What Is a Strategy?
A company strategy is the unique formula for success that forms the foundation of a business plan as well as serving to govern day-to-day operations. This strategy is not a business definition and summary of pertinent markets, but instead, it is an account of the one or two key factors that distinguish the firm from its competition and are most expected to contribute to the firm’s long-term success.
To be most effective, a company’s strategy should be no longer than one page. For most businesses, a single sentence would be ideal. The strategy should be easily and frequently communicated to employees so that a cohesive business focus is always maintained.
Why Develop a Strategy?
All firms, from one-person start-ups to global conglomerates, should have a strategy. Following a good, distinctive strategy will ensure that a business builds, maintains, and continually strengthens a specific identity in the marketplace.
The strategy will become the nucleus around which an annual business plan is developed. It will also form a framework for helping to consider mid-term deviations from the plan. In addition, it will help set a consistent direction for key functional areas. A good strategy should endure year after year, and hence will tie together one year’s business plan to the next. This will enable the company to easily build upon the accomplishments of the previous year.
Without a clearly defined or closely followed strategy, companies of all sizes tend to lose sight of their direction when they run into temporary difficulties, or when management just gets bored operating “the same old business.”
Why You Can’t Copy Your Competitors’ Strategy
I see entrepreneurs not just frustrated (and often downright depressed) but also baffled when they have disappointing results right out of the gate. Often they think: It seems like I’m running my business the same way the competition is, but it just isn’t working! Well, guess what? That’s just the WRONG way to be running any business, and for a new business it can be the kiss of death!
A new business has to start from scratch to get new customers, gain credibility, and build momentum. It can’t just depend on copying someone else’s business model. To ensure success, you must somehow be not just better but also different—different in a way that matters to some potential customers.
Remember, a new business doesn’t just have to attract customers—it has to lure customers away from existing businesses. That might require a highly distinctive product or service, an especially attractive offer, or some very aggressive marketing. Sometimes it requires all three.
Drifting Away from Your Strategy
It is amazing to me to see so many very small businesses, after having had a few moderately successful years, adding completely unrelated product lines or services to their agendas that only muddy their identity. This tactic signals customers that the management has no clue as to what the nature of the business really is. What would you think if your favorite ice cream parlor began offering a full-service dinner menu literally overnight? Or if the local boat dealer suddenly decided to devote 50 percent of its floor space to lawn mowers? You’d think they were confused, right? I have seen real-life examples of both of these specific business transitions.
No one business type is immune from this appalling lack of strategic discipline—not “mom and pops,” not large corporations, not start-ups, and not established businesses. But, whether your firm is large or small, new or established, having a strong strategy and staying with it can make all the difference in the world.