Many companies claim to have a strategy, but all they have done is an exercise in goal setting. This is a mistake. In this blog, we will discuss what a strategy is and how to create a "real" one.
Research from the Harvard business school shows that (up to) 90% of strategies fail due to poor execution. This assumes your company even has a "real" strategy to begin with. Many companies come to me claiming to have a strategy, but usually, all they have done is an exercise in financial goal setting. We all want to grow, but growth is not a strategy. We all want to improve quality, but quality improvement is not a strategy. We all want to be more efficient, but efficiency is not a strategy. We all want to continuously improve, but improvement is not a strategy. Strategy is not about being better than your competitors either. Bigger, better, faster, is not a strategy!
What is strategy then?
Strategy requires disciplined analysis and a deep understanding of how your industry is likely to play out in the coming years. Then you need to get very clear on the few, key strategic moves your company needs to make in order to position yourself for future success.
Strategy is about establishing a meaningful point of difference in your industry that you can preserve. Nothing lasts forever, of course, so you need to keep innovating and re-establishing your point of difference.
Strategy requires tradeoffs. You cannot be everything to everybody. You cannot just blindly copy the moves of your competitors and hope to win. You have to figure out what to say "YES" to, and what to say "NO" to. You make clear cut choices about how you will compete in the future, and then allocate your time and resources accordingly.
Are you looking at least 3-5 years into the future?
Some people challenge me on this and say that it is impossible to predict what will happen in 1 year, let alone 3 to 5 years and that planning that far into the future is a waste of time.
I always smile and share this quote from Jeff Bezos of Amazon.com:
"If everything you do needs to work on a three-year time horizon, then you're competing against a lot of people, but if you're willing to invest on a seven-year time horizon, you're now competing against a fraction of those people, because very few companies are willing to do that. We can't realize our potential as people or as companies unless we plan for the long term.”
I think we can all agree that Jeff leads a company at the forefront of the technology revolution. Perhaps we need to spend less time staring down at our shoes, or glancing sideways at what our competitors are doing, and start looking more toward the horizon! Surely it behoves us to plan at least 3, and preferably up to 5 years into the future?
Balance short-term with long-term.
Short-term planning is about improving your current core business, and meeting the needs of today’s target customers. Short-term strategy is about "improving what is". Most clients who come to me understand this, but that has been the sole extent of their strategic planning to date.
Long-term planning is not about performance improvement. It is about forgetting the past and reshaping your business to compete more effectively in the future. The long-term strategy is about "creating what will be". This is what Bezos is talking about, and what many business leaders fail to understand or address.
Balancing these two opposing concepts whilst operating your current business model is one of the great challenges of strategic leadership.
Do you have a "real" strategy for your long-term success?
Here is a brief introduction to the process I take clients through to help them create “real” strategies.
How well can you answer the following questions:
What is your vision for the future? (your BHAG or compelling long-term goal)
What competitive forces will determine how your industry is likely to play out in the coming years (competitors, new entrants, substitute offerings, suppliers, customers) – and what moves do you need to make to address the trends in these areas?
What macro forces will impact your business environment (political, economic, social, technology) – and what moves do you need to make to address the trends in these areas?
What geographic areas do you plan to serve, and how will you access those locations?
Who is the ideal target market customer for your brand?
What is your target customer trying to achieve, and how will you address this need (now and in the future)?
What core activities will you perform (now and in the future)?
What non-core activities will you stop doing?
How will you strategically position your brand in the marketplace?
What benefits will you offer?
What blunt overt promise will compel your customers to take action?
What key strategic moves do you need to make within the next 3-5 years to position your firm for future industry success?
What goals and milestones will measure your success along the way?
What is the current reality that you must deal with?
What projects will you implement in the coming quarter to address your current reality and/or move your business in your chosen strategic direction?
What Key Performance Indicators will track and drive the success of your current business model?
Strategic planning should be an ongoing process - not an annual event. Effective companies update their strategic plan every 90 days to ensure relevance with the competitive environment and to re-align all their people to the most important priorities each quarter.
Creating a winning strategy is just the beginning. The real leadership challenge then becomes the successful execution of your strategy. But of course, you must start with a "real" strategy – if you want to have any chance of winning at the game of business.