Tag Archive: strategy

Top Ten Entrepreneurial Mistakes

Top Ten Entrepreneurial Mistakes
It’s hard to avoid certain mistakes, especially when you face a situation for the first time. In fact, many of the following mistakes are hard to avoid even if you’re an old hand. Of course, these are not the only mistakes CEOs make, but they sure are common enough. Take the following self assessment: give yourself ten points for each of these entrepreneurial blunders you are in the process of making. Deduct five points for those you have narrowly avoided. Your score, of course, will be kept confidential, but do seek help. Fast!

1. Big Customer Syndrome

If more than 50 percent of your revenues come from any one customer you may be headed for a meltdown. While it both is easier and more profitable to deal with a small number of big customers, you become quite vulnerable when one of them contributes the lion’s share of your cash flow. You tend to make silly concessions to keep their business. You make special investments to handle their special requirements. And you are so busy servicing that one big account that you fail to develop additional customers and revenue streams. Then suddenly, for one reason or another, that customer goes away and your business borders on collapse.

Use that burgeoning account as both a cause for celebration and a danger signal. Always look for new business. And always seek to diversify your revenue sources.

2. Creating products in a vacuum.

You and your team have a great idea. A brilliant idea. You spend months, even years, implementing that idea. When you finally bring it to market, no one is interested. Unfortunately you were so in love with your idea you never took the time to find out if anyone else cared enough to pay money for it. You have built the classic better mousetrap.

Do not be a product searching for a market. Do the “market research” up front. Test the idea. Talk to potential customers, at least a dozen of them. Find out if anyone wants to buy it. Do this before anything else. If enough people say “yes” go ahead and build it. Better yet, sell the product at pre-release prices. Fund it in advance. If you don’t get a good response, go on to the next idea.

3. Equal partnerships

Suppose you are the world’s greatest salesman, but you need an operations guy to run things back at the office. Or you are a technical genius, but you need someone to find the customers. Or maybe you and a friend start the company together. In each case, you and your new partner split the company 50/50. That seems fine and fair right now, but as your personal and professional interests diverge, it is a sure recipe for disaster. Either party’s veto power can stall the growth and development of your company, and neither holds enough votes to change the situation. Almost as bad is ownership split evenly among a larger number of partners, or worse, friends. Everyone has an equal vote and decisions are made by consensus. Or, worse still, unanimously. Yikes! No one has the final say, every little decision becomes a debate, and things bog down quickly.

To paraphrase Harry Truman, the buck has to stop somewhere. Someone has to be in charge. Make that person CEO and give them the largest ownership stake, even if it’s only a little more. 51/49 works much better than 50/50. If you and your partner must have total equality, give a one percent share to an outside advisor who becomes your tie-breaker.

4. Low prices

Some entrepreneurs think they can be the low price player in their market and make huge profits on the volume. Would you work for low wages? Why do you want to sell at low prices? Remember, gross margins pay for things like marketing and product development (and great vacation trips.) Remember, low margins = no profits = no future. So the grosser the better.

Set your prices as high as your market will bear. Even if you can sell more units and generate greater dollar volume at the lower price (which is not always the case) you may not be better off. Make sure you do all the math before you decide on a low price strategy. Figure all your incremental costs. Figure in the extra stress as well. For service companies, low price is almost never a good idea. How do you decide how high? Raise prices. Then raise them again. When customers or clients stop buying, you’ve gone too far.

5. Not enough capital

Check your business assumptions. The norm is optimistic sales projections, too-short product development timeframes, and unrealistically low expense forecasts. And don’t forget weak competitors. Regardless of the cause, many businesses are simply undercapitalized. Even mature companies often do not have the cash reserves to weather a downturn.

Be conservative in all your projections. Make sure you have at least as much capital as you need to make it through the sales cycle, or until the next planned round of funding. Or lower your burn rate so that you do.

6. Out of Focus

If yours is like most companies, you have neither the time nor the people to pursue every interesting opportunity. But many entrepreneurs – hungry for cash and thinking more is always better – feel the need to seize every piece of business dangled in front of them, instead of focusing on their core product, service, market, distribution channel. Spreading yourself too thin results in sub-par performance.

Concentrating your attention in a limited area leads to better-than-average results, almost always surpassing the profits generated from diversification. Al Reis, of Positioning fame, wrote a book that covers just this subject. It’s called Focus.

