Not Everyone Gets a Trophy
It’s been a bad couple of decades for strategy
As the pace of business continues to move faster, business owners and managers need to make time for strategy. It’s not unusual for small businesses to be so busy that they don’t even have time to think about planning. It’s not just the smaller companies that have struggled with sticking to a plan. Even medium and larger companies continue to buy into a number of simplistic ideas about competition and as a result, many have abandoned strategy almost completely. Porter would say that strategy has suffered because of a few myths: people have tried it and determined it’s hard, implementation continues to be the shiny new toy (think lean design) and with the rapid pace of change, businesses can’t afford to pause to think about something as rigid and inflexible as strategy. Often, small business owners say, “not true, we have a strategy”. The “strategy” is to deliver the highest-quality services at a lower cost to the company, and the owners dive back into the day-to-day tasks to keep up with surprise growth, they ask their employees to do more work, faster to keep up with demand, and hopefully, better position the business to obtain customers. Basically, do more, faster & better – with less. In actuality, doing more with less is more about improving on best practices; and to be clear – that’s not a strategy.
Strategy 101: Choices
There’s a fundamental distinction between strategy and operational effectiveness through efficiency only. Strategy is about making a choice. You can’t be all things to all people. It’s about looking at the trade-offs and deliberately choosing to be different. Operational efficiency should not be a choice, it’s about what’s good for the business, the team, and the customers.
Operational efficiency is what every business should be doing.
The core principle of strategy is about setting limits on what a business is trying to accomplish. A business without a strategy is likely to try anything. It is important to remember that if all a business does is essentially the same thing as the competitors in the marketplace, it’s difficult to stand out and thrive. Any business should be vigilant and not assume that it can deliver the same products or level of service as its competition and actually outperform them for very long. Today, more than ever, access to information and capital is extremely convenient and fast. It’s dangerous to bet your company’s success on the incompetence of your competitors and that’s what owners are doing when they’re competing on operational efficiency alone.
What’s worse, a focus on operations alone has created a reciprocally damaging form of competition. If every practice is trying to get to the same place, then, almost unavoidably, that causes customers to choose based on convenience & price. Looking at the last few years, this theory of increased price competition is difficult to argue. After all, when is the last time you paid for shipping?
Goals and Continuity
The fundamental principles of strategy are enduring, regardless of the industry, technology, or the pace of change. Sound strategy starts with having the right goal. Goals are different than your purpose. Often business owners are conflicted because it is innate for them to champion the customer and therefore set their goals aimed at customer outcomes and satisfaction. But strategists argue that the only goal that can support a sound strategy is superior profitability. When a company doesn’t begin with that goal and pursue it fairly directly, they can quickly be led to actions that will undermine their business. In today’s economy, businesses can surely grow large or grow fast, but if they are not focused on the goal of superior profitability, the company will have problems.
Remember, strategy cannot be continually reinvented. Strategy is founded on the basic value a business is trying to deliver to its perfect customer. The focus on that positioning is where endurance needs to be strongest. Otherwise, it’s difficult for the organization to understand what the strategy is. And it’s hard for your customers to know what you stand for.
It still sounds hard
It’s actually a lot easier than it sounds. Martin speaks of 5 questions to build a strategy, and the first three are where owners and managers should begin:
- What are our aspirations & goals?
- Where should we play?
- How will we win?
If the people in the company don’t understand how the business is supposed to be different, or how it creates value for its customers better than the rivals down the street, then it is impossible for them to make the day-to-day decisions that are necessary to drive the business’ competitive advantage.
Be the guardian of trade-offs
Hundreds of ideas pour in every month from employees with suggestions, from customers asking for things, from suppliers trying to sell their products to the company. A majority percentage of this input will be inconsistent with the organization’s strategy. Enforce the trade-offs. Yes, it would be great to have more customers, but if we did that, we would look like the company down the street – and it wouldn’t fit with our high-touch customer care philosophy.
There is nothing rigid about championing your strategy— it’s something that a company should be continually getting better at — to create a sense of progress while adhering to a clear and sustained direction. In today’s competitive business environment, not everyone gets a trophy.