5 Tips to Make Strategy Work
Introduction: Keeping Strategy Real, Usable and Grounded
For all its potential power, strategy can seem mysterious and unfathomable. What’s worse, large strategy consulting firms can have an incentive to keep it that way in order to increase their perceived need and expertise (and hence their billable hours).
The unfortunate downside is that if strategy can’t be understood – or owned by the company commissioning it – strategy loses its impact and usability.
Here are five tips to help ensure that strategy does what it’s supposed to do: pose the right questions and add real economic value by positioning a business where it’s best placed to achieve results.
1. Keep Strategy Flexible and Open-Ended
The most common criticism of strategic planning is that life, circumstances and markets do not conform to our elegant plans, and that once formulated, plans act as dust collectors until the planning process cranks up again next year. As John C Lyons and Edward de Bono observe:
People used to plan with great formality where a company should be in the future. Strategic planning fell into disfavour when the future refused to play the role assigned to it by planners. The sheer unpredictability of the future, the rapid rate of change, the instability and positive feedback loops in non-linear systems made a nonsense of planning. (emphasis in original)[1]
And as one well known and highly qualified strategist, Napoleon, pointed out, ‘Unhappy the general who comes on the field of battle with a system.’
The criticisms are well justified. Does this mean that strategy is irrelevant and shouldn’t be undertaken at all?
No, it’s just that strategising needs to happen in such a way that it does not second-guess the future or attempt to shoe-horn it into what works for us. Strategy needs to be seen as a process (strategising) rather than strategic planning per se, and its emphasis has to be on ensuring the business or organisation is adaptable and shapes itself to circumstances (rather than shaping circumstances).[2] Gaining ongoing feedback about the market and competitors forms an integral part of this process.
While many draw the distinction between strategy (long-term direction) and tactics (short-term manoeuvres) strategy is for the most part tactical.
This doesn’t mean that the strategy formulation process itself shouldn’t be systematic; only that strategy should not be rigid, closed or inflexible. It should enhance your ability to deal with and exploit circumstances, rather than providing the illusion that you can control them.
2. Take Stock of Your Existing Strategic Position and Performance
Part of the benefit of strategising is that it brings to the fore important elements of your existing situation. The day-to-day welter of problems, concerns and tasks makes it difficult enough to get a clear view of where the business is now, much less where it ought to be (or more accurately, could be).
Formulating strategy is similar to problem solving, where the first step is to identify and define the problem. The same applies with strategy: to get to where you want to be you have to know where you are.
In its broadest sense strategy boils down to using your strengths to grasp market opportunities. It’s about how your core competencies and areas of excellence mesh with market need and opportunity. As such, your strategy represents a ‘package’ or profile of certain products, markets, processes and distribution channels. Strategic positioning is about having a clear fix on this profile, and refining, amending or optimising it.
To properly create the business of tomorrow it’s necessary to understand the business of today, in terms both of the current strategic position, and the results produced by it. There are powerful strategic insights to be gained from making existing strategy and performance concrete and objective.
3. Be Different; Battle to be Distinct
While it’s true that if you put 20 consultants in a room you’ll likely get 32 definitions of strategy, one thing on which virtually all agree is that differentiation is at the heart of strategy. There must be something in your business’s strategic profile which is distinct, unique, new, different or first. Even those businesses where success is predicated on imitation of others (such as the Japanese electronics manufacturers of the 1970s who imitated Western products) were different by dint of being lower cost or having a large-scale market presence.
Former General Electric CEO Jack Welch differentiated his company’s businesses by moving towards areas which were less affected by commoditisation: high value-adding technology businesses and service add-ons.
Arthur Koestler observed ‘…the principal mark of genius is not perfection, but originality, the opening of new frontiers; once this is done, the conquered territory becomes common property.’[3]
How is your business different? What is distinct about your…
- products
- markets
- processes, or
- distribution channels?
Having a clear answer to this question is critical to effective strategising. All strategic efforts will founder until there is a clear response to this question.
