Strategy development is more about ambiguity than it is about risk.
Both courage and risk appetite are required to establish a good strategy and to play to win. However, people also need to deal with ambiguity in a productive way.
Strategy is about making choices.
To win, companies must choose to do some things and not others. This helps focus and simplify the strategy.
Strategy is about increasing the odds of success.
There’s no such thing as perfect strategy. The future is unknowable and all we can do is think in logical ways that increase the likelihood of success.
Making a successful strategy combines rigor and creativity.
Strategy should be creative and scientific; effective strategy development involves generating and testing hypotheses. Making choices with rigor increases the probability of success. Strategy is the iterative process.
Strategy is a coordinated and integrated set of 5 choices
- A winning aspiration
- Where to play
- How to win
- Core capabilities
- Management systems
A winning aspiration
- Craft with the consumer explicitly in mind, guard against marketing and product myopia
- Look at all competitors, not just those you know best, what are they doing strategically and operational that is better than you? Where and how do they outperform you? What could you learn and do differently?
Where to play
- Narrow the competitive field to
- Consumer segments
- Distribution channels
- Product categories
- Vertical stages of the industry
- Against which competitors (who are you winning with and against)
- Plan for your competitors’ reactions to your initial choices and think multiple stages ahead
How to win
- Create unique value and sustainably deliver that value
- A choice about how a business will win on its chosen playing field. What’s the organization’s competitive advantage? Does it compete on low cost or differentiation?
- There can be only one low-cost player in any industry, Alternative to low-cost is differentiation – offer products or services that are distinctively more valuable and at the same time able to do so with approximately the same cost structure that competitors us
- Differentiate in
- Product design
- Product performance
- Distribution and so on
- Integrated and mutually reinforcing set of capabilities that underpin the where-to-play and how-to-win choices
- Understand your existing core capabilities
- May need to generate and invest in new core capabilities to support w-t-p and h-t-w choices
- P&G believed it could win through
- Consumer understanding
- Brand building
- R&D and innovation
- Global scale
- Go-to-market ability via strong partnerships with both suppliers and customers
- Systems that create, review, and communicate the strategy
- Strategy dialogues
- Innovation program reviews
- Brand-equity reviews
- Budget and operation plan discussions
- Talent assessment & development reviews
- What gets measured gets done. Specificity is crucial. These measures should span financial, consumer and internal dimensions.
- To deliver its low-cost value proposition, for example, Vanguard must have a management system for monitoring and controlling costs.
4 Steps of How to Win
- Industry – distinctive segments, structural attractiveness of each segment (Porter’s 5 Forces)
- Customer Value Analysis – understand the consumer value equation, truly get to now your consumers through ethnographic study– to engage with them beyond the quantitative survey, through deeper, more personal forms of research – watching them shop, listening to their stories, visiting them at home to observe how they use and evaluate your products
- Relative Position – how do your capabilities stack up, how could they stack up, degree to which organization can achieve approximate cost parity (matching prices with the market leader)
- Competition – competitive response that could undermine or trump the strategy
7 Steps to Strategic Decision Making
- Frame the choice – what are different ways of resolving this problem?
- Generate strategic possibilities – express as narratives or scenarios
- Specify conditions – what would have to be true for each possibility to be a terrific choice
- Identify barriers to choose – which conditions are least likely to be true
- Design valid tests – what tests must be performed in ways the entire group will find compelling?
- Conduct Tests
Procter & Gamble applied strategy cascade
Remember the answers to 5 questions must reinforce one another.
6 Common Strategy Traps
- Do-it-all strategy – failing to make choices, making everything a priority
- Don Quixote strategy – taking on the strongest competitor first, head to-head, pick somewhere where you have a chance to win
- Waterloo strategy – starting wars on multiple fronts with multiple competitors at the same time. If you do everything, you’ll do so weakly.
- Something-for-everyone strategy – trying to all consumer or channel or geographic or category segments at once.
- Dreams-that-never-come-true strategy – high-level aspirations and mission statements that never get translated into concrete where-to-play and how-to-win choices, core capabilities and management systems. Remember aspirations are not strategy.
- Program-of-the-month strategy – settling for generic industry strategies in which all competitors are chasing the same customers, geographies and segments in the same way
Best practices for applying strategy cascade
A core group should drive the process and solicit input from key stakeholders.
Have one individual as the steward of the process, as well as a core group to run the process. This group should reach out to everyone who will influence the organization’s ability to turn strategy into action.
Amount of time spent on strategy development depends on each unique situation.
In some instances, decisions must be made quickly and it’s possible to do so because the organization has a logic with which it feels comfortable. In other cases, a new strategy must be presented to the board and considerable data and analysis are required to buttress the underlying logic.
No strategy lasts forever.
Strategy is an iterative process in which all the moving parts influence one another and must be considered together.
All strategy entails risks.
Remember specific is crucial. No decision is a failure of strategy.
Aspirations are not strategy.
Mission and vision statements alone aren’t enough.
6 Telltale signs of winning strategy
- That looks different – means you’re attempt ion to deliver value in a distinctive way
- Customers adore you, and non-customers see no reasons buying from you – means you have a niche.
- Competitors make a good profit doing what they’re doing – means you know where-to-play and how-to-win choices and you’re not attacking the hear of your market to survive
- More resources to spend on an ongoing basis than competitors have – means you’re winning the value equation and have the biggest margin between price and costs and biggest capacity to take opportunity or defend your turf.
- Competitors attack one another, not you – means you look like the hardest target in the broadly defined industry to attack
- Customer look first to you for novel solutions – means you’re uniquely positioned to create value.