30 Apr What is Strategy?
What is Strategy?
Here is an easy way to get started.
If you have no time to read the full article, here is a summary
Creating a strategy is not as complex as it sounds. By asking yourself the right questions, you will be able to create a strategy that is right for your company
- SWOT Analysis
- Strengths: Look at what you are best at, where you beat the competition.
- Weaknesses: Look at where your competition beats you.
- Opportunities: In your current situation, what can you achieve? Which can of customer you can target? Where is your niche, market?
- Threats: What potential factor will hinder your growth or make you lose market shares?
Focus will increase your strengths and help you to make the best use of your resources. Focus is even more important when your resources are limited.
- Your Objective(s)
When you use your resources to achieve a particular objective, never lose sight of where you want to go in the future – the big picture. What’s your milestone in 5 years and 10 years from now.
Questioning is the Essence of Strategy
The building blocks by McKinsey is a very important and useful tool to start creating your strategy.
1. Strategy is about focus
First thing, I started to do a SWOT analysis. I analyzed what were the company’s strengths and weaknesses,opportunities and threats. If you have read Sun Tzu The Art of War, the SWOT analysis is what Sun Tzu means by “know yourself and you can win 50% of the battle”.
The immediate benefits of doing the SWOT analysis was: I could focus on my company’s strengths, focus on the market that was matching our offering and build our brand and reputation around these strengths.
The first year of work was to leverage the company’s strengths in order to gain market share, but I know we were limiting our company’s revenue potential by ignoring our weaknesses.
The second year, I started to look at which weakness, if decreased, will reinforce our strengths and our brand. In this case, I saw we were focusing on the top end of the market, but we were missing some huge opportunities in the mid-tier market.
After realigning our offering with the market, we were able to double our turnover year-on-year. We increased our selection of products that reinforced our uniqueness, we were able to gain even more wallet share per customer than before.
The main point of doing a SWOT analysis is to find out your strengths and opportunities and focus on them. You have limited resources (time, money, staff, etc.), you have to use these resources on your strengths and on the biggest leverage points.
For example, in the company mentioned earlier, the biggest leverage point was to focus on high end customers who had an existing need for our offering. Because these type of customers were already ordering large quantities from our competitors, we targeted them and use our strengths where our competitors were weak. It helped us to secure a good cash flow within 12 months.
2. Strategy is to know where you’re going
When you are creating your strategy, you need also need to think of where do you want your company to be in 3, 5, 10 years from now? I know it can be difficult to imagine, but you have to decide where you want to be.
The objective here is to be able to know what you’re aiming at. You need to position your company based on your key strengths. It’s very important, because once you have an objective, you can focus on how to get there.
From that initial objective, you can design an action plan with several milestones to achieve in order to reach this objective. You will need to include in your plan, the resources you will need, who will be assigned to which task ,when is the tasks expected to be completed, who are responsible (shared responsibilities), etc.
You can only manage what you can measure. Setting up some Key-Performance-Indicators (KPI) will help stay on track. You will need two types of KPIs:
- Big picture KPIs: Revenue, profits, number of customers, wallet share, volume of sales, etc.
- Activity KPI: website traffic, leads generated, number of Meetings, emails, calls, proposals, leads, PR, campaigns, etc.
Both activity KPI and Big Picture KPI are connected. The activity KPIs will help you reach the Big Picture KPI.
3. Strategy is about questioning
The only way for you to build a realistic and effective strategy is to ask yourself the “right” questions.
Here are two very interesting articles from Harvard Business Review (How to design an effective strategy) and McKinsey (The building blocks of a strategy) that I read recently.
Let’s keep things simple here, it’s easy to make strategy look complex. Here are a few questions you can use to frame your strategy:
- Where do we want our company to be in X years? Why?
- Where do we make money? Why?
- How can we enhance our position? What will make us relevant to our customers and dominate our competitors?
- How can we ensure our Strategy will be executed correctly?
- How can we ensure our team will openly and freely share feedback in order to adjust the strategy accordingly?
No matter which book/article you read about strategy, it always revolve around the questions above. Of course, you can get into more details if you feel this is necessary. You may also use different questions that you think are more appropriate to your situation. It’s fine.
Your answers to the 5 questions above must be “connected”, they need to reinforce each other.
To conclude this post, what is important to keep in mind is your strategy is limited in time. The environment is constantly changing, evolving with new technologies, new trends, new competitors, etc. You strategy needs to be reviewed, improved or changed often. You constantly needs to ask yourself the right questions, re-assess your strengths and weaknesses, etc.
Never lose sight of the customer, he is the only one that will grant you his money (or not).
There is no such thing as a timeless strategy, only timeless advice on how to create a strategy.