What is Strategy?
Strategy is the intentional direction of your company and alignment of your resources to provide specific value to targeted customers.
Being all things to all people isn’t strategy, it’s the absence of strategy. It’s what hungry start-ups do for cash and sometimes forget to stop doing once they’ve grown up.
Strategy is the intersection of your values, vision and mission with external market demand (real or created) and your core competence.
These are the major steps in strengthening your strategy:
1. What does the customer want?
First, identify, from your customers’ perspectives, why they buy from you and how they use your product or service. We are looking for the specific outcomes or benefits they receive. There are likely primary benefits and secondary benefits. Usually, you will discover that the customer values things that don’t cost much to provide but you could charge for (higher margins), and doesn’t value certain things that are expensive or difficult to deliver (and lower margins).
For example, the primary benefits of a good tax return are that you maximize deductions. Secondary benefits are that you minimize your risk of an audit, monitor your year over year income and wealth, and sleep better at night. You don’t want the cheapest accountant you can find, ever!
Unbundling your services is a great way to maximize value. Creating options where customers select the level of value they want can further enhance customer satisfaction and increase your margins.
2. Your values
Next, analyze your personal and business values, where you see your company in the future, and the specific purpose of your business – from the customer’s perspective. A common pitfall to avoid is labeling your business based on what you do instead of what your customer wants or needs.
If the purpose of your business is to provide high quality industrial parts, then your customers won’t expect the lowest price but will demand quality that minimizes their breakdowns and maximizes their operational uptime.
3. Core competence – what are you really good at doing?
The last major step is to analyze your core competence. Core competence is defined as the part of your business that is critical to customer satisfaction. Don’t start with this step because it will limit your perspective and hamper your ability to attract and communicate with customers.
You would never outsource your core competence because you need to control its development. However, you might outsource shipping or even manufacturing if your core competence is customer knowledge and design.
If you have distribution competence, it doesn’t mean that’s your strategic core competence. You may have knowledge of your customer’s situation and be able to respond quickly with the right part. Knowledge and speed are your core competencies. Yes, they are part of your distribution competence, but sending the wrong part quickly or the right part slowly won’t make your customer happy.
4. Metrics – Keeping track of progress
After you’ve clarified your strategy and defined your primary and secondary strategic drivers, the next step is to develop strategic metrics. Metrics empower you to align the front line with your corporate strategy and measure and monitor organizational performance.
These can be very powerful because they are leading indicators and can predict future performance.
Getting control of the future and being able to predict, with some certainty, is the sign of great management.
Copyright 2011. All Rights Reserved. Phil Symchych