DEVELOPING A STRATEGY
The pragmatic way companies develop a great strategy is through a series of leadership workshops supplemented with research, analysis, and often surveys. Workshops work on many levels. They help develop the collaborative problem solving and decision-making of a leadership team. They create better strategies given the relevant and complementary perspectives different leaders bring to the table. And, they invest the leadership team in the strategy.
For most companies strategy comes down to focus; focusing the elements of their business model on what matters, what will drive value for their customers, what will drive competitive differentiation, and focusing the organizations’ activities and initiatives to drive a step-function improvement in ROI. Developing a strategy is often more about what you are not going to do, so you can free up resources to focus efforts on what matters.
THE FOUR KEY STRATEGIC QUESTIONS IN DEVELOPING A STRATEGY
A series of leadership problem solving workshops focused on answering the following key strategic questions leads to great strategies:
- What context is important to our future in terms of our business, industry, and competition?
- Which customer segments in which markets and geographies can we drive significant value with our products and services and how do we ensure we competitively differentiate our value proposition and optimize the efficiency of our go-to-market for our target customer segments?
- What are the 3-5 major strategic pillars of our strategy?
- What is the portfolio of strategic initiatives and how do we ensure we have the right resources and governance to accelerate our capability to drive strategic change?
As a leadership team progresses through the series of workshops, the fidelity of their strategy sharpens as the team problem solving becomes more insightful and produces better answers. While there is a progression through the four key strategic questions, it isn’t simply a linear progression, progress loops as previous answers become stronger with more context and problem solving to new questions and topics.
ANSWER THE QUESTIONS TO UNLOCK YOUR BUSINESS MODEL
The ultimate goal of these workshops is to answer the key strategic questions which will ultimately crystalize a company's business model strategy comprised of:
- Mission & Vision
- Targets– market, customer, geography
- Value Proposition – products, services, pricing
- Go-to-Market – sales, marketing, distribution
- Organization – functions, people, processes, technology, partners
Companies have strengths and weaknesses across their business model. They may be dominant in a certain geography and market with room to expand, but not focused enough on the right target customer. They may have strong aspects of their value proposition but need to drive better value versus the competition for the right target customers to unlock growth. They may be good at converting and growing customers but lack the top-of-funnel strategy to drive step-function sales growth. They may have a strong team and culture, but not the processes and technology to drive next-level efficiency and effectiveness. Inevitably, strategic planning is about unearthing the strengths, weaknesses, and opportunities of a company’s business model and prioritizing the goals and actions necessary to unleash the company’s growth potential.
The good news is many of the answers to the key strategic questions are already within the minds of the leadership team they just need to be revealed, developed, synthesized, and prioritized through collaborative problem-solving workshops. So, let’s move on to answering the four key strategic questions.
Question 1 - What context is important to our future in terms of our business, industry, and competition?
The first question leadership teams answer in workshops often supplemented with our strategy leadership survey is “what context is important to our future in terms of our business, industry, and competition?”
In essence, we create a rough heat map and high-level critique of all the business model elements – mission, vision, targets (markets/competition, customers, geographies), value proposition (products, services, pricing), go-to-market (sales, marketing, distribution), organization (people – culture, structure, employee journey, etc., processes, technology, partners). We collectively develop an understanding of what’s working, what’s not working, what needs focus, what needs fixing, what major trends the business can capitalize on or will negatively affect the business, competitive dynamics, etc.
The strategy leadership survey is a great way to jumpstart answering this question because each leader answers a series of questions about each element of the business model. It introduces them to a common language around strategy and forces them to holistically think about strategy and each element of the business model. The survey uses mostly open-ended questions, so each leader must reflect and compose their thoughts. The results are then synthesized to provide rich context about the business, industry, and competition and it serves as a great start to the series of strategic planning workshops. The results produce great hypotheses and highlight where there is alignment and misalignment on key strategic topics across the business model, competition, and industry, which helps prioritize the workshop problem solving. For those companies looking for insights about and from the entire organization, we deploy the employee strategy survey which is effective in creating a deep understanding of the strategic opportunities within the organization while creating new ideas and hypotheses.
To reveal and refine the important context, we also employ strategic tools including SWOT Analysis, Porter’s Five Forces, Adoption Curves, PESTLE Analysis, the One-Page Business Model, and others. The output is an evaluation of the business model elements in terms of what is working and what needs to be improved. Once you get a rough outline of the business model, we typically move on to the meat of any business model which is better defining the target customers, markets, and geographies to compete in and the value-improvement interplay between those targets and the value proposition and go-to-market, which leads us to the next key strategic question.
Question 2 - Which customer segments in which markets and geographies can we drive significant value for and how do we ensure we competitively differentiate our value proposition and optimize the efficiency of our go-to-market for our target customer segments?
I know, the question is actually three questions, but they are all interrelated and need to be answered together. The more focused the customer segments, the easier it is to understand their needs that if addressed through an improved value proposition will drive more value for them, the more ROI you can drive through a focused go-to-market strategy with effective messaging through the right marketing and sales channels and distribution, and the more you can tailor the organization’s people, processes, technology, and partnerships to better align with the target customers. Companies that get these three elements (target customers, value proposition, & go-to-market) right and aligned drive incredible synergies which translate into value and growth.
We often find clients are not focused enough with their target customer segments, which leads to a host of strategic issues and a lack of synergy between business model elements. Most companies can fuel their next growth phase by simply focusing their efforts on growing share within one or two target customer segments.
