Business Strategy
How is the game changing? Where do you have the greatest potential to flourish?
Culture eats strategy for breakfast
Strategy is an integrated set of choices that positions you on a specific playing field in a way that enables you to win. It contains:
- A coherent theory about why you should compete in a particular space
- A clear explanation of how you'll be better than competitors at serving customers
- An outcome-focused approach that specifies competitive results you aim to achieve
Planning, by contrast, is a list of activities or resources a company intends to deploy:
- Typically focuses on costs and inputs (hiring people, building facilities, launching products)
- Lacks internal coherence between different departmental wishes
- Feels comfortable because you control these elements
- Doesn't specify how these activities collectively achieve competitive advantage
The Challenge
The fundamental challenge with strategy is that it requires committing to outcomes you don't directly control. While you control your costs and resources, you don't control whether customers will choose your offering over competitors. This creates natural discomfort and angst that many managers avoid. Escaping the Planning Trap to develop real strategy:
- Clearly articulate your strategic logic - what must be true for it to work
- Keep it simple - ideally on a single page
- Watch how reality unfolds and be ready to refine your approach
Your strategy gives you the best possible chance of winning.
Context
- First Principles: Understand how value flows through your systems
- Progress: What does success look like?
- Antifragile: Be your worst enemy
- Business Ideas: Explore the matrices of your mind
- Industries: Score your opportunities
- People: Build trusted connections
Strategic Decisions
Your strategy must have a hypothesis that links decisions to predictions on how you intend to maximise your potential.
Time and Timing
Is it time to expand or contract? Innovate or adapt? What is your appetite for risk?
Defend (Consolidate) or Attack (Experiment), Innovate or Adapt.
- How do you want to play the game? (Spirit and Desire)
- How big is the market for that?
- Do you have the capability to execute??
- Do you have the management systems to support?
- Why will this strategy work?
- How much are you willing to bet?
Focus on practising decision making with speed and agility as many opportunities have limited time windows before they close - Learn from Rugby
Customer Focus
Guides the long-term direction for competitive positioning of products, markets, and partnerships. It outlines how the company plans to achieve its goals and outperform competitors.
- Prioritize direct customer feedback on user experience (feel the pain)
- Stay closely connected to customer needs, which can rapidly change in volatile environments.
- Maintain hands-on approach in product development and key decisions
- Stay deeply involved in operations, not just high-level strategy
- Flat hierarchy with cross-functional teams for special projects
- Trust your instincts and vision over conventional management advice
- Set clear expectations to challenge and replace underperforming employees
- Be prepared to pivot based on customer feedback and market trends.
Implementation
Close gaps and complete feedback loops.
- Conduct regular reviews of business strategies and operations.
- Establish feedback loops that allow for rapid response and adjustments to strategies.
Risk Management
- Identify potential risks and vulnerabilities in your current business model.
- Develop strategies to mitigate these risks and to thrive in volatile conditions.
- Consider stress testing your business under various scenarios to identify weak points.
Diversification and Adaptability
- Diversify products, services, and markets to reduce dependency on a single revenue stream.
- Create a culture of adaptability where change is expected and embraced.
- Invest in continuous learning and development to stay ahead of industry trends and shifts.
Leverage Technology
- Implement technologies that enhance flexibility and scalability, such as cloud computing and AI.
- Ensure that your tech stack is adaptable and can integrate new technologies as they emerge.
Supply Chain Resilience
- Develop a supply chain that is resilient to disruptions through diversification.
- Embrace technologies and practices that enhance supply chain visibility and agility.
Cash Flow
- Financial Prudence and Strong Cash Reserves
- Maintain a strong balance sheet with sufficient liquidity to weather unforeseen events.
- Avoid over-leveraging and have contingency plans for financial crises.
Innovation
- Formula for betting on experiments to discover breakthroughs that fuel growth.
- Encourage innovation as a core value within your organization.
- Adopt a 'test and learn' approach to business decisions, allowing for experimentation and learning from failures.
Compliance
Legal and Regulatory
- Ensure that your business model is compliant with current laws and adaptable to potential regulatory changes.
- Monitor changes in the legal landscape that could impact your business.
Balance Scorecard
The Balanced Scorecard (BSC) is a comprehensive strategic management system that helps organizations translate their vision and strategy into measurable objectives and actions.
- Financial Performance Tracks traditional financial metrics like profitability, return on investment, and operating costs to measure shareholder value.
- Customer Focus Evaluates customer satisfaction, retention, and service quality to understand how customers perceive the organization.
- Internal Processes Examines operational efficiency, quality control, and process improvements needed to excel at delivering value.
- Learning and Growth Assesses employee capabilities, information systems, and organizational culture to support continuous improvement.
Advantages
The balanced scorecard provides several strategic advantages:
- Creates a holistic view by combining financial and non-financial metrics
- Forces managers to consider tradeoffs between different performance areas
- Helps communicate strategic priorities throughout the organization
- Connects day-to-day activities to long-term strategic goals
Strategic Failures
- Insufficient leverage to control speed and direction.
- Don't understand cost, time and quality
- Too many goals, not enough focus
- Ill-informed decisions
- Insufficient belief in the story