4. Define What Opportunity Looks Like for Your Business
Opportunity is the lifeblood of strategic endeavour. No matter what school of thought you subscribe to, strategy is nothing if it’s not seizing opportunity.
Of course, making that general observation is relatively easy: the challenge for businesses and other organisations is meaningfully defining – and then operationalising – what opportunities are open to them.
This varies dramatically across industry and business types, and with the values and temperament of organisations and their leadership.
For example, some companies are fundamentally about generating new and innovative products with styling and/or technical excellence sold into mass markets (think Apple's iPod, or Pixar’s computer animated films). For companies such as these, new products are opportunities, especially if they leverage new technologies (eg. mp3 downloads over the web or film animation software) or dovetail with other platforms (such as apps) which open up new consumer experiences. For businesses playing in this space, there is a degree of multi-dimensionality associated with opportunities.
Other firms however are not about creating new products but instead acquiring existing businesses (think Warren Buffett’s Berkshire Hathaway, or News Corporation). For these companies opportunity amounts to being able to acquire high-return business assets at low prices, or businesses which add markets or reduce costs and so support and enhance the existing business (or portfolio of businesses).
Still other businesses act as brokers by matching supply with demand: opportunity for these businesses means being plugged into the market so that they can easily buy low, sell high or both. Real estate agents and the deposit and lending function of banks fall into this category. So does the Microsoft breakthrough in 1980 in buying DOS software (DOS was not written by Microsoft, but by a company called Seattle Computer Products) for $50,000 and offering a perpetual, royalty-free licence for it to IBM on a non-exclusive basis for $80,000.
There are many other forms in which opportunity presents itself: process improvements, technological innovations, new geographical markets, changing customer preferences, demographic shifts, and so on.
What does opportunity look like for your business?
5. Concentrate Your Efforts; Forcus Your Energies
Concentration is, as Peter Drucker points out, the key to real economic results. Spreading resources (whether financial or human) in a diffuse and scattered fashion will not yield anything of significance. The splaying of effort and management attention, as well as the reduced impact in the minds of customers and prospects softens the capacity for achieving results.
Strategy is all about decisions; it’s about deciding on a course of action, and assiduously implementing it. That means not choosing some options, and abandoning others. Like all major decisions, this can be painful, challenging and risky. But choosing powerfully and objectively is what creates (or re-creates) a business. Being unfocused because strategic choices have not been made has its own challenges and risks, chiefly those associated with inefficient use of resources and shallow returns.
The strategic imperative of concentrating resources is well-known, perennial and often breached. It underpins the need to be different and distinct (see number 3 above) and the 80/20 rule (that 80 per cent – ie. most – results stem from only 20 percent of causes).
There are many examples and applications. Napoleon counselled ‘The military principles of Caesar were those of Hannibal, and those of Hannibal were those of Alexander – to hold his forces in hand, not to be vulnerable at any front, to throw all his forces with rapidity on a given point’ (emphasis added).
The steel magnate Andrew Carnegie wrote in his autobiography:
I believe the true road to pre-eminent success in any line is to make yourself master of that line. I have no faith in the policy of scattering one’s resources, and in my experience I have rarely if ever met a man who achieved pre-eminence in money-making – certainly never one in manufacturing – who was interested in many concerns. The men who have succeeded are men who have chosen one line and stuck to it.
Fundamentally, concentrating resources and maintaining focus boil down to the economic imperative of allocating scarce resources to their highest and best use. Your business’s strategy must reflect and support this concentration of effort.
__________________
[1] Marketing Without Money by John C Lyons and Edward de Bono, Pennon Publishing 2003, p. 206
[2] There are some circumstances where, owing to a massive competitive advantage or market shift, a company can shape circumstances, but these are the exception. The point remains that sensible strategising creates the organisation’s future, rather than trying to predict the future.
[3] The Act of Creation Picador 1977 p. 402
© Michael Carman 2010