I got a serious interest in strategy when I was studying my first Master Degree. I came across an idea of “managing your desired outcomes”, which I think it’s a fundamental principle of any strategy – personal or professional. If you apply this principle – plan your desired outcome – you will always 1) think a few steps ahead and 2) you will respond, not react. Your life is going to be much simpler because you always know why you do what you do. As my interest in this area grew, I then chose to do a Ph.D. in business strategy. I learnt that there are many tools that help businesses do strategic planning such as SWOT Analysis, TOWS, The Balance Score Card, and etc. The problem is there are so many of them. I really doubt that anyone, apart from those high-fee consulting companies, would know or get benefits using those tools. They are very, very theoretical.
A few years later, I came across two great books that entirely changed my perspective about business strategy – one is Good Strategy Bad Strategy: The Difference and Why It Matters by Richard Rumelt, and the other one is Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant by W. Chan Kim and Renée Mauborgne. I summarised the concept of Blue Ocean Strategy in my previous post.
Why did I like these two books very much?
The first book by Richard taught me about the core principle of a strategy. He suggested that a good strategy needs to have the following three components:
- A diagnosis – what is going on? What is(are) the challenge(s) that you or a company encounter? I find that this is the most important step in any strategic activity. If you don’t understand a problem, how could you come up with a solution?
- A guiding policy – once you understand the challenges, you need to come up with guidance or a direction on how you think you can overcome those challenges. It could mean that you need to add more product features, or you may need to add another product line, or you need to improve your service offering.
- Coherent actions – There is no distinction between a strategy and an execution. You may have heard people saying – oh it’s not working because even though a strategy is good the execution is bad. The execution bit is a key part of your strategy, period. To execute the guiding policy above, you need to design all related / relevant actions.
What’s about the Blue Ocean book? The concept of the blue ocean strategy is to encourage us to stop restricting our thoughts around the traditional competition and industry boundary. The authors call this traditional concept “red ocean” – the trade-off between differentiation and low-cost. The blue ocean strategy argues why we have to choose if we could do both. The question is how and if you could find a way to do it, you wouldn’t have to worry about competitions anymore. The idea is basically to look for gaps or unfulfilled pain points or demands and offer something to close those gaps. In short, blue ocean strategists focus on creating and capturing new demand, not fighting over existing customers.
Having the right strategy for your business is important, and most importantly, it’s not difficult at all.