How To Craft A Killer Business Strategy For The First Time
Made any plans for 2020? Feeling confident about the future? Is there a clear road-map in your business, leading to a new and thrilling destination? If you’ve answered no, you’re not alone. Businesses often come to me with vague ideas about their strategy at best, let alone a killer business strategy. They’re bogged down in meaningless jargon and much of it is guesswork. There’s little research to back up their tactical plans and little understanding of their true competitive position.
Then they tell me they want to grow their business! Impossible! Scaling-up a business without a clear strategy is like captaining a ship without a rudder. There’s no control. You’re constantly buffeted off course by the winds and currents of life.
Maybe you’re worried that strategic planning is too overwhelming and time-consuming? It really isn’t. In my experience, it takes just two days to work it out. Two days to kick-off an entirely new way of thinking and interacting with the world. That’s got to be worth it!
So what’s the process I use? How do you create a killer business strategy for the first time?
1. Start with ‘Who’
Linking in with last week’s blog, I always start by working out Core Customer. Everything else flows from this. Your guiding principle should be, ‘Who are the customers that will buy from us at maximum profit?’ Most of the time, my clients don’t have this. Since they started trading, they’ve attracted a broad array of customers, all looking for different things. This makes it hard to narrow down to the Core Customer that will ultimately drive their growth.
Perhaps it’s a customer segment that buys the fullest range of services or has the potential to do so. We narrow it down to one person who best represents these customers and build a profile of them – what are they trying to do in their business? Do they have a transformational challenge? What insights tell their story? How will they feel when they sign on the dotted line?
Sometimes a SWOT analysis can be useful to dig further into the identity of this customer and their unique problem. This external analysis looks at who else is in the market and also whether the problem you’ve identified is getting bigger or going away. Is there an economic imperative to solving this customer’s issue? There’s no point pursuing something that won’t be profitable.
2. Find your ‘Why’
This is the visceral and emotional connection to why you’re doing what you’re doing. Unless you can articulate why you’re well placed to solve your Core Customer’s problem, and why you care, there’s no emotional incentive. A true sense of purpose will sustain you in the longer term and ensure you attract staff, customers and suppliers who are inspired by your mission.
But this doesn’t have to be about changing the world or saving seals. Quite often, it can simply revolve around creating a product, service or working environment that other people value. Case in point. One of my clients runs an industrial tiling company. He’d started the business simply because he needed a job, but now realises he needs more of a purpose. As we talked about his industry, we realised that none of his competitors ran an apprenticeship scheme, even though there was a shortage of tilers. So he set out to attract young people with an industry-leading programme. He’d built a business that others valued.
3. Work out your destination (and make it thrilling!)
Ah yes – the BHAG (or big, hairy, audacious goal). This is fab. I get to see the fear in my clients’ eyes! What is it? It’s your ultimate destination – the place you could get to in 10, 20 or even 30 years if you follow your core purpose. The place your business could be, long after you have left it.
Jim Collins and Jerry Porras coined this phrase in their book, ‘Built to Last’. They looked at the characteristics of businesses that survived and thrived long term and worked out they had a ‘north star’ that constantly guided them forwards. One example was Citicorp whose first BHAG, set in 1915, was to become the most powerful, serviceable, far-reaching, world financial institution ever. It took them five decades to achieve it. Then in 1990, they re-set their BHAG to ‘obtaining one billion customers worldwide’. They think it will take 20 years to achieve (they’re currently at around 100 million).
At its most powerful, the BHAG is an emotional tool. It should fire people up, inspiring passion, excitement and motivation. Eyes should shine and spines should tingle whenever it’s discussed. The best ones are clear and compelling, requiring very little explanation. It’s about raising your sights and believing in what you could achieve.
As part of this, it helps clients if they can pick a single word that they can own. When I was at Rackspace, we set out to own the word ‘service’ in the context of IT. This fitted clearly with our purpose of ‘Fanatical Support’ and BHAG ‘to be known as one of the world’s great service businesses’.
4. Get clear on ‘How’
OK – so you know your Core Customer, your purpose and your BHAG. Now you need to work out how it all fits together. What do you need at this stage?
- Core Values
These are the definition of your company’s culture. They’re a shorthand way of capturing behaviours that you see as important in your business. Work through Jim Collins’ ‘Mission to Mars’ framework to find them. Once agreed, communicate them throughout your business and reinforce them at every opportunity. They only work if you can hire, promote and fire within them. And don’t forget to always give praise through a values lens.