There are so many good ideas in the world, your job is to pick only the ones which provide superior returns in your focus area. Don’t spread yourself thin. Get known in your niche for the thing you do best, and do that exceedingly well.

7. First class and infrastructure crazy

Many a startup dies an untimely death from excessive overhead. Keep your digs humble and your furniture cheap. Your management team should earn the bulk of their compensation when the profits roll in, not before. The best entrepreneurs know how to stretch their cash and use it for key business-building processes like product development, sales and marketing. Skip that fancy phone system unless it really saves time and helps make more sales. Spend all the money really necessary to achieve your objectives. Ask the question, will there be a sufficient return on this expenditure? Everything else is overhead.

8. Perfection-itis

This disease is often found in engineers who won’t release products until they are absolutely perfect. Remember the 80/20 rule? Following this rule to its logical conclusion, finishing the last 20 percent of the last 20 percent could cost you more than you spent on the rest of the project. When it comes to product development, Zeno’s paradox rules. Perfection is unattainable and very costly at that. Plus, while you getting it right, the market is changing right out from under you. On top of that, your customers put off purchasing your existing products waiting for the next new thing to roll out your doors.

The antidote? Focus on creating a market-beating product within the allotted time. Set a deadline and build a product development plan to match. Know when you have to stop development to make a delivery date. When your time’s up, it’s up. Release your product.

9. No clear return on investment

Can you articulate the return which comes from purchasing your product or service? How much additional business will it generate for your customer? How much money will they save? What? You say it’s too hard to quantify? There are too many intangibles? If it’s too difficult for you to figure, what do you expect your prospect to do? Do the analysis. Talk to your customers, create case studies. Come up with ways to quantify the benefits. If you can’t justify the purchase, don’t expect your customer will. If you can demonstrate the great return on investment your product provides, sales are a slam dunk.

10. Not admitting your mistakes.

Of all the mistakes, this might be the biggest. At some point you realize the awful truth: you have made a mistake. Admit it quick. Redress the situation. If not, that mistake will get bigger, and bigger, and… Sometimes this is hard, but, believe me, bankruptcy is harder.

Assume your costs are sunk. Your money is lost. There is good news: your basis is zero. From this perspective, would you invest fresh money in this idea? If the answer is no, walk away. Change course. Whatever. But do not throw any more good money after bad.

OK, everybody makes mistakes. Just try to catch them quickly, before they kill your company.

To avoid some mistakes in the future, it sometimes helps to ask good questions ahead of time. Click the link if you would like a copy of my fractal strategic planning questionnaire.

Growing Your Small Business Sales Through Creating Connections

Growing  Your Small Business Sales Through Creating Connections
Your mission as a business owner is to develop a marketing strategy which offers your potential clients/customers a way to improve their situation in a certain way, solve a problem, provide more value, or open new opportunities for them which will motivate them to pick up the phone and buy from you. This requires that the focus of your marketing plan be placed on your customer – NOT ON YOU! Taken from The 90 Day Marketing Marathon Blunders from A to Z these ten powerful tools will support you in creating meaningful connections with your clients/customers and providing real time solutions to their challenges of the today.
1.   Custom Assessments.

By using a tool such as Assessment Generator you can build custom assessments which will allow the visitors to your website the opportunity to engage with you while providing value which is memorable.  With Assessment Generator you as the business owner will receive the basic results of the survey to see if clients are where they want to be in their lives or their businesses.
2.   Online Survey Tools.

A well-designed online survey can greatly empower business, academic, and charitable organizations by finding out quickly what is on the minds of your current and prospective customers/clients. Creating an online survey can be extremely simple and convenient with a free survey tool such as Advanced Survey or Zoomerang. By designing a survey and sending this to your database, you can poll targeted groups quickly and in detail while obtaining real time results.
3.   “Feedback” Hot Links.

As you update your website, author articles, or launch new products and services, add a “feedback hot link” to your site or to your e-mail signature. This link can state “Send me feedback” or “Send me your comments” and will automatically link to an e-mail which can be used for your website visitors to provide you with insight into what is working and what is not with your products and services. The key is to make communicating with you as easy as possible.
4.   Weblogs With Comments.

A weblog is a simple yet compelling online environment, which will allow you to put your thoughts, ideas, and experiences on the web via a journal, photo album, or diary. With a tool such as Typepad you can provide your clients and customers with access to your online journal AND allow them the ability to comment to your posts. If you are blogging around a topic which creates discussion or a topic which can generate ideas for your new products and services, you will find that blogging with a tool which allows for comments will take your products and services to a more advanced and sophisticated level quickly and with the support of your customers/clients.
5.   Client Scenarios That Create an Emotional Tug.

