We hear it all of the time in business… and sometimes in our personal life. A new product launch is scheduled, a new competitor comes onto the scene, a difficult problem arises, and someone wise says “we need to take a strategic approach to this.”
At face value, this means “let’s think it through before taking action.” But what happens next is often very haphazard — and different at almost every company.
A lack of clarity about how one goes about building strategy has created a vacuum filled with unhelpful and destructive myths. How many of these myths have you accepted blindly, to your detriment?
And how do you know that your ultimate approach is strategic? This article attempts to debunk misperceptions about strategy, and in the end, provides you with the definitions and concepts that you need in order to determine if you’ve really been strategic.
Myth #1: Strategy Is Clearly Defined in Business
Have you ever Googled the definition of strategy? What you’ll get is wholly unhelpful in almost all cases.
There seem to be three types of definitions of strategy:
- The overly simplistic: “a plan of action or policy designed to achieve a major or overall aim.”
- The checklist: “a strategy accomplishes these 12 things…”
- The obtuse: “strategy is done above the shoulders, tactics are done below the shoulders.”
Most of our clients do not find these explanations to be helpful. But at least these definitions attempt to provide some way for you to decide if your plan is strategic enough.
In many companies, a strategy is defined even more (overly) simply by how well a plan is presented — if done smoothly, it is deemed to be strategic!
In Myth #3 below, we offer up a clear, powerful definition of strategy. In the meantime, here is what a lack of a strong definition of strategy is costing you and your business.
Signs That Your Company Hasn’t Properly Defined Strategy:
- Lots of actions are taken that have no relationship to the company’s positioning, capabilities, and culture.
- Strong presenters get plans automatically blessed, while better plans that are presented less smoothly face significant pushback.
- Inordinate time is spent trying to figure out how to present and evaluate plans – what’s a strategy, what’s a tactic, how do we know any of it will work?
Myth#2: War Provides Appropriate Metaphors for Strategy
Many online and written resources on strategy quote Sun Tzu’s Art of War, the famous military treatise from the 5th century B.C. It seems that ever since then, consultants and deep-thinkers have been using military analogies to define what strategy is and how you build it.
Yes, just like in war, business competitors must be “defeated.” But business has one component that war does not: customers.
Attacking a competitor where they are weakest may be a great battle strategy. In business, this might just lead you to build competitively superior capabilities…that don’t mean a thing to customers. Ditch the war analogies, and consult the advice under Myth#3 below, to win where it really matters: with your clients and customers.
Signs That Your Company Is Overly-Focused On Competitors instead of Customers:
- You rely on old planning standards like SWOT which highlight your strengths and opportunities without regard to whether they matter to customers
- You are so focused on traditional competitors that you get surprised by the underrated/indirect competitors that your customers seem to like
- You over-invest in “cool things” that fall flat with customers
Myth#3: Strategies Emanate From Anything Other Than Customer Needs
Unclear definitions and war analogies have led to a hodgepodge of approaches that pass for strategy — but are really something else:
- Fake strategy #1: “To be #1 or #2 in every market that we compete in.” This is actually a great objective or goal – or what we like to call a “business challenge.” It typically includes metrics and financial targets.
- If you are managing a product or portfolio, this business challenge is usually handed to you by corporate executives or strategists. How you plan to go about achieving it, through differentiating on key customer needs, is your strategy.
- If you are a corporate strategist, we suggest doing some “bottoms-up” strategic work like we’ve outlined below so you know which financial metrics are achievable. You might be pleasantly surprised and raise your expectations.
- Fake strategy #2: “To gain x% market share from Competitor Z in the _____ market.” This is a remnant from the “business is war” school of thought. This could serve as a metric supporting a strategy — but only if “Competitor Z” is considered a viable option to your customers.
- Fake strategy #3: “To be the low-cost provider in the _______ market.” This is actually a tactic to support a strategy of differentiating on key customer needs like saving money, achieving speedier response, or enabling you to offer a broader value proposition.
In other words, strategy emanates from customer needs only. Because the one thing you have to have in business is…customers.
A Crucial Definition: What’s a Strategic Option?
So what’s a strategic option? None other than how you plan to compete on key customer needs.
Some customer needs you will choose to own or differentiate on. Some you will choose to be competitively comparable on. And some you will choose to ignore.
This strategic recipe will be different for each company. It just has to add up to unique value for customers.
From this recipe, you can ladder up to the types of objectives and financial goals that are achievable. You can decide which competitors matter and how you will demonstrate unique value to customers.
Beyond that, you can decide your operational needs like where to build plants; your HR moves like which type of talent you should hire or what type of structure you need; your financial requirements like how to finance your differentiated value proposition to customers — even the type of new product developments, acquisitions or partnerships that you should pursue. Once again we reiterate: everything in your strategy should emanate from how you are going to provide unique value to customers.
No other basis makes sense because customers are the one thing your business can’t survive without.
Here’s the Recipe For Building a Real Strategy
- Analyze customers, markets, and your customer’s options (a more holistic and enlightening way to say “analyze competitors”)
- Settle on the 5-7 most important customer needs that you could address. These are your strategic options.
- Examine your own capabilities vs. your customer’s other options. Choose which customer needs you will own to set you apart from competitors, which you will seek parity on, and which you will ignore. These represent your strategic choices.
The sum total of your strategic choices is your strategy. It can be stated succinctly: “We will achieve our objective through a strategy of being the customer’s best option for ‘need a’, while maintaining competitive parity on ‘needs b and c’, and ignoring ‘needs d and e.'”
Positioning, value proposition development and tactical/operational initiatives/programs, and functional support needs flow very easily from here.
All Strategy Should Be Customer-Centric
There are many ways to compete in the wide world of business. None of it matters if you don’t create unique value for customers.
Whether you are the Walmart (operationally excellent) Nordstrom’s (customer-intimate) or Trader Joe’s (innovator) provider in your industry, you do what you do well for the primary purpose of serving customers. Isn’t it time to make them the primary focus of your strategy?