expand, to increase profits, and/or they want to maintain their current profitability.
If you are a startup, your goals may include things like being acquired for X+ millions of dollars or achieving a series A round of funding. You may need to get your revenue to a certain level before you can raise investment funds, but the long-term goal is to raise that money. It is important to clarify what your ultimate goals are, rather than just aiming for the baby steps to get there.
There may be different paths that you haven’t yet thought about to get you that goal, but you won’t be able to identify them if you don’t have the big picture in your mind. What you think is your goal (revenue) may indeed be only one of a few ways to raise money.
Before committing to a goal, ask yourself these four critical questions:
What is your VISION?
What specifically do you want to accomplish, and why? Why is it important to you?
Do you feel PASSION about achieving your goal?
Do you really really want it? Do you want it enough to devote serious time and effort, and probably sacrifice other desirable things, in order to attain it?
Does the organization or team have the necessary TALENT or STRENGTHS to achieve this goal?
Is this goal a natural fit for what you and your team can do well?
What CONSTRAINTS or OBSTACLES stand in the way of your goal?
What WEAKNESSES exist on your team that could make it difficult to achieve the goal?
How to strategize
Once you’re clear on your goal, you can begin to plot out your strategy.
Your strategy will largely consist of lower objectives which you will need to hit, further fleshed out by action steps that will help you reach those objectives — and, subsequently, your goal.
If you’re feeling a little lost, don’t get hung up on the semantics of what all the things are at this stage. Stick with whatever terminology keeps it all clear for you. Strategy encompasses ALL OF IT: goals, objectives, tactics, actions, and choices. Most importantly, a good strategy includes intentional choice.
Communication is the key ingredient to successful strategizing
A good strategy requires clarity. Everyone who is involved in executing said strategy needs to have a deep understanding of each level, as well as their role in its execution–otherwise, you’ll end up with waste and inefficiency. This is especially true if you are running a startup or small team; everyone needs to be involved in the strategy discussion.
If you walk into a room and announce, “Okay, everyone, listen up! Here’s our strategy,” your team won’t have full buy-in. It won’t feel organic to them, and their investment is crucial to execution. If all hands are on deck when you hammer out your strategy, your team will be motivated and accountable to one another. By approaching your business management strategy as a team collaboration, you create a level of personal investment that is unparalleled.
Real accountability requires open communication and trust. You have to keep an open mind, and stay genuinely curious. You have to be willing to learn from your team members. Don’t just ask questions as a way to elicit confirmation of what you already think you know. Ask questions to learn stuff. Have an appetite for surprise.
If you are running a new, smaller organization…
If you’re running a small business, you may think, “Oh gosh, we have so few resources! We don’t have enough capital to compete with the big fish!”
This is (probably) true, but that’s no reason to feel discouraged. What you do have is profound freedom to innovate. You have the unique potential to disrupt your large company competition through a creative business management strategy. By being smaller and less rigidly established, a small organization is far more flexible than a large company. This makes it easier to identify what needs aren’t being met in your market and pivot accordingly.
Big companies have inertia. It is hard to change when you have a lot of customers and employees used to doing things a certain way. It is hard to see a new way when you’ve known a way that worked to get you to the size that you are.
A startup or small business is much more adaptable. If your organization is compact, you retain the ability to be whatever you want to be. That is truly the greatest resource you can have. Let this level of flexibility play a role in your business management strategy!
Of course, there is a danger that you can over-pivot yourself into limbo if you’re too “loose” about your goals. As long as you’re balancing pragmatism with your innovation, the ability to recreate yourself is a tremendously powerful resource.
Now that we’ve discussed different ways to approach your business strategy, it’s time to take action. Stay tuned for an upcoming post which will share how to make a comprehensive strategy map – step by step.