I find most people over-think strategy. They feel it’s complex, full of buzzwords, too theoretical. For smaller businesses, some think strategy is something for large corporations who can afford to have strategic planning departments.
Some companies spend their time crafting mission statements. It’s not that mission statements are a bad idea. A good mission statement will be a way of expressing the company’s underlying strategy. When the mission statement is developed without being founded on a strategy, it usually comes out vague, wishy-washy and meaningless to most employees and customers.
Strategy is really all about making choices and it’s not as complex as people think. In truth, there are only 3 basic strategies to choose from.
Where most people go wrong is not sticking to a single strategy or not aligning the other elements of their business plan around a single strategic principle. Another trap is focusing on tactics rather than strategy. Your tactics may be sending mixed messages to your customers because they are drawn from multiple types of strategy instead of consistently following a single strategic direction.
Michael Porter has an interesting way of phrasing it: “Strategy is what allows you to say “no” to the things you shouldn’t do.”
We’re going to discuss the basics of strategy over the course of the next few weeks. What we promise is to keep it simple. No buzzwords. No charts or diagrams.
A colleague of mine recently did a presentation on strategy for a business networking group and I liked the way he structured it. He used the analogy of a triathlon: three different sports – cycling, swimming and running. Winning triathletes don’t win because they’re the best at all three sports. They win because they’re tops in one sport and just good at the other two.
In a similar way, business can be broken down into 3 strategic elements: Product (or Service), Operations and Customer Focus.
A concept I learned from some of the sales people who worked for me – the 3-legged stool – shows how simple it can be to apply strategic principles. They offer the customer a choice of three things: Product, Price and Service. The customer can only have two of those three things, and the third they have to concede to the sales person. For example, if a customer wants great products and excellent service, he will have to accept that he will have to pay a premium for these. If it’s price and service, the customer will have to make some concessions product quality or features.
At the overall business level, the three strategic directions a company can take are:
- Product Leadership – sometimes known as innovation
- Operational Excellence – sometimes referred to as “low-cost producer”
- Customer Intimacy
Next week, we’ll discuss what Product Leadership means and how it can be applied in your business. Don’t feel disappointed if you don’t think Product Leadership is right for your company. It’s OK to not follow that path. It just means you will have to make a choice between the other two types of strategy.