By David Edmunds, Financial Analyst
Last month we started our 2020 planning series by focusing on your business direction, basically where you want your business to go.
Converting your 2020 business goals to outcomes will require a clear plan on how that is to happen, which brings us to strategy.
A strategy is the “how” in your business model; how you generate value for customers and how that success is able to generate profits for your business. Without a successful strategy, it is very difficult for a business to have long term success and returns above that attributable to your labour effort.
If your business strategy could do with a refresh, consider working through the following:
1. Draft a strategy statement
A strategy statement is a short, guiding statement which covers off on the following three elements:
An overarching Goal – not goals plural, successful strategies have one overriding goal. It is critically important this is exactly where you want to take the business and what you want it to become. Often this will be turnover, market share or profitability based. The goal needs to be tangible and specific.
Scope – The importance of a clear scope is as much about where you are targeting to be successful as where you are content not to be, accepting that trying to appeal to all potential customers is unlikely to be particularly appealing to any. A clear scope will have identified:
- The type of customer you’re trying to appeal to. Can you describe in detail your ideal client?
- What you are offering to them. Your business may have a range of capabilities, but what are the offerings that will most contribute to you achieving your overarching goal?
- The geographical markets you are targeting.
Competitive advantage – This needs to be more defined than “great customer service” or “product reliability”. Consider the key criteria customers have when deciding whether to buy from you or a competitor. Of these criteria, what is your business very good at? What options are there to improve that even further? The more these advantages can be embedded into your operations the more difficult they will be for competitors to copy. This could include exclusive supplier agreements, the product designed uniquely for a customer demographic or operational efficiency driven by superior processes and staff recruitment and training.
A strategy statement might seem a little clunky to make an internal feature of and share with staff members but can have the power to really align behaviour and future decision making, which will be critical to achieving your business plans.
2. Test your strategy’s sustainability
As part of this process, it’s important to have very honest conversations about whether your strategy is better than your competitors, and from there, whether it justifies paying a premium because of this. There must be a conviction that the approach chosen will have the ability to gain market share.
Working hard is unlikely to be enough. Invariably someone will be willing to work just as hard as you. That may even be a staff member, who if seeing little strategic protection to your business model could be willing to have a go themselves. These are tough questions to ask, but it is easier to try and answer them than deal with the consequences of not addressing them.
However deep you dive into a strategic process, having a very clear understanding of where you want your business to go, what your great at and who can best benefit from this will serve you well.
If you missed the last part of the series on business planning, click here.