What are the typical challenges of your clients, what do they complain about to others, and what do they really want in life? Do they say things such as:
·    I am a CEO, and I cannot seem to motivate my team.
·    I am a pet owner, and I am looking for a Veterinarian I can trust.
·    I am a Solopreneur who is working for a lunatic.
·    I am a business owner who is looking to invest my money to double my financial wealth.
·    I am a new college graduate, and I am looking for the career of my dreams.

By honing in on what’s most important to your website visitors and actually posting these for the world to see, you will begin to connect with these folks in a way which calls the emotions to be tapped.  List these client scenarios in bullet form on your website, and link each scenario to a very tangible benefit of what you can offer.

Example: If you are marketing to pet owners who are looking for a Veterinarian he/she can trust, link this client scenario to a special report on “The Top Ten Questions to Ask When Hiring a Veterinarian for Your Pet.”
6.   Data Driven Landing Pages.

Landing pages, also known as “jump” pages in the world of marketing, are self-contained web pages that visitors are driven to for a specific purpose (usually for the purpose of collecting e-mail addresses.)  Landing pages are very focused and usually contain a message, in most cases to allow you as the web host to determine what visitors click on as well as other statistics.  A data driven landing page contains a form requesting the user to enter contact information, usually in order to get something, such as a free special report, newsletter, or to register for an upcoming event. By including a question on this page such as “What is the thing you most want in the area of _______________” (fill in the blank) you will be able to see trends of what folks most want, which can be key to the growth of your business.
7.   A Research and Development Team.

A Research and Development team is a group of people you invite to join you in developing your products, programs, and services.  Your R & D Team may be as small as ten people or as large as 1,000 people. It is recommended that you call on your R & D team at least two times per month, as they will provide you with valuable information about what is working/not working in your business, and they will tell others about what you are up to.  As your business grows, you will want to continue to add people to your list so that you have a cross section of people, ideas, and perspectives from people from all walks of life and all corners of the globe.
8.   A Mastermind Group.

The purpose of a mastermind group is to share thoughts, ideas, opinions, and information.  To be successful in business, it is important for this group to be supportive and to care enough about you and your business to provide you with honest feedback about what they see is possible for your business.  Spend at least one hour per week with your mastermind group, and use the feedback gained to grow your life, both personally and professionally.
9.   A Product/Service Development Team.

Are you ready to develop a new product or service, and you just don’t know where to begin or how to make it happen?  If so, invite ten of the coolest people you know to support you in developing the new product or service in exchange for a slice of the pie once the product/service is launched.  People love to share their wisdom, especially when they know that they are involved in development of something that will be financially rewarding in the end.
10. Risky Business.

One time per month, add one product or service that is out of the norm or a little bit risky for you and your business.  Why?  Because it will keep your mind moving and will allow your customers to sample something which is cutting edge and exciting!  Example: You are a bookstore owner, and you host a “Mystery Night.”  Invite the public to preview the 12 hottest mysteries by attending a masquerade party on the premises of your bookstore – loads of fun, intrigue, and excitement.  A suggestion/comment box can be situated near the door, inviting guests to contribute feedback and ideas for the next big event for your biz.

Strategic Planning in Managing Information

Strategic Planning in Managing InformationStrategic Planning in Managing Information

Strategic Planning in Managing Information. Establishing An Information Management Policy, by: acknowledging the importance of information to the strategic planning process and to the operational performance of the organization; implementing an information management policy that will ensure a continuous flow of appropriate information to all levels of the organization; allocating responsibility for the maintenance and improvement of the policy to an executive level manager; allocating level-specific responsibilities for the maintenance of the information flow. Strategic Planning in Managing Information

Implementing an information management policy that is robust and rigorous is essential, not only at the strategic, corporate levels, but operationally as well. In the case of strategic planning, the quality of the information gathered, the channels used to distribute that information laterally and vertically throughout the organization, and the interpretation of the information gathered, is vital. Without a sound foundation, the policy and its procedures, the information that is fed into the strategic planning process will be flawed, in parts at least. This will, inevitably, be damaging to the chances of the chosen strategies being successful. Strategic Planning in Managing Information

