Ask CEO’s and senior management of large companies in any sector and it will become apparent that many of them – in fact the vast majority – are not satisfied that their strategic planning process is working. There seems to be a belief that these processes are essentially a waste of time and distract the organization away from focusing on core issues. This belief incidentally is not just restricted to large organizations – it is an even bigger concern for not so large companies with limited resources….
The reason strategy processes and discussions are not productive are as follows:
More focus on budgets and spreadsheets and extrapolations not on the actual core issues of strategy like what is the business and what is the market. Most strategic plans don’t work because they are spreadsheet drive abstractions based on a combination of historical fact, guesswork and a large dose of opinion
No real connection between the strategic plan and the actual practice at the coal face. It’s almost as if the business strategy discussion and the actual operations are happening in separate organizations.
So what is the solution? There are lessons to be learnt in this area from the Lean Startup movement that recognizes that effective business strategy is less about a grandiose mega-plan that may or may not work and more about addressing key questions about the organization as it stands today and then iterating a way forward based on market reality and feedback.
Business strategy is really about three fundamental questions:
First, what market segments and businesses should you be in and what products and services should you offer?
Most organizations do not fully understand the answers to these questions and even if they had asked these questions a few years ago, the answers will almost certainly have changed by now.
Second, how can you differentiate yourself from the competition?
Staying relevant and continuing to succeed in any market for any size of firm is basically a function of how you offer value relative to your competitors. Key questions to address are:
-Who are the main existing and emerging competitors?
-What are their unique value propositions?
-What are the competitive risks and opportunities?
Third, what is your unfair advantage?
What are your capabilities, competencies, processes or other attributes that give you an advantage that is hard to emulate for your competitors. This is a truly important question to address as it is your insurance to preserve and grow your market share.
Once an organization is able to address these three fundamental questions, it can put together a more coherent and realistic business strategy.
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