Being a strategist sounds like a bit of a luxury for many entrepreneurs. Too much deliberation and the opportunity will be gone. The world is moving too fast. As Richard Branson has famously claimed, “In the end you [have to] say, ‘Screw it, just do it’ and get on and try it.”
At times this action-first approach will work but moving faster doesn’t guarantee success (NB sorry to say the vast majority of start-ups fail). If you don’t think strategically on a regular basis it may keep you stubbornly on the wrong path or potentially leave you vulnerable to the competitor who takes a more ‘strategic’ approach.
I think you can have the best of both worlds – spend time on strategising whilst moving fast.
How? Two things. Firstly, understand what strategy really is and secondly, follow the 5 Key Strategy Question framework Jonathan Bannister and I have developed based on the work of A.G. Lafley and Roger Martin in their book Playing To Win: How Strategy Really Works.
Simple, yeah? Glad we got that sorted. Thanks for reading. See you next month. Ok so maybe I should expand a bit on those two points.
And by the way only 8% of leaders, according to a piece of research by Leinwand and Mainardi, are effective at both execution and strategy.
What is strategy?
One of the problems with strategy is that there is no one clear definition of strategy and even less clarity on how to build one.
Strategy is fundamentally about making choices – about what to do and what not to do.
And a strategy to win in the marketplace – i.e. one with sustainability – is about choosing a different set of activities than your competitors or performing similar activities in different ways.
As Lafley and Martin said, “strategy is an integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.”
I also like Jim Collins’s definition of strategy. “Strategy is simply the basic methodology you intend to apply to attain your company’s current mission.” NB Mission, as Jim defines it, is your Big Audacious Goal. My mission, as I know you are interested, is to help one million entrepreneurs find their spark and flourish.
It’s all very well keeping your options open as long as possible but a winning strategy comes out of making the hard choices. What to do and what not to do. Do you not think companies like Google or Apple made some hard choices?
Making hard choices does not guarantee success but it forces you to focus on what matters. A company can’t do all things or be all things to all people. Without choices, we can’t provide sufficient value to customers, give meaning to employees or generate ongoing profits to sustain the company over the long-term.
The Framework
Strategy is not about creating a 40 page tombstone which takes months to draft, is never fully read and is only thought about every few years.
Setting strategy is about answering these questions in 5 key areas:
- Winning Aspiration (or Purpose) and Mission. What is your winning aspiration or guiding purpose? Why does your company exist? And what is your big challenging and specific goal or set of goals you are looking to achieve?
- Where You Play. Where do you choose to play? Which geography, customer segment, go-t0-market channel etc do you choose to play in? And where do you choose not to play in?
- How You Win. How are you going to win within the chosen place to play? What are your competitive advantages? Who are your competitors and how are they going to win?
- Key Capabilities. What specific capabilities support your competitive advantage? What are your company’s sustainable strengths?
- Management Systems. What systems do you have in place to support your key capabilities? How are you going to measure how your systems are performing?
We encourage the entrepreneurial companies we work with to ask themselves these questions regularly and consistently i.e. more than once a year. You need to build up the strategy muscle in your organisation as no one strategy will be successful forever. Early stage companies fire off lots of bullets but eventually there will be a time when you need to land on a cannonball or two (using Jim Collins’s analogy from Great by Choice). But even then the cannonball may not be the right one and you need to keep asking these strategic questions as the market changes and competitors react to your moves.
At the end of the strategy sessions we run, we suggest you create a written document, ideally no more than two or three pages, which is short, clear and summarises the essence of answers to the Key Strategy Questions. From this you will have the priorities and the workstreams you need to work on in the coming weeks and months.
To help you better understand the 5 Key Strategy framework here’s a bit more detail on each category. This should hopefully give enough insight into running a strategy session yourself but, if I’m honest (and yes I am biased!), I think you will get better results with outside facilitators like Jonathan and myself. Why? A few reasons. Using a combination of deep facilitation and coaching skills we make sure everyone’s voice is heard, we create a safe environment allowing everyone to do their best thinking, we hold the mirror up and challenge in a supportive way, we handle any conflict which arises and we keep the momentum going towards the results you want.
1. Winning Aspiration (or Purpose) and Mission
Something else Jim Collins and I are aligned on is that strategy must come from your winning aspiration or purpose and mission. You must be crystal clear on why your company exists and what your main goal or mission is. Winning aspiration and mission first then strategy.