Identify Information Needs, by: discussing information needs with the strategic planning team; using scenario building techniques to identify potentially differing information needs; identifying information needs of partners and key stakeholders who will be involved in the planning process; forecasting information needs for the strategic planning process; forecasting post-implementation information needs; reviewing existing information, channels and flows and identifying gaps and inadequacies; drawing up a list of information needs. This is another crucial early stage in the use of information in the strategic planning process. The leader(s) and other members of the planning team must be clear about their information needs. Whilst at this stage it is not possible to identify all the specific details, it is essential to draw up a list of categories of information that will lead to sufficient information being gathered. For example, one of the categories will be information on forecast changes in the external environment, another will be information on current and predicted competitor behavior, another may be information on potential manpower resources, and so on. For public sector organizations one of the categories will be predicted government actions, such as in the setting of financial targets or other performance indicators. The role of the planning team is to ensure that their needs are understood and satisfied. Strategic Planning in Managing Information

Establish Effective Gathering Methods, by: evaluating methods of information gathering currently used in the organization; evaluating methods of information gathering not currently used in the organization; selecting an appropriate range of methods for use in the strategic planning process; selecting individuals and teams to carry out the information gathering activities; providing training, financial and physical resources, to support the information gathering activity; implementing a monitoring and control procedure to ensure the process continues to be productive. There is a range of well established methods used internally by organizations, and well established commercial companies, that will provide the required information. In both cases, the methods used in gathering information must be appropriate and effective, in terms of being cost-effective and in terms of the quality of information gathered. In addition, particularly in the case of the commercial providers, the methods should be ethically sound. Whilst information gathered through unethical methods may not directly damage the strategic planning process, damage may well be caused to the reputation of the receiving organization, and this may well then damage the chances of the strategies being successful.  Obtain Required Information, by: obtaining primary and secondary objective information from internal sources and external providers; obtaining subjective information from analytical techniques such as PEST and SWOT analysis; obtaining subjective information from Competitor Analysis techniques. Strategic Planning in Managing Information

Validating Information Obtained, by: vetting the quality of all sources and providers of information; testing the validity of information received; replacing unsafe information or at least acknowledging the weaknesses in it and highlighting this when it is used in the planning process. It is critical that the information used in the strategic planning process is valid. Plans based, even in part, on inaccurate, invalid, or in any way inappropriate, information, are inherently flawed and will almost certainly fail in part or totally. Internal sources of information, and the process of gathering that information, must be rigorously checked on a regular basis. External providers of information, such as commercial companies that carry out surveys or other information gathering activities, must be treated in the same way as other suppliers, in that they must be vetted for appropriate expertise and experience, for their operational quality levels, for financial standing, as well as for their ability to understand and interpret the needs of the purchasing organization. Regarding the analytical techniques used, there are a huge range of tools and techniques that can be used to analysis information. The techniques mentioned above are named because they are common ones, familiar to most senior managers. There are many other proven methods, and these should be evaluated and used where appropriate. It is however, important to be aware that the quality of the output, the findings, from these analytical techniques are dependent on the skills of those using them and the interpretation, the conclusions, made by the analyses, and then by the end users.

Apply Outcomes To Strategic Planning Process, by: interpreting and applying the findings to the deliberations and decision making activity; regularly reviewing the validity of information and interpretations used, during the process; refreshing the information and interpretations as necessary. Using the information in the decision making activity, in building up the strategic plan, must be seen as a continuous process and one that must be monitored and controlled. If, for example, information is gathered and interpreted at the start of the planning process, and is only applied at a later stage (some annual strategic planning processes can last for many months) then the validity, the currency, of that information and its interpretation, must be challenged and if necessary discarded and replaced.

Review Effectiveness Of Process, by: carrying out regular audits on the effectiveness of the methods, tools and techniques, used in the information gathering process; carrying out regular audits on the relevance, accuracy, and value of information used in the planning process; regularly reviewing the value of the information inputs as part of the strategic planning review sessions; taking corrective action where necessary. The whole information gathering process must be reviewed on a regular basis. Ideally this should be an agenda item on all the scheduled strategic level team meetings. An additional review should take place before each distinct strategic planning process starts. In addition, the Information Management Policy itself must be reviewed and refreshed annually. To rely on outdated, inappropriate, invalid, information gathering processes would be highly damaging to the chances of future success.

