and what to do about it
Do you ever feel like you are bashing your head against a brick wall? You are working incredibly hard but not really getting anywhere, at least not anytime soon? It could be because your strategy sucks!
Michael E. Porter’s definition of strategy makes sense to me: “Strategy is choosing to perform activities differently, or, to perform distinctly different activities than rivals”. So, strategy is about moving your business from A to B, where B gives you a competitive advantage.
Are you interested in developing a strategy that will take your business to the next level? For me, the most effective strategy is one that considers the following criteria:
Well thought out
It’s tough to develop strategy when your head is in the detail all day, every day. Making time to think is one of the most important activities a business owner must do. How long is it since you considered your ‘what, why and how?’
In the words of Steve Jobs, you need to think differently.
You will note that the first part of that sentence is the requirement to think. Effective strategy requires the discipline to set aside time to think.
Having trouble with that? A different environment will also stimulate your thinking by providing a different perspective from your day to day work location. Or external stimulus such as reading.
If you need to rethink your business strategy, one of my favourite books Blue Ocean Strategy offers a framework to visually map your current market and identify opportunities to do things differently from your competition.
It will stimulate ideas about what you could do differently.
Assumptions are sound
Developing a strategy on poorly thought-out assumptions is like building a house on shaky foundations. Do your research – how well can you support the assumptions that you are making? Discuss them with others – how sound are those assumptions in the eyes of others?
Undertake a SWOT analysis* and a PESTLE analysis* to see the big picture and identify changes in your market or your business environment. There are probably a thousand other analyses too but I reckon those two will do for now. What are the potential areas for disruption?
Also consider the small picture – the “what ifs” in relation to your clients, suppliers and staff, as these can also have major impacts on your business.
Risks have been identified and are containable
Having identified potential risks in your SWOT and PESTLE analyses, ensure you have a plan to manage or mitigate these. Your risk management plan should realistically reflect the risk of an event occurring and the significance of the effect on your business, noting this could be direct or through your clients, suppliers, staff or lender.
But remember Mike Tyson’s advice – “Everyone has a plan until they get punched in the mouth” – and ensure your risk management plan can be adapted.
Understand market limitations
There’s a natural limit on your current market and market share, which is why (unless you are happy with that) you need to look outside your current market and even outside your current industry for inspiration. Blue Ocean Strategy will get you thinking about how you can expand your market or create a new market before your competitors do.
Responds to the market
Giving your customers what they want sounds like the first principle of any business… but how do you really know what your customers want? Well, for starters, you could ask them! (See our body of work on customer advisory boards).
Or you could walk a mile in their shoes. Mapping your customer experience helps you identify areas where you can build a strategic advantage over your competitors by delivering value to your customers again and again.
Leverages your strengths
Your SWOT identified your business’ strengths – now you need to leverage those. Use your unique strengths to maximise the opportunities you’ve identified or to minimise threats to your business. Think about how you can carve out a defendable position in your market and how you will use your unique strengths to appeal to your ideal customer.
Focuses your action
Once you’ve finalised your strategy, you can develop your business plan to ensures your goals are focused and aligned to your strategy.
Is adequately resourced
Review the resourcing – cash, people, equipment – needed to achieve your strategy. Otherwise, all you’ve got is a dream.
Realistically, you may need to cut back in some areas to increase resourcing in others, so consider what adjustments you need to make (such as securing bank funding or increasing your staffing) and the lead-time needed to make them.
It sounds obvious, but setting your strategy is all about increasing your business profitability. Run your projections, double check them and build a sensitivity analysis model so you know your numbers backwards. If it requires a rethink, now’s the time to do it.
Your strategy and plan need to stand up to fluctuations in your income, costs, or market changes. You need to ensure you’ll stay afloat if your biggest customer goes under or moves to a new supplier, if interest rates increase, or if your landlord hikes up the rent.
Your business strategy drives your business’ future success, so it’s crucial that you invest the time to really think about it.
If you’d like help with developing or reviewing your strategy, it’s the sort of stuff we love. Call us on 1300 656 141.
* SWOT = Strengths, Weaknesses, Opportunities and Threats
** PESTLE = Political, Economic, Social, Technology, Legal and Environmental