Imagine a $20 million customer analytics software company with a good product, and decent growth but no customer focus. In analyzing their customer base, they discover banks and credit unions are more profitable, easier to sell to, and derive a lot of value from the software. They decide to focus their strategy on banks and credit unions. They develop a product strategy to address more use cases for banks and credit unions and create competitive differentiation. They begin focusing all their sales, marketing, and partnerships on this customer segment and begin to improve the ROI throughout their sales funnel. They focus on hiring people throughout the organization with financial experience, who talk the talk and understand the unique needs of banks and credit unions. Within a few years, they double in sales and are on a new trajectory of growth with a competitive advantage and room to grow within their existing competitive space or into new markets, customer segments, or geographies.
The strategic growth equation of most successful companies begins with focusing on target customer segments and aligning the rest of the business model to drive more value in a financially superior way than competitors for those customer segments. In working with clients, answering this question is when the creative sparks begin to fly and leadership begins to coalesce around a vision of what could be.
Our workshops addressing this question are often supplemented with research and analysis around current and potential customer segments, markets, competitive dynamics and benchmarking, sales and marketing funnel performance, and product and service benchmarking. In some cases, we execute a customer survey to create a robust fact base on customer needs and profiles, competition, product and service benchmarking, and their customer journey through the sales and marketing funnel. This fact base serves as the foundation for decision-making in narrowing down to the right customer segments, prioritizing the product and service roadmap to maximize customer value and company growth, and crystalizing a high-ROI go-to-market and customer journey strategy.
Question 3 - What are the 3-5 major strategic pillars of our strategy?
Strategic pillars are the big blocks that the company will focus on over a few years such as “create a surround sound sales and marketing campaign for customer segment A”, “productize our service offering”, “develop a new world-class product offering”, “expand into geography B”, or “execute a lean transformation of our customer journey and operations.” Strategic pillars must be at the right level of specificity for teams and functions to be able to develop their strategies, plans, and actions around.
During this phase, we also develop the BHAGs or “Big Hairy Audacious Goals” of the company. These BHAGs can be around revenue (i.e., “double revenue in 3 years”), competition (i.e., “be the unequivocal leader in our market in 4 years”), customer (i.e., “amass 100,000 customers over the next 3 years”), or anything else that is measurable, has a 3+ year time horizon and will inspire and energize the organization to reach and achieve. You want to make them big, hairy, and audacious enough that they inspire people to think differently and energize them in a way the culture has never had before.
The strategic pillars are the big things a company needs to do to drive sustainable profitable growth. Some of the 3-5 strategic pillars are self-evident from the first few workshops, while others take a while to coalesce. We often find our clients typically create a long list of potential initiatives and action items that we collaboratively synthesize into the larger strategic pillars.
Clients often initially struggle with the magnitude of action items that need to be done to realize their strategy, but once they realize it is about sequencing the action items over time and starting small with the goals to develop the strategic change capabilities, they build the confidence they and their teams need to execute.
Question 4 - What are the goals over the next year and strategic plan of initiatives and how do we ensure we have the right resources and governance to accelerate our capability to drive strategic change?
Once we have the 3-5 strategic pillars then we move into developing the next level of a strategy which are the goals and strategic plan of initiatives. There are a few things we are trying to solve for during this phase. First is building the internal capability for developing and executing a strategic plan. Second, given the client's capabilities, what should the goals look like over the next year, and the strategic initiatives to achieve those goals?
We often work with clients whose leadership team has been more focused on “working in the business” than “working on the business”. Strategic execution is a muscle companies typically need to train and develop. As we work with clients, we get a good sense of the capacity for change and strategic execution. This plays into how we think about a client’s first year of initiatives. We work with clients to scope out and sequence initiatives in a way that will give them the momentum of success they can build upon in preceding time frames. We work with them to identify people internally and the external roles they need to hire to champion the necessary strategic change.
As we think about goals and strategic initiatives, we do it within the context of the strategic change capabilities of the client. The evolution of working more on the business than in the business is one of the most difficult journeys for a leadership team. As we develop the goals and strategic initiatives over the next year, we often utilize the prioritization matrix and start with the high-impact and low-effort initiatives to develop execution momentum and, in turn, we keep the goals manageable. While some large or capital-intensive initiatives necessitate a time horizon of more than one year, most initiatives we develop with our clients aren’t longer than one year. This gives them a clear time frame to execute and see how far they can get. During the next few years, the strategic pillars don’t change, but the initiatives and pace of execution do change.
As a client’s strategy solidifies into a clear plan, we also work on the messaging and marketing of the strategy to the broader team and important external constituents. A strategy is a pitch to a company’s employees to get on board and be a contributor to the strategic execution. You need to have convincing and compelling language and messaging and a variety of ways to consistently communicate it, including all-hands meetings, internal website, FAQs, emails, office posters, tchotchkes (e.g., coffee mugs, mouse pads), offsites, coffee chats, virtual chats, team meetings, performance reviews, and any other creative way to drive the messaging.
A good strategy is only as good as the ability to execute it. The translation of a strategy’s words and images to purposeful action differentiates great companies from everyone else. We work with clients to ensure they have the right people, decision-making, accountabilities, cadence, plans, and governance to accelerate the execution of a strategy and the realization of their vision.
Developing a strong strategy takes a ton of collaborative problem solving with a leadership team. If you are looking to develop a strong strategy and would like some help with your strategic planning process, workshops, research, analysis, and putting it all together, set up some time with me to start game planning.
All the best in your journey,