It’s January, and we all know what that means: time to set New Years resolutions that we’re going to break! The main things resolutions are good for is causing the gym to get way too crowded for the first six weeks of the year. You have a tool at your finger tips that will do far more for you than simply setting resolutions.
Skip your resolutions and set strategy, instead.
A strategy is a 50,000-foot view of your life or business. A good strategic plan gives you a roadmap for where to put your time and effort this year. It tells you what to say “yes” to and what to say “no” to.
As you know from my article on how vision and mission relate to strategy, your strategy for a year answers the question, “How can we further the company vision, given the realities of the markets, customers, and resources under our control right now?” Strategy is how vision plays out in today’s real world context.
But when you’re setting your strategy, make sure to approach it from both the outside and the inside.
Look Outside to Set Strategy
Your strategy depends on what’s going on outside your company walls. You need to develop a plan that makes you more desirable to customers than any of your competitors. That means knowing:
- How do your customers think of you? What product category do they put you in? (Don’t assume you know. A yacht isn’t necessarily a vehicle. Rather, it may be a status symbol.)
- Who else is in that product category? If you’re a yacht, are you competing against Toyota and JetBlue (transportation) or are you competing against Jetstream and Sotheby’s (status symbols)?
- What advantage do you have over your competitors?
- How can you best communicate that advantage to the market?
- Who has the power in your ecosystem, and how can you increase your power?
One of my favorite books on external strategy is Co-opetition by Adam Brandenburger and Barry Nalebuff. If you’ve ever heard of Michael Porter’s “Five Forces,” Co-opetition goes one step further and deepens the model. Just the way Brandenburger and Nalebuff define competitive and complementary relationships is worth the cost of the book.
Strategy Looks Inside
Looking outside is only half of the equation. You also need to look inside when you formulate your strategy. If strategy is vision made real now, part of “now” is the resources you have under your control. You need to take stock of your resources and decide which resources will form the foundation of your strategy.
When you make ultra-yachts, two of your assets are your customer list (oodles and oodles of rich people), and your yacht design capabilities. If you base your strategy off your customer list, you will expand into other products and services that your current customers might want. Like platinum dinner place settings. If, however, you base your strategy off your design capabilities, you might instead expand into other kinds of yachts, or other sea-faring vessels.
My favorite book on internal strategy is Top Management Strategy by Tregoe et al. The book is 30 years old, but is pretty much just as relevant today as when it was written.
Treat yourself to a 3-martini lunch
If you don’t have a formal strategy session planned, then at least take a long lunch. And over lunch, review the vision/mission for your venture. Why are you in the game in the first place? Then ask yourself how that gets expressed in the world of 2017. Review your external factors—competitors, customers, suppliers, and so on. Review your internal resources, and decide which you plan to base your strategy on.
Then go for it. Give shape to your plans for the next year. Make sure to build in time to review and course correct, and get your year off to a good start. A New Years resolution might only last a couple of weeks, but a good strategy will support you for a year.
You’re so proud of your new vision statement. It sounds nice. Inspiring, even. But the vision is useless unless it can direct action.
Your vision lays out a destination; your destination guides your strategy; and strategy chooses action. It’s action that leads to success. In those moments of action, having clear direction is crucial for building momentum. If your organization is like most, you spent weeks debating every word crafting your vision, mission, strategy, and goals. But no matter how lofty, if they aren’t created in a way that provides direction, those statements are little more than high-priced indulgences.
Every company means something different by the words “vision” and “strategy.” One person insists that “Provide our customers the highest possible quality widgets” is a vision. A friend takes one look and assures him, “That’s a strategy.” Here are some useful definitions that will help you decide if you’ve set a direction that can truly get traction.
Envisioning the future
Vision is timeless. It’s based on who/what you want to do. It’s why you’ve got an organization in the first place. It must be specific enough that everyone can use it to decide if their work is moving the company forward. Progress towards the vision must be measurable. A vision is independent of specific competition, and while it may mention the customer, it must guide even someone who doesn’t know the customers’ mind. The best visions imply whom the company serves, what it provides, and what distinguishes it from other companies providing the same products and services. Vision sets the broad direction. It says, “Go west, young man.”
Wrong: We will provide exceptional products and services that our customers value.
This vision requires knowing the customers’ mind in order to understand what the company provides. It doesn’t distinguish what is unique about the company, since presumably everyone in the market produces something customers value.
Right: We will help boat owners everywhere navigate new seas with geographically based directional products and services.
This vision tells us the market, the product (navigation products and services), the distinguisher (geographically based), and the progress measurement (delight).
The strategy thing
Strategy links the destination (vision) with current reality. Strategy applies to the whole company, and answers the question “How will we reach our vision, given current market conditions, competitive scenario, regulatory environment, etc.?” Strategy is narrower than vision, but broad enough to guide companywide organization structure, hiring, capabilities that must be developed, and so on. Strategy says, “We’re going west, but we ran into this grand canyon. We can go around to the north or south. Let’s choose south.”
For example, a company may have a vision to “provide scientifically proven technology to solve the medical needs of consumers and hospitals.” In the 1950s, the strategy may be doing in-house research, hiring and developing scientists, and a compensation program based on discovery. In the 1990s, the same company may have a strategy of acquiring small drug-making companies and buying and protecting patents from other companies. Both strategies will reach the vision, but they are appropriate for different competitive environments, and they have different organization structures, different financing options, and different operational characteristics.
You know you have a strategy if you chose your current path from many alternatives, all of which would have reached your vision, each of which would have required hiring different people and building different systems. If you didn’t consider many alternatives, or you didn’t choose your alternative considering your competition, your vision, and your current market conditions, then you probably have a tactic, not a strategy. If you can execute your strategy with your current people, reward systems, and organization structure, then it’s not a strategy, it’s a tactic.
Tactics are limited in scope, typically just to a part of the company. They’re shorter term than a strategy. They involve executing given the existing capabilities and resources of the company. Unlike strategy, tactics generally work within the current organization structure, rather than changing the organization. Tactics say, “We’re on the south path. Let’s travel two miles today.” Your tactics probably won’t work unless they’re generated from a strategy that lays out a consistent philosophy for how your company will compete/win/attract customers in today’s market.
“Flashpoints” are those moments in time when traction and momentum are built. For example, a flashpoint in creating a quality-driven organization might be when the CEO refuses to ship a poor-quality product, even though it will hurt quarterly numbers. Flashpoints always happen during a tactical action. That’s why you need a vision and strategy—without them, people at the flashpoint won’t have the guidance to ensure they can move the company forward in that moment of traction.
Your strategy also helps you find flashpoints. If your strategy involves locking up important distributor relationships, your flashpoints will involve reputation and relationship building, creating the perception of value to the distributors, and establishing negotiating leverage to capture an exclusive relationship. If your strategy is to be a low-cost provider, your flashpoints might be times when opportunities for efficiencies arise, or incidents where you can encourage a “continuous improvement” mindset in your team.
At the end of the day, your vision and strategy only exist to drive tactics. And often, the most significant tactics are those flashpoints whose effects are far-reaching. When your vision sets direction and your strategy ties it to your current situation, they provide a compass for everyone in your organization to follow for years to come.
Even first-time CEOs often realize that they should be thinking about strategy. But what is strategy? Strategy is different from vision or tactics, but how? And how should the CEO approach strategy? My current HBR.ORG article helps you understand the entrepreneur’s job description and how an entrepreneur should approach strategy.