Establish Future Information Needs, by: implementing a continuous development approach to information gathering, whereby the information needs of the organization, at strategic and operational levels are continuously assessed and action instigated to satisfy those needs. In today’s fast changing world of business the strategic planning process is one that is repeated at least annually, often more frequently to the point where for many organizations it is now a continuous process. Satisfying future information needs cannot be carried out as a discrete pre-planning activity. Information gathering must be continuous, and therefore future information needs must be identified on a regular basis, and these needs must then be satisfied by the information gatherers. In this way the planners have access to the necessary information as and when they need it.

In Summary: High quality information is critical to the success of the strategic plans of any organization. All other factors can be in place, but if the information is flawed in any way, then success is much less likely. If success is achieved it may well be at a high cost. High quality information must be acknowledged as one of the organization top priorities. Adopting a continuous development and improvement approach to the information gathering and interpretation process is essential. A complimentary approach that should be implemented in parallel with this is that of Knowledge Management. This relatively new approach is in response to the recognition of the increasing importance of identifying and gathering the internally generated information and the accumulated knowledge held within the organization, and making effective use of these. The leader(s) of the strategic planning activity should combine the established principles of continuous development and improvement with the techniques of knowledge management, and build this into the strategies of the organization. In this way the organization is generating a continuous flow of high quality information, and making the most effective use of that information to support its chosen strategies. Strategic Planning in Managing Information

 

The Secrets Of Strategy – Part 2 Of 2

The Secrets Of Strategy – Part 2 Of 2

The Secrets Of StrategyThe Secrets Of Strategy – Part 2 Of 2. Of course you’ve heard that when you do what you’ve always done, you’ll likely get what you’ve always got. In this case that means playing the tactical game: coming up with acceptable–or worse–comfortable options and executing them as time permits. Likely, what you’ll get is business as usual, and things will be… well, they’ll be fine.

But “fine” may not be what you’re after, and you are probably reading a series called “How to Create Strategies That Work” so you can do better — perhaps much better…

And if you are willing to take some time and do your homework: the research, inquiry, analysis, synthesis, and the activation of strategy — you can add dramatically more power to each one of your individual tactics, and potentially revolutionize your entire business.The Secrets Of Strategy – Part 2 Of 2.

In the beginning of this series I showed you how to start the process of selecting a market-dominating business and marketing strategy.

The Secrets Of Strategy – Part 2 Of 2: The first four steps are:

– Set your vision

– Gather environmental and competitive intelligence

– Take stock of your organization’s strengths and weaknesses

– Answer the Global Strategy Question

I covered those in The Secrets of Strategy, Part 1. In this article I’m going to cover the next four steps:

– Establish decisive objectives

– Rate and rank your “SWOTs”

– Match your internal and external factors to identify strategic alternatives

– Select the highest-impact strategies for implementation

Establish Decisive Objectives

Strategy is contextual. This means you should not make any kind of strategic decision–choosing strategy A over Strategy B, for instance — without first setting a context with Decisive Objectives.

The word decisive is from the Latin decidere, which means to cut off. Decisive objectives are the goals that cut off irrelevant business opportunities and distracting details. They define the boundaries of your company’s efforts and direction, and establish the measures by which you will gauge your success. The Secrets Of Strategy – Part 2 Of 2.

This step is to select company-defining goals, the attainment of which will mean your vision has started to become a reality. These objectives or goals should relate to the following:

In what markets will you do business?

What market share will you have? Will you be a marginal player with a small percentage, a big player with a significant portion of the market, or will you dominate your market and crush all competition?

Where will you operate geographically? This question ties back to the issue of market share; you might dominate the market locally but be a small player nationally.

How much revenue and profit will you earn? Larger revenue goals will have different strategic needs. 

What impact will your business have on your industry, your community, your world?

How will you exit your business? Will you run the business and eventually pass it on to family members? Will you sell it privately? Will you go public?

These are examples of the kinds of goals which shape your company. The decisive objectives create the context for the strategy alternatives you generate.

Rate and rank your “SWOTs”

Previously, you analyzed your external environment and internal strengths and weaknesses. Now rate and rank the most important factors.

Evaluate each external factor: is it an opportunity to be taken advantage of, a threat to be defended against, or is simply something neutral you can safely ignore? Do the same for your internal factors: are they strengths to capitalize upon, weaknesses which much be bolstered or outsourced, or neutral conditions?

Using your Decisive Objectives as a guide, select amongst the potential opportunities, threats, strengths and weaknesses, those factors you consider critical to the success of your business. (Ignore the neutral factors.)

