One more time: What Is A Business Strategy And Why Do You Need One?
This is one of the most fundamental, recurring discussions we have with our clients. And this post will provide some straightforward answers.
Before we get started, we wanted to share a question and some eye-opening research on strategic business planning from Harvard Business School Online:
Do you know what your organization’s strategy is? How much time do you dedicate to developing that strategy each month?
If your answers are on the low side, you’re not alone. According to research outlined in the Harvard Business Review, 85 percent of executive leadership teams spend less than one hour per month discussing strategy, and 50 percent spend no time at all. The research also reveals that, on average, 95 percent of a company’s employees don’t understand its strategy.
Those stats really put things into perspective.
As successful business owners, many of us tend to stay too close to the trees to see the forest.
In other words, we’re too involved working in our business to work on our business. Think about it, starting a small business usually begins with a great idea, a lot of hard work, encouragement from friends and family, laser focus on your customer(s), and possibly a little luck.
And that’s all good! Maybe, without even knowing it, you’ve developed a strategy and some core values, like hard work and a passion for customer satisfaction.
But can you, and everyone on your team, describe your strategy in simple words?
I often ask the members of a leadership team at the beginning of our work together to quietly write down their strategies in 3 or less sentences. If there are 5 people in the room, more often than not, I get 5 slightly different responses.
If we don’t agree on the leadership team level on what our strategy is, how can we expect the rest of the organization to execute the strategy?
So what exactly is strategy? Sometimes it’s helpful to start with defining what it isn’t:
A plan is not a strategy
Your plan to build a new facility, implement a new software or improve the customer experience, those are a set of activities, you might call them goals or rocks or OKRs, but they are not a strategy and might not deliver the results you want, because they aren’t tied to a strategy in the first place.
In a nutshell, your business strategy answers the question:
“How do we provide unique value to our customers?”
It’s a set of choices that define where you are going to play the game of business and how you are going to deliver higher value to the customers you are choosing to serve compared to your competition.
There’s often the notion that strategy is complicated and it’s only something big Fortune 500 companies need and have the resources to do, but that’s not true. Even if you are a small 10 person family business, regardless of what you do as a business, everyone on your team needs to be in alignment on the answers to a handful of questions that define your strategy
The challenge can be stepping back after your initial success, reevaluating the business, your playing field, and taking the time necessary to define your strategy.
So where does it all start?
- What is your aspiration? — Every company exists to make the life of their customers better in one way or the other. It doesn’t matter if you are in health care, construction, law or manufacturing some widget. Defining why you exist, while idealistic and aspirational, doesn’t mean you’ll need to save the world. But every organization exists to make a positive impact on the lives of the people they choose to serve. What is that for you?
- What is your organization’s DNA? — Everybody has heard about core values, some organizations have them defined and few actually bring them alive. What I mean by that is, defining a set of rules, 3 to 5, that define your organization’s personality. Then using these values to help you attract, lead and manage the right people for your organization every day.
- Where will we play? — In other words, a simple statement of the product and/or services we chose to provide. No jargon and flowery superlatives required, this is not a marketing exercise. Rather a simple one sentence statement, so the leadership team is crystal clear about the nature of your organization’s core focus.
- How will we succeed? — This question gets to the core of your strategy and is the collection of intentional decisions an organization makes to differentiate itself from the competition. A clear value proposition based on your sense of your customers needs and challenges in the future. This is often difficult for leaders as it involves a good amount of uncertainty, it also involves making some (potential) customers unhappy if they don’t align with your value proposition (think wanting a free meal on a Southwest flight).
- What capabilities do we need? — Once you have created clarity around why you exist and how you behave as an organization, you understand your playing field and defined your unique value proposition, then it becomes much easier to define the capabilities and specific activities and their priority to successfully execute your strategy.
Once the leadership team is 100% aligned around the answers to these questions, it is important to continuously and repetitively communicate these answers to create consistency, focus and accountability throughout the organization.
So where can you go for more information and resources on how to develop a strategy for your business?
That’s the easy part. You’re already here. We’d love to schedule an initial consultation to see if we can add value to your business. You can also download some excellent resources.
Our team has over two decades of experience in senior leadership roles in Fortune 500 and smaller privately-owned businesses, delivering top-line growth and profitably across a broad spectrum of industries.
We’ve helped numerous companies scale their operations to support double-digit growth rates. We’ve also helped build high-performing leadership teams by creating clarity and alignment on direction, a safe environment that enables a high level of trust, and open communications that foster innovation.
Our passion is to help teams discover their extraordinary so they can achieve extraordinary things.
Call us at 415.991.4961 or get in touch with our team online today to schedule a complimentary consultation.