When you are looking to discover your purpose or winning aspiration, don’t be too modest, better to be too bold than timid. After all, you want to make it meaningful and powerful to your team members. As part of the process it can help to visualise what winning would look like, what the ideal future would be if you superbly delivered on your purpose.
The purpose is the why – why you exist – and the mission is the mountain you want to climb, your Mount Everest or Ben Nevis (ok so Ben Nevis is a bit timid!).
To be clear your purpose and mission is not your strategy, they set the context for the strategic choices to follow.
And fundamental to the purpose is to make it a winning aspiration. Lots of people try to win and fail and so imagine what happens to the probability of success if you don’t even try to win in the first place and are satisfied with playing.
Lafley and Martin use the example of General Motors when they made a bold choice in response to the success of the Japanese car brands in the US and launched a new brand in the small-car market. The mission as defined by the then chairman, Roger Smith, was to “sell a car at the lower end of the market and still make money.” Yawn yawn! It was a defensive strategy rather than a winning one. It didn’t fail because of making bad cars, it failed because its purpose or aspiration was too modest – it didn’t spark winning where to play and how to win choices, key capabilities and management systems.
2. Where You Play
This is about choosing where to compete and where not to compete. Where you play is tightly bound up with how you are going to win. There is no point in playing somewhere if you don’t know how you are going to win there.
Consider where to play choices across a number of different domains including:
- Geography. What countries or regions do you want to compete in?
- Product or Services. What products or services will you offer?
- Customers. Which customer segments are you going to target? What price levels? What customer needs are you meeting?
- Distribution Channels. How are you going to reach your customers?
It might be tempting to go for a big market place like China or the US. But as Uber found out, if you don’t have a compelling how to win strategy in China you will fail. NB they didn’t have a first-mover advantage in China as they did in the US. And for the UK readers you will be aware of many of our best UK retailers failing spectacularly in the US e.g. Marks and Spencer and Tesco.
Choosing to serve everyone is not a winning strategy. There are no generic ways to win.
The effective way to generate strategy choice is to consider matched pairs of Where to Play and How to Play.
You want your where to play choices to reinforce each other and to match up to customer needs. To do so requires a deep understanding of users, the competitive landscape and your own capabilities.
Strategy requires you to make trade-offs in where to compete and to choose where not to play.
3. How You Win
When you have decided where to play (and where not to play) you need to decide how to win. How to win within the domains you have chosen – geography, services, customer segments etc.
Where to play and how to win choices must reinforce each other; a strong where to play choice is only valuable if it is supported by a distinctive and actionable how to win choice.
According to Michael Portas there are two ways of providing better customer value – low cost and differentiation. Very few companies pursue both sustainably. Low cost approach is about relentless reduction of costs. I am assuming most of you will be choosing the differentiation strategy.
Differentiation is essentially about distinctiveness and creating a competitive advantage. A competitive advantage according to Portas is “the specific way a firm utilises its advantages to create superior value for a consumer or a customer and in turn, superior returns for the firm.”
Competitive advantages help your business be successful and defensibility helps you stay there. Both add value to your business.
For a start up in the digital world, competitive advantages might be speed of growth, ability to raise capital, unique team or customer insight, proprietary data or information, relationships, geography (i.e. being located in Silicon Valley or London) and patents.
And defensibility might be economies of scale, brand, embedding (i.e. embedded software) and network effects (i.e. when another user makes the service more valuable for every other user).
And to give you examples of good and poor practice when it comes to choosing your where to play and how to win choices, I couldn’t resist using Microsoft as an example of what not to do and Fit & Happy, the company I set up with Jonathan Bannister, as an example of what to do!
So firstly what not to do. Microsoft was desperate to get into the smartphone market and they made a choice to get into it by acquiring Nokia’s handset business. But the problem was they hadn’t figured out how to winin this fast, growing and competitive market. And it ended up a spectacular failure.
And then to what to do. Fit & Happy decided to play in the fast growing, startup world. Why? Jonathan and myself have seen the entrepreneurial journey from all sides as entrepreneurs ourselves, as coaches and mentors of entrepreneurs and as investors in early stage companies over a couple of decades. Great that makes sense, but how are we going to win in this arena? By putting together our capabilities and complementary skills – introvert and extrovert, generator of ideas and optimiser, talker and listener, facilitator and coach, tall and short (ok so clients are too interested in that one and can’t tell over Zoom anyway) – thereby offering something unique others can’t copy. And along with our frameworks or canvases the ability to deliver workshops that are simple, clear, realistic and effective.