Group the critical factors into internal and external. Rate each internal factor from .01 to .99 based on its perceived importance to your business. The total should add up to 1.0. Do the same for the external factors. The Secrets Of Strategy – Part 2 Of 2.

Select the top five to ten internal factors and external factors for matching.

Match your internal and external factors to identify strategic alternatives

Matching combines each internal factor with an external factor, generating a potentially relevant strategy. A software manufacturer might match an internal strength such as flexibility with an external opportunity of a new law in a related industry, yielding a strategic alternative to reconfigure the software and provide solutions to the new legal requirements. The Secrets Of Strategy – Part 2 Of 2.

Or, a duck farmer might match his internal strength of breeding expertise with an external opportunity demanding low-fat, high-protein foods to yield a strategy selling low- fat duck.

Strengths are matched with opportunities to create SO strategies. These are generally your strongest, highest leverage options. Strengths match with threats to create ST strategies. These use your natural assets to minimize external threats to existing revenue streams and your current competitive position. But since the best defense is often a strong offense, you may find yourself reverting to an SO strategy — typically a better alternative.

WO strategies use external opportunities to reduce the impact of internal weaknesses. Of course, you may simply choose to put your resources into areas of strength and outsource weak factors. The Secrets Of Strategy – Part 2 Of 2.

WT strategies are the weakest of all: defensive approaches designed to minimize internal weaknesses or external threats. Sometimes necessary to protect weakening revenue streams, there are often other, more powerful approaches that take better advantage of company strengths. The Secrets Of Strategy – Part 2 Of 2.

This process is often called SWOT, named for the four types of internal and external factors. I prefer to call it SOT, since the most powerful options will not pay much attention to weaknesses. In our business philosophy you will gain more ground more quickly by amplifying and exploiting your strengths and outsourcing — or ignoring — the areas in which you are weak.

Select specific strategies for implementation

At this point many people choose to intuitively select which strategies to pursue. Others may prefer to bring rigor to the ranking process. This final step combines your various subjective analyses into a defined framework, giving each strategy a strategic impact score.

Compare your new strategic alternatives to your list of critical factors to find those factors affected by each strategy. For each match, rank the attractiveness of the strategy relative to the factor from 1-4 (1-not attractive, 2-somewhat attractive, 3-reasonably attractive, 4-highly attractive) and multiply it by the factor’s rating (.01 – .99). Sum all the scores for that strategy into a total “strategic impact score.” The Secrets Of Strategy – Part 2 Of 2.

Lastly, select your go-forward strategies based on the highest strategic impact scores.

This is a demanding process with many steps, but it is well worth the effort. The strategies you create will take greatest of advantage of your strengths and opportunities, while protecting your company most effectively against threats and weaknesses. They will provide your company with leverage to make the most of your assets, your competitive position and your markets, all while insuring your strategies are consistent with your company’s vision and goals.

Important notice for strategy-minded entrepreneurs:

Strategy creation is a long road to hoe, and goes much more smoothly when you know what questions to ask and in what sequence. To make it easier for you and your senior team, I’ve created the Growth Strategy Roadmap.

This program of flowcharts, questions, checklists, and detailed processes takes you through the entire progression of evaluating your external and internal environments, and provides all the steps and forms necessary to generate matched options, and rate, rank and select a high-leverage, high-growth strategy. The Secrets Of Strategy – Part 2 Of 2.

(c) Copyright Paul Lemberg. All rights reserved

The Secrets Of Strategy – Part 1 Of 2

The Secrets Of Strategy – Part 1 Of 2

The Secrets Of StrategyThe Secrets Of Strategy – Part 1 Of 2. A step-by-step guide to creating a growth strategy based on your current situation and future possibilities.

I’ll bet you think you already have a strategy.

And well you may, but strategy as a concept is just like love: much used and little understood. Many businesses (and that includes small entrepreneurs, large corporations, non-profits, community organizations, governments, NGOs…the works) neither know what strategy really is, nor how to get one. The Secrets Of Strategy – Part 1 Of 2

And even if you do, in fact, have a strategy — is it the right one? The best one? This is so important — marketing guru Jay Abraham says — and I agree — a superior strategy badly executed will beat a bad strategy well executed, any day.

