Question: How, exactly, do I create my company’s strategy?
Answer: This is a question that drives right to the heart of a successful business or an unsuccessful business.
In my experience very few executives or business owners can honestly answer the question, “Can you summarise your company’s strategy in 45 words or less?” Those of my clients that can answer honestly are usually highly successful. To be effective the strategy has to be clear, simple and easily communicated.
A strategy statement has three basic elements – the objective, the scope and the advantage. It is vital to recognize the true essence of these three components. For example a strategic objective is NOT ‘To maximize shareholder wealth by exceeding customer expectations…’ This is no more than a platitude. It must be the single precise and specific objective that will drive the business over the next 5 years or so. A strategic objective is, for example, ‘To generate at least 15% growth per year in the value of the company for the next 3 years’ – specific, measurable and time-framed.
The second element – the scope – should not only describe exactly what should be done within defined boundaries, it should also specify where the firm or business should not go. For example it is clear that The Body Shop will never stock and sell cosmetics which have been developed through the laboratory testing of products on animals. Ryanair is another example – basically ‘no frills’ air travel. This approach shows how a self-imposed restriction can be of real strategic and competitive value.
Third – the advantage – is the most critical aspect of the strategy statement. This is expressed by stating the compelling reason why the customer should buy from you – essentially your customer value proposition. It also describes the unique activities that allow your company alone to deliver on that value proposition.
Clarity in all three elements is what most helps your team members understand how they can contribute to successful execution of your strategy. As a discipline you should restrict your strategy statement to 35 words
To show that I practice what I preach, this is my strategy statement:
To establish ten new mentoring engagements a year by offering trusted advice and guidance to Thames Valley-based business leaders and executives. They wish to realise their own potential, rather than depend on conventional consultants.
You will see that this contains the three key elements: 1) the objective; ‘ten new …. engagements a year…’, 2) the scope; ‘…Thames Valley-based business leaders …’ and 3) the advantage; ‘… They wish to realise their own potential, rather than…’
I have had many questions on the topic of company identity and strategy, and I will be dealing with them in the coming months.