I recently read a great abstract on Elevate: The Three Disciplines of Advanced Strategic Thinking, by Rich Horwarth. Here are some of the key points.
Mr. Horwarth talks about why business strategy matters, why many companies fail at strategy, what components make a good strategy, and how to strategize.
He defines strategy as “the intelligent allocation of limited resources through a unique system of activities to outperform the competition in serving customers. Resources include time, talent and capital.”
A 25-year study of 750 bankruptcies identified bad strategy as the primary reason businesses fail. Strategy is crucial, but most firms give it neither the respect nor the attention it merits. The Conference Board reports that 70% of public companies that suffer a “revenue stall” will see their market cap drop by more than 50% and that poor strategic decisions account for most of this.
Most executives recognize the need for smart strategic thinking, yet few know how to develop a strategy. Research with 500 managers identified the Top 10 Strategic Challenges:
- Time – Managers suffer excess responsibilities, endless to-do lists, and pressure to deal with immediate tasks and problems. Most lack the time to think strategically.
- Commitment – Employees do not know what a company’s strategic plan is, so they can’t get behind it. The Harvard Business School reports that 95% of employees do not know about or do not understand their organization’s strategy.
- Lack of priorities – Do not give every concern the same weight. Make trade-offs.
- Status quo – Strategy implementation usually requires change. Some employees will get more resources, some fewer, and some will lose the resources they have. Those who lose resources will most likely dislike the strategic changes.
- Not understanding what strategy is – Many people mistake strategy for mission, vision, goals, objectives and even tactics.
- Lack of training or tools for thinking strategically – Many managers lack experience or education in planning or setting strategy.
- Lack of alignment – Large firms have many different constituencies which often don’t operate in sync and sometimes conflict. This hinders executing a unified strategy.
- Firefighting – Executives cannot think and act strategically if they spend all their time putting out fires. They must adopt a reflective “let’s think about that” style.
- Lack of quality or timely data and information – Strategy requires astute interpretation and application of data. It calls for developing quality insights about creating value for customers. Information is the “core of strategic thinking.” Executives who lack access to timely data operate at a strategic disadvantage.
- Unclear company direction – The people at the top must set clear a direction. But some executives don’t want to reveal their plans because they fear providing information to competitors. However, leaving everyone in the dark makes planning nearly impossible.
You need to make sure you keep the big picture in front of you and what your long-term goals are. These three strategic disciplines can help you do this by asking if you are working on activities that are helping you execute your strategy.
These are the three disciplines:
- Coalesce – Bring together the data that your business needs to compete. This data will help you identify key patterns. This data also helps you to recognize key insights about your products, services, markets and customers. One of the keys here is to learn what can differentiate you from your competition thereby increasing your profitability. Big Data is offering new opportunities that never before existed.
- Compete – Develop a strategic system that that gives your company a competitive advantage. Assess your competition to understand how you compare and look for ways to differentiate yourself. Understand your “Who” (or core customer) and what their needs, not wants, are to give your company an advantage. Do not try to be all things to all people, but rather, be selective and focus on what you can be the best at delivering to your market.
- Champion – Lead your team to think and act strategically. Communicate and bring your strategy to life. Everyone in the organization should understand the company’s strategy, and the entire leadership team needs to be fully committed to carrying it out with support from all. Keep coming back to this strategy as you plan long term, annually and quarterly. Look for changes that might have occurred to ensure the strategy is still valid.
Your BHAG can also be a guiding light for your strategy. Make sure it is clear, understood, quantifiable and aspirational.
The most important point your strategy must encompass is differentiation. Otherwise, your offering will be forced to compete on price, not value. A study of 25,000 firms showed that those with the best return on assets did so by differentiating, not lowering prices.
Think about these concepts as you enter your next planning session. Ask the following questions:
Focus on the right things and set the right priorities that help you reach your strategy.
Good luck and strategize well, Alan