It’s easy to say, “This is big company stuff. We know what we need — why should we do all the extra work.” While a “strategy-less” group of marketing tactics may work well and produce good results, is it taking your business in the best direction? You may be making money, but are you making the most money possible? Could another suite of tactics implementing a superior strategy produce far better results? 

Which brings me to the point of this two-part article: how to formulate strategy. In the next 1500 words, I’m going to present the first half of a basic system for identifying high-impact strategies in your business. (Just the first half? Yes. While I strive to make this as simple as possible, it still takes a bit of explaining, and editors and readers alike detest long articles!) So Part 2 will finish the outline, and in future articles, I will discuss each system component in finer detail. 

Let’s begin with a working definition of strategy.

Strategy is the guiding principle on which are based a series of interlinked decisions regarding the selection and deployment of resources and tactics, whose purpose is realizing a vision and achieving decisive objectives in a competitive and changing environment. The Secrets Of Strategy – Part 1 Of 2

This definition tells us a few things:

* The purpose of all strategic decisions is achieving your vision and “decisive” or critical-to-purpose objectives.

* Strategy is about selecting specific resources and tactics to get the desired result.

* Strategy is not static; it is decisions in a series, and evolves continuously over time.

* Strategy is broad and all-encompassing. With that in mind, here are the 8 steps in formulating strategy:

1. Set your vision

2. Gather environmental and competitive intelligence

3. Take stock of your organization’s strengths and weaknesses

4. Select your “grand strategy”

5. Establish decisive objectives

6. Rate and rank your “SWOTs”

7. Match your internal and external factors to identify strategic alternatives

8. Select specific strategies for implementation

Of course, there is one last step: turning your strategy into tactics and game plans, and execute. We won’t get into that in this article.

Step 1. Establish your vision.

People complicate the idea of vision. A vision is simply a story describing how you want things to be in the future. Some people can tell these stories easily — they know exactly where they want to be and what it will “look” like. The Secrets Of Strategy – Part 1 Of 2

Others need help. The best approach is to answer a series of questions regarding what your organization does, who are it’s clients or beneficiaries, what its impact is, how big it is, where it is, how it operates, when all these things will occur, and so on. As a result of answering these questions, your vision will emerge.

Of course, you may already have a vision. If so, now is the time to insure that it is relevant and powerful.

The test of a good vision is if it inspires; not only you and your management team, but all of your stakeholders: your partners, employees, clients, investors, vendors, lenders, your community, your government-and perhaps the public at large. A great vision inspires, and it also provides direction. Every action you take should further your vision. If it doesn’t, don’t do it. The Secrets Of Strategy – Part 1 Of 2

Step 2. Gather environmental and competitive intelligence.

To develop the best strategies you must understand the world outside your organization. Quantify and qualify, not just absolutes, but trends. And importantly-identify changes in the status quo. Key areas for focus include competitors, technology, market size and trends, your clients’ industry health, macroeconomic trends, availability of key resources (people and materials) government regulations and other political considerations, and changes in demographics and psychographics — like customer taste.

Devise relevant measures for each of these key external areas. For instance, examine your competitors for revenue, profit and market share growth (or decline), product and service changes, shifts in marketing and sales strategy, changes in geographic distribution, strategic alliances, and major customer announcements. The Secrets Of Strategy – Part 1 Of 2

Macroeconomic factors include the obvious such as interest and employment rates and trends, production and consumption statistics, along with finer grained-industry issues such as new home buying-which impacts a wide variety of businesses, or defense spending-which impacts a completely different set of sectors.

Step 3. Take stock of your organization’s strengths and weaknesses.

Now it is time to shine the light on your organization. Examine each functional area looking for strengths and weaknesses. Identify strengths that will help the company realize its vision, and weaknesses that will impede its goals. The Secrets Of Strategy – Part 1 Of 2

The following is a starter list of focus areas:

* Ability to get new prospects (Marketing)

* Ability to get new clients (Sales)

* Products and services, both existing and those in R&D

* Finance or Money, including cash flow, access to capital, revenues, profits, ROI

* Leadership, including values and vision alignment, decisive objectives

* People, including skills inventory, staffing levels, employee loyalty, compensation

Other areas to examine include:

* Client satisfaction

* Client services

* Logistics

* Competitive positioning

* Unique Client Proposition

* Management team

* Administration

Step 4. Select your Grand Strategies.

