Strategy: How to set your company apart from
your competition and control your destiny
In this module on strategy, we are going to focus on creating unique, insightful strategies, corporate or functional like marketing to help you and your team turn your startups into a business and if you are an established company to accelerate your growth again.
Whenever you talk about strategies you have to define what you mean by a strategy because the word has become so overused and because people confuse strategy with goals, growing your business 20% per year for the next three years is not a strategy, its a goal.
Having a strategy is critically important and often is the difference between a ho-hum business and a spectacular business. Richard Rumel in his book “Good Strategy / Bad Strategy” has the best definition of strategy I’ve seen. It’s simple and it’s practical. He says the “Kernel” (the minimum requirements) of a strategy are:
A diagnosis of the problem or opportunity and from that diagnosis, creating insight to solve the problem or exploit the opportunity.
Then, you need to define the general policy you will use to achieve the goal. This requires deciding what the company will do and what the company will not do. And the will not do is very important because you have to conserve resources and focus on the goal.
And finally, defining the specific, focused, coherent actions you will take to realize the goal. And again because resources are limited.
Southwest Airlines is a quick example of a good strategy. In San Antonio, Texas in 1972, Rollin King was filing bankruptcy on his small regional airline and was being helped by Herb Kelleher, his lawyer.
At the end of the meeting, Rollin said he had a great idea (insight) and drew a triangle and at each point wrote: San Antonio, Houston, Dallas. Rather than running a small airline that served small towns, why not run a small airline that served big cities. They could avoid the Texas Civil Aeronautics Board, which would mean they could operate pretty much as they wanted. They both agreed it was a crazy and brilliant idea.
The general policy was that they would fly short routes into large cities, they would avoid hubs (where the big airlines dropped off and picked up passengers) fly into small airports (like Love field which was more convenient for passengers) They would/could lower fares because of operating efficiencies.
Their cohesive action (it took 4-years to get operational) included hot-pants wearing stewardesses and “free” fifths of Chevis scotch for passengers who purchased full fare tickets.
Today, they are the largest low-cost airline, and in 2018, and they are the only airline that has been profitable every year they have been in business.
To contrast this, J C Penny is an example of a bad strategy. This story also makes another point. This example also illustrates the point that strategies can also be risky. Well. Strategies are hypotheses, and like any hypotheses, they need to be proved and validated.
Remember when J C Penny’s was in trouble, and the board of directors brought in Ron Johnson from Apple (he was an experienced retailer and had designed the Apple Stores (which get the most revenue per square foot of any retail store). His strategy was to make JC Penny stores more like Apple stores.
He made many changes without finding out if his customers liked what he wanted to do. He changed how the merchandise was laid out. Instead of the merchandise displayed in groups, like the boy’s department and the girl’s department, he changed the store layout to be like small boutiques. He also did away with discounts and changed the name to JCP. Then he spent a ton of money remodeling all 1,200 stores in 12 months.
The results were disastrous. JCP customers were not like Apple customers. They liked their discounts, etc. and the board fired him after one year.
A strategy is a simple description of how your company will exploit an opportunity you have identified and do so in a way that captures a significant share of your selected market and at the same time, puts your competitors at a disadvantage in your market niche.
General Policy and Coherent Action
In addition to diagnosis, we also need to look at the other two parts of the Kernel, the general policy, and coherent action. In addition to diagnosing a problem and having an insight into your strategy, it is also essential to have a coherent strategy — one that coordinates policies and actions.
Many companies go after several or many objectives rather than focusing and coordinating their policies against one objective. Your strategy gains strength when it’s focused and coordinated.
Also, once you understand the Kernel (diagnosis, general policy, and coherent action), it is much easier to create, describe, and evaluate a strategy.
The General Policy is for dealing with the challenge. You need an overall approach to deal with or overcome the obstacles identified in the diagnosis, and a set of coherent actions that are designed to carry out the general policy.
This guiding policy outlines the overall approach for overcoming the obstacles highlighted by the diagnosis. It is “guiding” because it channels action in specific directions without defining precisely what will be done. It also directs and constrains action without fully defining its content.
This policy is not a goal or a vision. What the general policy does is define a method of grappling with the situation and ruling out vast numbers of possible other actions. Remember Apple; their strategy was to break with the status quo (computers were for businesses) and empower individuals and their general policy was only to produce well designed and easy to use computers (you had to be a techie to use computers at that time).
This general policy gives you an advantage. It anticipates the actions and reactions of others; it reduces the complexity and ambiguity of what will be pursued, it exploits the leverage inherent in concentrating your efforts, and by creating policies and actions that are coherent rather than responses that cancel out each other.
The third part of the Kernel is coherent action. A strategy is about action. Actions have to have an impact, actions need to be coordinated, and they must build upon each other, and focus the company’s energy. The strategy will determine what actions should be taken.
A strategy is about deciding what is essential and focusing resources and actions on that objective; It can be challenging because focusing on one thing means leaving out others. Remember, you have to think narrow, and own that space first to become more prominent.
Have you been through this process for your company? Even if you have strategies have to be updated as time and technology changes. Maybe its time to re-think your strategy.