I once worked with a highly paid management team in a large company that lacked a clear business strategy. Because industrious people abhor a vacuum, several senior people created their own assumptions around strategy. The chief technology officer and the chief marketing officer each had a large influence and huge budget; they spent money on competing projects and visions like drunken sailors. The results were disastrous; they wasted large sums of money and accomplished nothing. This is what happens when there’s no clear business strategy to align the troops!
But before we get into how to create it, let’s identify what it is!
Business strategy identifies the aligned set of actions you’ll take to win in your defined market.
Each word is important, so let’s dig in!
Alignment means that your people all pull in the same direction as opposed to the aforementioned example. It also means that the dollars you invest move you in one direction rather than a shotgun approach. Few CEOs would say their business strategy is to throw around dollars in random areas and try to generate an above-average return, yet they allow it to happen without a clear strategy!
This is about action, not concepts. If your strategy doesn’t tell you how to act, it’s worthless!
Just like the Supreme Court often must interpret what actions the Constitution requires, senior management members still have to make judgment calls on what activity to undertake, but they focus on a specified, not random, direction.
Identifying where you compete means you pursue some markets or customers and say no to others! You cannot be all things to all people. You can’t even be many things to lots of people.
There must be a reason that you win vis-à-vis your competition.
How will you win? If you can’t answer the question “Why would someone buy from us versus our competitor?” you either don’t have a clear business strategy or you’ve done a poor job on strategy execution.
So now you know what it is. How do you create a compelling business strategy? There are two primary requirements:
1. You must have a process.
Carl Sandburg said, “Ordering a man to write a poem is like commanding a pregnant woman to give birth to a red-headed child.” Likewise, I once worked for a CEO who put his top five people (I was one of them) in a room to figure out our strategy. No facilitator, no process, just us guys.
We had an eight-hour turf battle and produced nothing. There are many processes you can use to develop strategy, and none of them is perfect, but you must use one. I use several with my clients.
2. Those who execute the strategy must create it.
Many consulting firms would like to tell you what to do. I won’t. I will, however, facilitate a process whereby you and your executive team identify actions that will win in your marketplace.
Critical Elements of Business Strategy
“Having determined your destination, you set sails, motivate rowers, adjust for winds and currents, avoid shoals and rocks, allow for surprises, and expend finite energy efficiently. You control some things but align yourself with others. You balance, while never forgetting that the reason you’re balancing is to get from where you are to where you want to go.”
—John Lewis Gaddis, “On Grand Strategy”
This is a great metaphor for crafting and executing strategy. You must have a destination (vision), understand your competitive environment, marshal assets, develop plans and adjust as you keep your eye on the destination.
What this doesn’t say is as important as what it does say. Some would have you believe that great strategic leadership entails putting on blinders and running through an obstacle, regardless of developments on the field. Although this sounds “muscular,” it’s naive. The concept of business strategy is closely aligned with military action, and ironically some of the most spectacular failures highlight the folly of “one way” (e.g., Vietnam).
Likewise, you don’t set sail with no destination, letting the winds take you where they will. That might work for a vacation, but it is not a model for business success and ignores the element of human choice. Luck plays a role in all success and failure, but there’s a good dose of observation, planning and choice in successful ventures. Try to start a business with no destination, and see how successfully you find funding and hire talented people.
So success lies somewhere between an absolute linear progression toward your vision and a wandering ship of fools. The bad news is that there’s no one route. The good news is that you have numerous ways to succeed, as long as you pick one and course correct along the journey.
For those of you who like “pictures” (and I’m one of them), check this out:
Developing a business strategy starts with identifying where you want to go—your vision. I describe vision as a clear compelling picture of the future. Note the word “compelling,” because it applies to you as owner or CEO and your team! Buying a bigger boat may be nice for you, but the guy on the shop floor in Sweden doesn’t care!
You can use a collaborative process to develop a vision, or it can come from you as CEO. But there must be an answer to the question “Where are we going?”
Next, it’s important to understand current reality. What are your strengths and weaknesses?
What are your key assets?
What’s the competitive environment? How do your customers perceive you?
You need to know where you are, because you must develop a clear statement of what you’ll do to move from current reality to your vision. That answer to “What?” is your strategy. It identifies the aligned set of actions you’ll take to win in your defined market.
From that strategy statement, you’ll identify the critical issues to execute your strategy. They are the major (I emphasize major!) changes you must make to be successful.
If this sounds overwhelming, don’t fret. I’ll be there to help guide you through the process. You do, however, need to commit to the hard work.
Thanks for hanging in here! This is a deep subject. One more question that we should answer, however, is “Why do this?” As I mentioned above, I’ve yet to meet a CEO who says, “I’m going to encourage random behavior to see if I can get a good return on investment!” But, in fact, that’s what many do.
Here’s another picture for you:
Company A in our example above has complete alignment. It has a clear business strategy, and everyone is moving in the same direction.
Company B is in pretty good shape; perhaps some corrective action is needed with a couple of folks.
Company C is like the one I described above, with executives spending money like drunken sailors trying to take the company in seven different directions leading to no progress. Which would you rather be?
A Story to Bring It Home
If you’re fascinated by business strategy, by how you can address a market differently than everyone else, you might enjoy this story. If you’re just trying to be like all the others, stop now and crawl back in your hole.
I recently had coffee with the founder of a successful company in the outdoor-product world. I own several of his items and wrongly assumed that he’d attribute his success to a product strategy (i.e., best product wins).
His response to my strategy query was interesting, surprising and informative. He said it was really all about relationships.
If you think about successful product companies (i.e., those that charge revenue for tangible things)—such as Apple, Nike, Ford or Avery Brewing, one of my local favorites—you’d expect their core competency to be product development. And for many, it is.
There’s an inherent challenge with this core strategy, however. It typically requires constant reinvention. What was cool yesterday is out-of-date today. In addition, you typically need large marketing budgets—though this has changed a bit with the online world.
Companies that succeed with a product-driven strategy must build robust and quick product development competencies, and they have to keep feeding the fire. Some customers are asking “What have you done for me lately?” And brand loyalty is fleeting without other anchors.
One model I use to help companies talk about strategy dictates that you must “win” with one (maybe two) of four possible strategy components: product, service, relationship or distribution model. If you choose product, you need to move beyond competitive to either distinct or breakthrough to carry the day.
Back to my CEO/founder friend. … He knew his product had to be at least competitive (e.g., as good as his competition), or he’d be out of business. He also knew he couldn’t afford to continually reinvent his products, and he didn’t have a large marketing budget to work with.
So on Day 1 (quite a few years ago), he started building a relationship machine. He set out to meet all the potential influencers in his category. He put in what we’d today call a customer relationship management (CRM) system to track all their interactions. He found sales channel alliances. He focused on customer education. He made sure he owned the customer relationship so that when there was an inevitable problem, they’d come back directly to his company, rather than a retailer, and he’d wow them with great after-purchase service. He and A Story to Bring It Home the other senior leaders in his company spent many hours listening to their customers and responding with upgrades to address their needs. And, of course, he had good (but not revolutionary) products.
What allowed him to succeed was the deliberateness and maniacal focus on this strategy. He was passionate about his products and the markets that they served, but he wasn’t seduced into trying to win on multiple fronts, expanding into unknown areas and chasing product greatness over deep relationships.
There are many ways to succeed, but developing a sound business strategy requires you to be deliberate about your choice. Be different!