This “grand strategy” approach is based upon industry/product revenue growth rates. It is specific to a business unit with one major industry and/or product focus. If your business is more complex, you may repeat the process for each focus sector. The Secrets Of Strategy – Part 1 Of 2

First, consider your industry and product sector growth rate. Is it growing or declining?

Second, consider your competitive strength within that sector. For this analysis Competitive Strength has two components, the size and trend of your market share, and your organization’s financial strength; specifically either cash flow from operations, or access to capital.

To simplify: strong market share + strong finances = strong competitive position. Either strong market share or strong finances = average competitive position. Neither strong market share nor strong finances = weak competitive position.

This defines a two-by-three matrix of strategic choices from which to select your grand strategy.

The exact choice you make will be dictated by the specifics of your situation: sector strength and competitive strength, along with your stated vision and purpose. Choose from the list which best describes your business:
Strong sector, strong competitive position

This means that you are in a growing market, hold a commanding market position, and have cash with which to maneuver. Your strategic choices include:

* Market strategy to increase demand and sales for existing products and services, in existing and new markets

* Marketing strategy to increase market penetration for existing products and services and capture greater share

* Enhance or extend existing products and services; add-ons, backends, strategic joint ventures

* Gain control over distribution – bring external sales inside. Take sales from distributors

* Gain control over suppliers Acquisition, merger, or joint-ventures with competitors

* Develop strategic partnerships to increase distribution, or gain new products

* Develop related products and services for existing customer base – backend strategies

Strong sector, average competitive position

Here you are in a growing market, but have either a commanding position, but limited cash-or vice versa. The exact choice available to you depends on your situation. You can:

* Seek underserved niches: move into small, defined and profitable markets

* Marketing strategy to increase market penetration for existing products and services and capture greater share

* Enhance or extend existing products and services; add-ons, backends, strategic joint ventures

* Strategic partnerships – seek products/services for existing customers

* Exploit assets via joint ventures and host-beneficiary relationships

* Develop related products and services for existing customer base – backend strategies

* Increased marketing penetration via distributors and 3rd parties

* Get more money: raise capital via debt or equity

Strong sector, weak competitive position

You are in a strong sector, but have relatively small market share, and limited or no cash. Your choices include:

* Seek underserved niches: move into small, defined and profitable markets

* Marketing strategy to increase market penetration for existing products and services and capture greater share

* Strategic partnerships – seek products/services for existing customers

* Develop products and services for existing customer base – backend strategies

* Sell your client base to a competitor or cooperator; or reposition your existing products to appeal to new customer types

* Sell the product line and use cash to reposition remaining assets

* Sell the company

Weak sector, strong competitive position

In this case, you dominate a weak market and have cash to exploit your position. You should:

* Add related products and services for existing customer base – backend strategies

* Add un-related products and services for existing customer base – backend strategies

* Add new products and services for new customer base

* Create joint ventures in unrelated markets

Weak sector, average competitive position

You are in a mediocre position in a weak market. Depending on your exact circumstances, you can retreat, use what’s left of your cash to buy your way out with new products, or try to enroll a strong partner. Choices include:

1. Reduce costs however you can

2. Add related products and services for existing customer base – backend strategies

3. Add new products and services for new customer base

4. Seek to dominate the smallest definition of your market using low-cost / no-cost strategies

5. Create strategic partnerships and joint ventures

Weak sector, weak competitive position

Sorry to say, you are in a bad place. In a word — retreat! You can do this by:

1. Reduce costs however you can

2. Sell product line

3. Sell company

If you don’t want to liquidate, seek to expand your marketing using low-cost / no-cost marketing strategies – but this may be a losing proposition

Also, as above, attempt to create strategic partnerships and joint ventures, but it may be difficult to attract partners to a market with poor fundamentals. At this point you might say, “…sell the customers? Sell the company? No way. I’m holding on.” That just isn’t a strategic point of view. The Secrets Of Strategy – Part 1 Of 2

Strategy says you can make more money doing something else — so you best start thinking about it.

In general, these choices are listed from most attractive to least. Your organization’s best choices will be based on your particular circumstances.

By now you have formulated a vision, gathered analyzed your external environment and organization, identified relevant strengths, weaknesses, opportunities and threats, and begun to zero in on a grand strategy. That should keep you busy for a while.

In The Secrets of Strategy, Part II, we’ll complete the process.

Remember-you don’t need a strategy. But having one increases your chances of generating the greatest profits from your resources. After all, that is the whole point of strategy.

(c) Copyright Paul Lemberg. All rights reserved