What is Strategy?
Strategy has been called the antidote to competition. The Strategic Planning Institute suggests strategy accounts for 85 percent of a company’s success with all other factors contributing only 15 percent. But what is strategy?
Strategy is the creation of a business model that positions you to consistently achieve market beating returns.
A business model answers nine questions:
- Who is my customer?
- What is the relationship I desire with them?
- What can I do for them?
- Through what channels can I reach them?
- Which revenue streams can be created?
- Which partnerships must I build?
- Which unique activities must I invent?
- Which resources must I capture?
- What is the appropriate cost structure I must achieve?
Strategy in practice
Carefully agree on your core customers. The 80/20 rule is a good place to start. Now, ask yourself, “What are the three to five benefits we offer our core customers that they cannot get from our competitors because we have designed unique activities to create these benefits?” By focusing only on what your core customers value, you will see your compelling value to them, as well as how to reach them and the revenue streams available to you. These unique activities will point you to the key partnerships, resources and cost structure you require.
For example, Jim and Molly Jungbauer are the owners of Hollstadt and Associates. They provide contract consultants and project managers to some of the biggest companies in Minnesota. They charge a little more than their competition because they’ve invested in people and processes that provide significant value to their target customers. As a result, they can source and staff a client’s project one-two weeks faster than the competition. Their exacting selection process eliminates two-four weeks of vetting for their clients. Their proprietary processes to match consultants and keep the project moving ahead fully staff ed can save an additional four to 16 weeks of time over a typical engagement. This means Hollstadt clients can cut months of consulting fees out of their budget and proceed to launch faster. When a typical engagement calls for eight to 20 consultants, saving several months of fees quickly eclipses the modest premium they pay to use Hollstadt.
Does it matter?
Once Hollstadt salespeople understood how their unique processes create value for core customers looking to launch projects faster or save money over the total cost of the project, they could now target those customers and walk away from prospects who fixated on paying only the lowest hourly rates, which means more at bats with qualified prospects.
They’ve tripled their sales over four years. The Hollstadt story is one I’ve seen a lot. Because company leaders mistakenly focus on growth, they pursue non-core customers. This changes their processes, affects their cost structure and leaves them without a clear resonating value proposition.
Ironically, it is oft en the companies who focus on a smaller customer segment who put more profit to the bottom line.
To be strategic, you’ll have to make some tough decisions. You’ll have to fire some customers, you’ll have to eliminate noncore activities and people, and you’ll have to adjust to a much stronger bottom line. Then, you’ll be … on the inside track.