- Brand Promises
These can be incredibly useful to keep staff in step with your purpose and values. Work through the promises you’re going to make to your Core Customer. To be effective, they’ll need corresponding guarantees that track and measure their delivery.
At Rackspace, our brand promises with guarantees were 1. ‘Zero downtime network’ 2. ‘Answer the phone in 3 rings or less’ and 3. ‘Fix your hardware in under 4 hours’. If we failed to deliver on any of these guarantees, it cost us money. This was at the core of offering an SLA with teeth.
These guarantees were our catalytic mechanisms. Writing for the Harvard Business Review, Jim Collins refers to the power of ‘catalytic mechanisms’. They are systems that will create pain so that when a brand promise is breached, it costs you money. This forces your whole company to come together as it realises that failure is expensive.
- Secret Sauce
Ah – the magic of a secret sauce. This is the hidden ingredient that will help you disrupt your industry. Something that you don’t share with anyone outside your company. The 10x that will get you past traditional bottlenecks in your sector so you can steal a march on the competition.
Good examples are Uber – the world’s largest taxi company that doesn’t own any taxis. Or Amazon Web Services who brought a new cloud computing model to market with no SLAs and no support model. They knew that their industry was traditionally people-intensive so they designed an offering with no service. It turned the whole sector on its head.
5. Nail your ‘Where’
Now get a good handle on where you’re going to play – your ‘sand-box’. At this point, I use Porter’s Five Forces – a simple yet powerful tool that analyses competition and assesses your industry’s profitability. We work through competitors, supplier power, buyer power, threat of substitution and threat of new entry. Then we build a complete environmental picture of the client’s business, using a ‘3HAG’ (3-year Highly Achievable Goal) mapping tool designed by Shannon Susko.
At this point, you can look at exactly where you sit in the context of your customers, suppliers and competitors. And the specific geography of your business. There are often moments of major realisation. One of my clients owns a niche providing IT support to accountancy firms. It dawned on them that they needed to expand their geography rather than their Core Customer. So instead of targeting law firms in the UK, they now have their sights on accountancy firms in Europe.
6. Work out your differentiators
Rather than trying to be the biggest or the best, your strategy should focus on the difference you offer the market. This is where Shannon Susko’s brilliant 3HAG tool comes into its own. By mapping your company’s attributes with those of your competitors, you can find the elusive ‘white space’ that nobody occupies.
This should be the focus of your company’s activities. It becomes your killer differentiation in the market. As part of this, you’ll need to build a good understanding of the buying journey of your Core Customer and the attributes they’re seeking in a supplier of choice.
7. Boil it down to one phrase
Just what it says on the tin. If all of the above is true, how would you describe your strategy in one phrase? This can be deceptively hard. Like Occam’s razor, you need to shave it down to a few words. Once agreed, this will help everyone align around your new strategy.
8. Plan for the longer term
Now start to write the plan for the next 36 months, using 3HAG’s series of financial and non-financial metrics. I get clients to work out what their ‘widgets’ are – the particular units of production or sale that can be tracked and measured to show progress. This could be the number of days, or servers, or customers. Then we build out the 12 quarter plan on a constantly rolling basis. Also important is their ‘profit per x’ – the leading and lagging indicators that make them money and need to be tracked.
From the differentiators mentioned above, we work out ‘swim-lanes’ of activity that are often cross-functional, matching with a customer or employee’s experience of the client’s company.
9. Plan for the short term
Drill down to the nitty-gritty of the next 12 months. Work out overall objectives for the first year and your 90 day themes and goals. When I get to this point, I start with the OKRs (Objectives and Key Results) for the executive team and then broaden it out to the whole organisation.
10. Measure engagement
The final pieces of the jigsaw are my recommendations for metrics around engagement, for both customers and employees. I suggest all my clients introduce Net Promoter Score® as it’s a brilliantly simple way to measure which of your customers are super-engaged (and therefore more likely to refer you).
Also essential, to my mind, are daily KPIs for all staff. This refers back to that all-important first question of the Gallup Q12 survey of staff engagement, ‘I know what’s expected of me at work’. So many things flow from these daily KPIs – they’re like WD40 for your business. Spend time working them out and they’ll pay you back in spades. Nothing is better for increasing productivity, motivation and sheer happiness in your staff.
So there we have it. A whistle-stop tour through how to craft a killer business strategy for the first time. I’ve linked to existing blogs with more information and will flesh out more in future blogs. Watch this space!
Written by business growth coach Dominic Monkhouse. Find out more about him here.