STRATEGY IS DECIDING WHAT NOT TO DO
By Tim Williams, Ignition Consulting Group
Upon his return to the company he founded, Steve Jobs’ first executive action was to announce that Apple would scrub almost all of the 300+ projects currently under development and instead focus on no more than four. In an intense work session with his core team, he stood at the white board and drew a simple matrix consisting of four squares: two representing the home computer market and two for the business market. Apple would immediately discontinue its misguided and unprofitable foray into diversification and instead do just a few things well — really well.
The results of this simplification of strategy speak for themselves. By narrowing instead of expanding, Apple started down the path to becoming the most valuable company on the planet. Even at its present market value of $760 billion, Apple has only 200 or so SKUs (compared with HP’s 15,000 SKUs and a market value of just $30 billion).
One Apple executive who worked closely with Jobs at the time reported that “Over and over Steve talks about the power of picking the things you don’t do.” Jobs’ own observation was that “The way we’ve succeeded is by choosing which horses to ride very carefully.”
Strategy = Trade-Offs
The counterintuitive truth about business strategy is that it’s mostly about deciding what not to do. Contrast that with the experience most of us have had at the ceremonial “offsite strategic planning session” which typically results in a very long list of things the firm should start doing — new services we should offer, competencies offered by competitors that we need to match, new functions and disciplines we should add, and a multitude of ways we could grow and scale the company.
There is certainly value in blue-sky ideation and prototyping new ideas for the future. But as marketing professionals we must keep in mind the maxim proffered by the iconic David Ogilvy: “The essence of strategy is sacrifice.” Another way to frame this idea is through the lens of trade-offs. If a retailer decides they want to be known for superior sales help in well-furnished stores, they’re trading off the ability to also be the low-cost leader. Writing in the Harvard Business Review, authors David Collis and Michael Rukstad state simply, “The trade-offs companies make are what distinguish them strategically from other firms.” In effect, your trade-offs are your strategy.
Decisions, Not Plans
Even if you have a “strategic plan,” you may not have a strategy. Creating a comprehensive 30-slide “plan” is comparably easy when contrasted with the critical thinking needed to craft a bona fide strategy. A plan can be (and usually is) fairly long, whereas a good strategy is short. The essence of your business strategy should fit on one sheet of paper, as follows:
1. SETTING: What are the main dynamics of the current environment in which our firm competes (considering both direct and indirect forms of competition)?
2. CONSTRAINTS: In creating a unique story about our firm, what are the primary challenges or obstacles we must overcome?
3. OUTCOMES: What outcomes or results are we trying to produce with our strategy?
4. STRATEGIC FRAMEWORK: What is the specific position we’re attempting to occupy in the marketplace? Describe this strategy as:
“For (Who), we (What) by (How) because (Why).”
Who = The specific type of client we are targeting (inspired by industry categories, market segments, types of audiences, etc.)
What = The unique solutions or benefits we provide to these clients
How = The distinctive way in which we deliver the above (inspired by philosophies, approaches, methods, etc.)
Why = The underlying motivation for what we do; our purpose as a business
5. SUPPORTING IDEAS: For each of the major dimensions of our strategy, what can we offer as proof points, examples, or supporting ideas?
Vetting and Validation
Once you and your team have made the strategic decisions and committed to the accompanying trade-offs, vet your strategy by asking these three questions:
- Does it help us say no to the wrong prospects? Does our strategy provide us with a litmus test for selecting clients that want us for what we do best? A strong yet narrow focus makes our firm very attractive to a very specific target customer.
- Does it create strong barriers to entry? Does this strategy create boundaries that make it difficult for competitors to enter our space and do what we do? A unique strategy is, by definition, difficult to copy.
- Does it result in fewer competitors? By focusing on this strategy, do we have fewer direct competitors — other firms who say they do the same thing or serve the same market? An effective strategy puts us in the waters of the “blue ocean” where we have the potential to create something that's never existed before.
Remember, the ultimate strategy is to be in a category of one.