What is your company strategy? (Strategy series 1/3)
Having a solid strategy can mean the difference between winning and losing, failing and succeeding. Knowing the stakes, how do you create a good strategy? What does strategy even mean anyway?
At the company level, Harvard Business Professor Michael Porter defines strategy as a unique and valuable position involving a different set of activities than your competitors or the same activities done in different ways. The Management theorist Henry Mintzberg famously defined strategy as 5 Ps: plan, ploy, pattern, position, and perspective. He explains:
· The plan helps you attain your objectives to achieve your intended position.
· The ploy is a new offering that is usually a surprise tactic that competitors would not expect.
· The pattern is understanding what was implemented before and pulling out useful aspects going forward.
· The position is your market location and the role you play in relation to your main competitors.
· The perspective is how your organization sees itself and how various target audiences perceive you.
Generally speaking, strategy is about your intention or the way you pursue the work to further the mission and creatively grow the business in various facets — employee health, customer satisfaction, and revenue growth. Let’s break down some strategy components:
1. Strategy is about choices. To do well, a company must choose to do some things great and not others. So, how do you choose? Many people like to begin broadly in these four categories to be industry leaders:
· Product leader — Nike and Apple are product leaders. They constantly change their designs or shoe technology to be the coolest and most innovative in the market. It is hard to outdo them in this category.
· Customer intimacy — This is about creating an incredible experience for the customers where they are entirely taken care of. You are prepared to jump through hoops for them. Most big companies can find this challenging, but Nordstrom is an example that offers excellence in this department. It is easier for smaller companies to do this like coffee shops, where workers know your name and have your order ready for you upon arrival. Zappos is known for exceptional customer service. Tony Hsieh shared a story about taking clients out one evening and when they all returned to their rooms, one of them craved a pizza, but room service was closed. Tony suggested they call Zappos and they came through on the request! Although they didn’t deliver themselves, they found a nearby pizza parlor that would.
· Operational excellence — This is about performing efficiently at scale. Starbucks and Chipotle have standardized their processes and have a model that can be exported seamlessly.
· Low Prices — Cost-effectiveness can be a powerful strategy. It is part of IKEA’s competitive advantage. They target young furniture buyers who want style cheaply.
Roger Martin, named #1 by Thinkers 50 says to know if you have picked a good strategy, follow this rule — “If the opposite of your choice is stupid on its face, you have not chosen. For example, if you say, our strategy is to be customer-centric or operationally effective or to value our talent, you can perform this test by stating the opposite — Our strategy is to ignore customers entirely.” If it does not make sense, it cannot work as a strategy because it would be hard to do that and succeed, let alone stay in business. Maybe regulated monopolies like the DMV can get away with this, but they do not engender much love. If the opposite of operational effectiveness is inefficiency, then that’s not a choice because it is not a profitable route.
2. Strategy is about making trade-offs. Michael Porter says, “the essence of strategy is choosing what not to do” because you do not have the bandwidth to do it all. Focusing on 1–2 things per quarter and adding the rest to your future list. Leaders need to know how to say no often. As Peter Drucker says, “strategy is saying no to the things that you would like to say yes to.” We can have many good ideas but only so much capacity to execute. The key is to choose a couple of priorities because when you have too many, your team spins their wheels, and there is no organizing framework since they all need your attention. Southwest Airlines is an example of a company that makes these strategic tradeoffs. They offer short-haul, low-cost, point-to-point service between midsize cities and secondary airports in large cities. They avoid large airports and do not fly great distances. Their frequent departures and low fares attract price-sensitive customers who otherwise travel by bus or car and convenience-oriented travelers who would choose a full-service airline. They empower their employees at the front desk to make decisions aligned with their priorities (e.g., planes landing on time, cheap prices, and treating customers well). It’s the reason they do not have milk on their flights because they do not have refrigerators since they have to be repaired when there are breakdowns, and that can lead to late departures.
3. Strategy is about problem-solving. What’s the space between the outcomes you’re currently achieving and your aspirations? If you think about the biggest challenge in reducing client churn from 35–15%, what are the fewest battles necessary to win that war? How do you go about getting to the root of the problem to make sure you are solving the right one? How do you frame the question for the best solution?
4. Strategy should be simple. There is a myth that strategy needs to be complicated but to be most effective, you want to make it simple — understandable, memorable, and actionable. Research by Roger Martin supports this point. He says, “43 percent of managers cannot state their strategy. When executives are not clear on their strategy, they have to work harder to see their impact on the organization’s direction.” Moreover, execution does not like complexity. Leaders who talk about strategy in concepts and cannot make it simple to move it to a specific goal with the fewest number of executable targets will struggle. As Einstein said, “Everything should be made as simple as possible, but no simpler.” You can start with these simple questions — where are you? Where do you need to go? What resources do you need? What are your options? Which one is best to prioritize? What is the easiest workflow process? What’s your timeframe? What’s your process to reflect and reevaluate?
5. Be flexible and check in on your strategy. You can be clear on your vision and flexible in your strategy. You do not want a strategy that will handcuff you when a pivot is in order. Pay attention to the context and as variables and circumstances require you to update your strategy, be ready. You also may not have gotten it right the first time and that’s ok, you can alter it after your strategy has been tested.
Strategy is an important part of any business and while some people try to make it complicated, it does not have to be. As Jack Welch said, “In reality, strategy is actually very straightforward. You pick a general direction and implement like hell.”
Quote of the day: “A vision without a strategy remains an illusion.” -Author Lee Bolman
Q: What’s your favorite strategy? What’s your process for formulating your strategy? Comment and share with us, we would love to hear!
The next blog in this series (2/3) will focus on how to develop strategic thinking skills.
As a Leadership Coach, I partner with leaders to engage in strategic thinking for them and their teams, contact me to learn more.