Do you have a business strategy? You probably do. If you do, are you happy with your strategy? If you think you don’t, do you need one? By the way, when I refer to the term “business strategy”, I don’t mean a document that contains mission, vision, value, etc. I mean a step before that – the step that you, a small business owner, pull your thoughts and goals (of what you want to achieve) together. This step can be called a strategic framework development.
When talking about strategy, many business people often think about the answer to this question “how can I achieve my company’s objectives?” Even though it is the right starting point, it is too general and is not practically helpful. In his article – “What is strategy and how do you know if you have one?” – Costas Markides suggested a comprehensive approach to derive a strategic building block for successful and executable strategies. The building blocks are:
1. Strategy must decide on a few parameters. The key parameters are:
- Who will be your target market and who you will not target
- What products or services you will offer the chosen customers and what you will not offer them
- How you will go about achieving all of these – what activities you will perform and what activities you will not perform
The key point here is that your business needs to make clear choices on what you decide to do and, equally important, what you decide not to do. The reason is simple – your business cannot be everything for everyone. Additionally, you not only have to make those decisions based on the above parameters, but you also have to make those choices different from the choices your competitors have made. The only way to guarantee that you will have a successful business is to have a distinctive strategic position.
2. Strategy must pull all our choices together to create a reinforcing mosaic. After the choices are made, the next step is to combine those choices into a system that fits between what the business does and what the environment needs. In designing a business system, you must consider the following four principles:
- Whatever activities you choose to do must be demanded by the market
- The activities you decide to perform must fit with each other
- The activities must not only fit but must also be in balance with each other
- You must understand that the collection of your activities for your business will form an interrelated system.
3. Strategy must achieve fit without losing flexibility. Creating the fit between what your business offer and what the market needs does not guarantee a sustainable success. We are working under constant environment changes and if you don’t respond to those changes, your company may come to an end sooner than you think.
4. Strategy needs to be supported by the appropriate company’s environment. By environment, it means 4 key elements: a company’s culture, its incentives, its structure, and its people. You should ask yourself when you plan to start a company – what kind of culture, incentives, structure, and people you need to implement your strategy.
5. No strategy remains unique forever. Your strategy or business ideas could be unique today but nothing guarantees that it will be unique forever. Your competitors could imitate your business model or new strategies could emerge from somewhere in the world and erode your market share. You will need to question your business assumptions all the time – what if my customer’s demands change, what if someone in China could offer similar products but cheaper.
The objective of this post is to provide an easy-to-follow steps in developing a successful business strategy. It doesn’t matter of what business ideas you have or what industry your business is in, having a clear strategic direction is always extremely helpful. It will tell you how to respond to the environment changes. It will also tell you what to do (and what not to do) in the marketplace.