What is strategy?

We all have heard and used the word strategy almost everyday in our professional life. But, I found that not everyone truly understand what strategy is or whether what they are talking about is actually a strategy.

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:

  1. 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?
  2. 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.
  3. 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.

A true insight about strategy is valuable to everyone. It helps you to understand the situation, apply the right solutions, execute at the right time, and ultimately deliver the outcome that you want. You have to believe in this one.

Apivut

What I learn from Louis Gerstner

Louis Gerstner was a legendary CEO who saved IBM more than 20 years ago. He wrote a book called “Who Says Elephants Can’t Dance?” I love this book and have read it multiple times now. What do I learn from Louis’s book?

Louis had many interesting and useful management principles that I think would never been obsolete. The ones that I like the most are:

  1. I manage by principle, not procedure.
  2. The marketplace dictates everything we should do.
  3. I look for people who work to solve problems and help colleagues. (Love this) I sack politicians.
  4. I am heavily involved in strategy; the rest is yours to implement.
  5. (Also love this) Move fast. If we make mistakes, let them be because we are too fast, rather than too slow.
  6. Hierarchy means little to me. Let put together in meetings the people who can help solve a problem, regardless of position.

When I struggle at work, I always go back to his book. He is like my mentor.

Apivut

How to incorporate good strategy in a business plan for solo business owners

As a solo business owner, would preparing a business plan be on a top list of your priority? Based on the common challenges for many solo entrepreneurs (aka solopreneurs), preparing a business plan is not something that many solopreneurs do. Why is that? I come up with two main reasons – firstly, the word business plan sounds daunting, i.e. there seems to involve a lot of time-consuming work. Secondly, many solopreneurs think they have everything in their heads. Besides, many think their business models are straight forward – buy or create products and sell those products to someone else. How hard could it be?

Well, I do agree that the word business plan sounds daunting because I also don’t like to do it. However, it is important to have a plan for any business. Even you don’t require funding from a bank, having a plan and even better, a plan with a good, solid strategy, could make your business successful and increase a chance of success in a long term (by the way, did you know that more than 90% of new business failed?). Many sources suggest certain formats for a business plan. The structures are very similar. For example, an Australian Government website suggests having the following format:

  • Title page – This describes what the plan is for and includes general information on your business.
  • Business Summary – A one-page overview written after your business plan is finalised.
  • About your business – It covers details about your business including structure, registrations, location and premises, staff, and products/services.
  • About your market – This is the marketing plan. It should outline your marketing analysis of the industry you are entering, your customers and your competitors.
  • About your future – This section covers your plans for the future and can include a vision statement, business goals, and key business milestones.
  • About your finances – The financial plan includes how you’ll finance your business, costing and financial projections.
  • Supporting documentation – List all of your attachments under this heading in your plan for referral.

Some sources such as National Australia Bank (NAB) suggests focusing more details on a sales and marketing component and including a pricing strategy. I think the bank wants to ensure that solopreneurs are clear about how they generate revenue. 

My formula is slightly different. I am a big fan of having a clear strategy in mind. And, it’s always a good practice to put the strategy in the plan. Why? Writing strategy down is a great way to organise your thinking process. It also means that you have done your homework before you write the strategy down. Below is my recommended structure of a business plan for any solopreneurs.

Executive Summary

Have you heard about an elevator pitch? If you have under 1 minute to explain about your business compellingly, how would you do that? My suggestion is that you include the following components in your pitch:

  • Our business notice there is a gap in [xxxxxxx], and we can offer a perfect product or service to fulfill that gap
  • We will do it by [xxxxxxx]
  • The following will be happening in the next months

Demand Gap Analysis

This is the most important part of my business plan. You have to find out if there is unfulfilled demand in a product or an industry that you are interested in doing business. If you are selling the product that many people are already selling, it would be hard to differentiate yourself from the crowd. I don’t say that it’s not possible, I say it would be hard. In this case, you will have to ask yourself – why would customers want to buy from you? Is it because your product is cheaper or better? How can you tell customers that your product is better?  

Business solution

Once you identify the demand gap, now it’s the right time to explain about your product or service. Below are the good questions that should give you an idea on how to write in this section.

  • What is the product or the service?
  • How is it going to fulfill the demand gap?
  • Are there a number of businesses selling or offering the same product/service?
  • If there are, how is your product/service different from those businesses?

Sales and Marketing plan

This section is to use the analysis from the business solution section above and add how you would tell customers about your product or service. Imagine that no one is aware of your offer. You will have to explain how you will let people know. And, it’s not just letting them know about your product/service. You will have to give them good reasons to buy from you. You also need to think about communication channels. The common online channels to consider are:

  • Social media
  • Email
  • Search Engine
  • Website – to me, it is necessary to have a proper, professional looked website. The first impression is very important.

Financial plan and forecast

Your financial plan and forecast don’t have to be complicated. Chances are you will rely on personal financial sources anyway. What you have to bear in mind though is that you have to split your limited budget in different bucket carefully. The main buckets are:

  • Product-related budget
  • Sales & Marketing budget
  • Contingency budget

Remember this – you should always have enough money as a backup.

Future Plan

You should try to think and explain what could possibly happen in the next two to three years. Of course, you wouldn’t know for sure. However, this exercise encourages you to think beyond the next six months. My assumption is you want your business to last as long as you want it to be, correct? It doesn’t have to be complex. You could only ask the following “what if” questions:

  • What if my customer’s preferences change next year?
  • What if my suppliers increase prices by 10-20% next year?
  • What if there are 5-10 people selling the same product next year?
  • Or, what if my business work so well that I have to add more staff?

I hope the above plan doesn’t sound too daunting. I strongly recommend that if you plan to launch a new business, you should spend a few hours to prepare the above plan. I can guarantee that it will save a lot of your time and money.

Apivut

Execution – it’s a key part of great strategy

You may have heard before that one of the reasons why a strategy doesn’t work is because of a poor execution. In order words, a strategy is great but an execution is not so much. This notion is just wrong. Execution is a key part of a good strategy. When a strategy fails, it’s because the whole thing fails.

I read a book called “Good Strategy/Bad Strategy” by Richard Rumelt. He suggested that good strategy has 3 key components namely – a diagnosis of a situation, a guiding policy, and coherent actions. The last bit, the coherent actions, is the execution. What’s the point of having a strategy if you don’t plan to execute it right?

I just finished the second round of a book called “Who says elephants can’t dance” by Louis Gerstner. And this quote is brilliant – “execution is really the critical part of a successful strategy. Getting it done, getting it done right, getting it done better than the next person is far more important than dreaming up new visions of the future”.

Apivut

Welcome

Be yourself; Everyone else is already taken.

Oscar Wild

Hi…

I am Apivut and welcome to my blog. I was inspired by a marketing guru – Seth Godin – that I should blog every day. It took me a while to do this because I am not confident that I can blog once a day, every single day. I still don’t believe that I can but I should give it a go.

I think my stories might be helpful to other people who have the same interest, mostly business strategy, as I do. I tried to do a few blogs in the past but all failed. So, this time, I won’t have any set rules. I will just write, long or short blog posts depending on what I have in mind. And, in the past, I cared too much if anyone would read my blogs. But, as Seth said, it doesn’t matter if anyone would read your blogs. Writing blog posts helps your thinking process. Let see how it goes.

I work in marketing, in a large hospitality company in Australia. I originally came from Thailand. I didn’t plan to be in a marketing area as I like business strategy. But somehow I ended up in marketing for 20 years.

For whoever that comes across this blog and this welcome post, thank you for spending a few minutes of your valuable times to read or skim through this message. I hope we will communicate in the future.

Apivut