Strategy is far more than an often shelved business plan or simple
reflection of where the business ought to head and how to get there.
It’s a rigorous analysis that can take your business from limping to
leaping.
Strategy is far more than an often shelved business plan or simple reflection of where the business ought to head and how to get there. It’s a rigorous analysis that can take your business from limping to leaping.
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Entrepreneurs can easily become consumed with the day-to-day issues of running their enterprise, such as payroll, handling complaints and operations. However, being focused on survival leaves little time to look ahead, which can make defeating obstacles and adjusting to market changes difficult. Strategic analysis is necessary to pull the resources of the company together and create a competitive advantage that will fuel profit. For pizzerias, this is particularly useful in figuring out what makes their product unique in their marketplace.
“Strategic thinking is really important for determining what is your point of differentiation, what the market wants and your unique value proposition,” says Kristina Bovay, a business specialist and principal of Voice Marketing Inc. in Vancouver.
What is strategy?
In the book Strategy Safari: A Guided Tour through the Wilds of Strategic Management, authors Henry Mintzberg, Bruce Ahlstrand and Joseph Lampel describe strategy as the process of concept attainment in a person’s head at its most basic level. It’s a plan, a pattern, a perspective and a ploy that involves thinking as seeing. New angles and solutions can be found when one goes beyond looking ahead, above, below or behind the problem to seeing beside and through it.
Mary Crossan, a professor of strategic management at the Richard Ivey School of Business at the University of Western Ontario, describes strategy as the step beyond the big-picture vision. “It’s the roadmap that says, how am I really going to do this?”
A strategy is different from a business plan. Most people’s business plan is a marketing plan, explains Crossan, because a business plan is often a tool for selling to investors as opposed to something rigorously done to help your business strategically. Strategy is rooted in being able to the answer the “why” behind the decisions.
“You can say you’re making five big investments this year – that’s a plan. But why those and not others? You have to anchor the strategy question to the annual business planning,” says Crossan. She adds that strategy can be difficult to wrap your head around because there are lot of concepts of strategy out there that are weak and one-dimensional, making it difficult to build on the information.
How do I begin thinking strategically?
There are four main aspects to sizing up the business when forming strategies, describes Crossan. First the goal of the strategies must be decided in areas such as finances, profitability, ROI, how the business is run and employee satisfaction. Secondly, the product/market scope must be analyzed by determining what services and to what segments of the market will the product target. Thirdly, the core activities need to be looked at in the form of “how are we going to deliver?” This analysis combines the goals plus product/market scope into how things are set up. Lastly, form a value proposition. “What are you intending to deliver to the market and how will the consumers define it? You want to deliver gourmet pizza to the market but will your consumers define it as that?”
This four step process will help reveal misalignments between the goals and actualities of the business. There are several factors that may prompt a need to review or change strategies, such as a new competitor in your neighbourhood or issues in the supply-chain, but “lots of businesses, without any change in the economy or marketplace, will find they are not running as intended, that things are misaligned and new strategies are called for,” says Crossan.
Crossan warns against underestimating what it takes to do the required analysis of a business. It can be worthwhile to bring in someone to help facilitate strategic planning by assisting in ranking and prioritizing what the business owner really wants to achieve in the end. A strategy expert can help in developing strategic alternatives, so you have a plan a, b and c, as well as a full visualization of the strategy.
“Do you know what 30 per cent growth in a year looks like? Do you know what doing nothing in the face of new competitors looks like?” says Crossan. These are the types of scenarios that need to be fully fleshed out. When you begin thinking more clearly, you will have a better mindset for picking up on events in the environment that will have consequences for your business that you otherwise may have missed, she adds. In effect, you are developing a scanning capability.
Challenges to strategy development
Crossan outlines three basic concepts that serve as obstacles to businesses developing strategies.
Understanding what knowledge they need to formulate a sound strategy. A lot of work goes in to it. You need to know what kind of analysis is required. It’s a lot of work and it’s not a business plan.
What are the significant choices? Alternatives are not necessarily obvious and the tough choices that exist in your businesses require know-how and insight.
Realizing that there is no perfect solution. It’s a matter of the individual’s penchant for risk. There will always be some misalignment in the business.
You may know that you need to make changes in your business and be facing resistance in moving ahead. In Strategy Safari, the writers conclude that the entrepreneurial mode of strategy is characterized by centralized power with the leader. Strategy making is often characterized by big leaps of faith in the face of uncertainty with growth as the dominant goal. “Sometimes the organization is inflexible to deliver,” says Crossan, adding you often see this in family businesses, particularly when individuals just won’t want to change the way things are done. “Or, entrepreneurial organizations often have big visions and strategies to support them, but they don’t want to go past the entrepreneurial life and create the professional organizational structure. The management preference is a lean organization running on the seat of its pants, but the strategy is calling for something different, so they limp along and don’t know what the problem is,” she explains.
The writers of Strategy Safari highlight research by I. Bjorkman that outlines what a radical change may look like in the culture of an organization that is resisting.
Big strategic changes are preceded by a widening gap between the organization’s beliefs and the evolving environment.
Current belief systems change and there is a strategic drift that brings financial decline and tension through the breakdown in the ways of doing things.
There is a period of re-formulation that causes confusion, new strategic vision, decisions, and success that may reinforce a commitment in the new way of doing things.
Stablization happens through positive feedback that locks up a commitment to the new way.
Once the business is committed to making the required changes and there is an awareness of how that may play out with as resistance in the culture, management can begin making the required assessments that will lead to new strategies.
Assessing the Situation
First, flesh out the problem using SWOT (strengths, weaknesses, opportunities, threats), advises Bovay. Strengths and weaknesses are internal to the company while opportunities and threats are external. Once the problem has been seen from these sides you can begin to focus on solving the internal weaknesses and the external threats, she adds.
It’s crucial to get past the perception that you are too busy to do the strategic thinking, says Bovay, who has experienced many business owners in her consulting business who feel as though they are. She suggests setting aside 10 per cent of your time each week with a plan of what area of the business you will be focusing on. She suggests getting outside advice if you’re unsure of what you should be working on and that using a table of contents can help. There are many things to think about and it can be tough to focus and prioritize them.
“If you spend an hour a week you’ll get further ahead of your competition as long as you act on it,” says Bovay. “If I had a really limited amount of time and I owned a pizzeria I would focus on where my product is positioned, what my differentiation is and build my marketing around my differentiation, but there are so many areas to focus on.”
“A lot of entrepreneurs come to the programs at Ivey,” says Crossan. “A lot of them just don’t have formal business training. They don’t know what they don’t know. It’s hard to change if you don’t see the need for change or understand what you’re dealing with. The short courses open their eyes and they realize what is holding them back. It’s hard without training to pull yourself up by your boot straps.”
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