When you have generated pairs of where to play and how to win ask yourself these questions:
- Is it linked to your purpose or winning aspiration and mission?
- Do you have or can you build the key capabilities to win where you want to play?
- Can you build the management systems to back up these necessary capabilities?
4. Key Capabilities
The key capabilities are the activities and competencies, when excelled at, enable the company to win where it chooses to play.
The capabilities are how you bring where to play and how to win to life.
You are unlikely to win with just one capability such as best technology or best sales force. A more likely winning strategy is to have a bunch of capabilities which reinforce each other.
By choosing your key capabilities you are able to decide where to invest your time and resources and where not to. You will have capabilities that already exist which need to be maintained and others you need to build, as well as some which you will need to stop investing in.
Articulating your key capabilities forces you to focus on what matters most.
There is no magic list of capabilities but here are four to think about.
- Talent. We are good at attracting, retaining and motivating people
- Speed. We are good at making important decisions quickly
- Collaboration. We are good at working across teams and geographies to ensure both efficiency and effectiveness
- Learning. We are good at generating new ideas
These activities or capabilities help you define what the company is good at doing; they are your strengths in light of key aspirations and your where to play and how to win choices. It is my view that a winning strategy is one which focuses on making your strengths flourish rather than trying to improve your weaknesses.
When you assess your key capabilities you should ask yourself about feasibility (e.g. is this affordable to build?), distinctiveness (e.g. is this different from competitors?) and defensibility (e.g. is it defensible against competitive action?)
And so the exercise you need to do is to create a capabilities and activity map capturing all the critical ones you need to win i.e. will have the strongest and most direct impact on the execution of strategy.
5. Management Systems
You can’t stop at key capabilities. You need to establish the systems, structures and measures to ensure your choices and capabilities are supported. Otherwise the choices you make will wither away and end up on the scrap heap.
Roger Martin states that “A company needs management systems that build and maintain the distinctive capabilities that underpin a unique how to win in the chosen where to play that meets its winning aspiration.”
Distinctiveness is critical to management systems. The management systems that have a competitive advantage have three attributes to them:
- Drive disproportionate resource investment i.e. you invest more time and resources into these systems than others
- Specific novel decision rights i.e. there are unique ways of how decision-making takes place
- Mandate non-standard measurement/tracking i.e. create novel ways to measure how the systems are working
I will use some examples to bring alive these three attributes.
Most companies see their staff as key to their success. Easily said but too often not much substance behind the hiring, onboarding and development of staff. The companies who do it well put their money where their mouth is – they disproportionately invest in the ‘talent systems’. Investing disproportionately is not just about money, it’s also about developing unique systems with imagination and creativity. Some of the best hiring processes I have seen are a bit quirky, and different and are continually being improved. One example being that you don’t just rely on references from people given to you by the candidate, and you talk to others whom you select.
Also staying with the theme of ‘talent systems’ but related to novel decision rights, I have seen some companies cascade down the decision about who to hire. For example, instead of the CEO or leader having the final decision, different members of the team at different levels are given the decision. One example is Pret a Manger, the iconic healthy fast food brand, where team members of each site will vote on whether a new candidate will join the team once they have spent a day working with them.
And related to the third attribute of a sustainable management system, non-standard measurement, I like the example of a company I know who tracks how the candidates who got rejected for a new role rate the hiring experience. A brave thing to do as these candidates did not get the job but this company wants to know if these people, which make up 99% of sometimes a big number, are likely to be talking positively about the experience and the company and what they could do to improve the hiring system.
Summary
Building your strategic muscle is key to your long-term success.
Strategy is not a top-down plan, not a way of the c-suite telling the employees to blindly follow a certain path whether or not the customers want to follow it. Strategy should be focused on your customers and what they want.
Smart strategic businesses are responsive to their markets and to their customers as they develop. These strategic questions need to be consistently and regularly asked so that you can keep building products and services that your customers are willing to pay for.
___
Keep well. Give > Take.
Mark
Founder and CEO Coach, Entrepreneur, Business Builder and Angel Investor
Mark Farrer-Brown
Mark is known for his scale up expertise having been part of multiple successful exits over the last 25 years as a founder, business builder, coach, mentor and investor.
Follow Mark on LinkedIn.
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