How to get clarity on your strategy for 2022
Has Christmas given you some breathing space to think about your business? Maybe downing tools and taking a break has made you realise you’re not heading in the right direction. You don’t want 2022 to be like 2021 (or the many years before it). You want to do something different.
I get it. And it’s the reason our phones ring off the hook in early January. Potential clients pick up the phone, drop us an email, or connect on LinkedIn. They’re looking for coaching support to help them change direction and substantially grow their business.
After some chit chat to set the scene, I go straight for the jugular. ‘Tell me, Mr/Ms CEO. What’s your strategy?’ It’s not unusual to get silence back. ‘What do you mean?’ they eventually reply. ‘Describe your strategy to me in any way that makes sense to you’, I elaborate. And what do they come back with? ‘We want to grow by 10%’, or ‘We’re going to break into America’ or ‘We’re going to launch this new product’. None of these is a strategy. Tactics, ambitions or wants – yes. But a strategy? No.
It’s the difference between playing golf and practising golf. If it’s been your hobby for ten years, it’s unlikely that you’ve got much better at it. However, if you’ve set a goal to reduce your handicap in a certain timespan and broken it down into hitting x number of fairways in regulation and x number of putts per hole, you’ll be well on your way to improving your game. (Our client Callum, MD at ETCH, is a great example here – he’s now playing off scratch due to setting his goals and putting in the work.)
Work out your position in your market
The most important thing to understand about any strategy is it’s all about the position your business takes. Your strategy is a set of long term choices that differentiate you from your competitors. You can chart this position on a graph alongside your direct and indirect competitors. The X-axis is your customers’ willingness to pay – what is it that you do, and how can you change it so that people are willing to pay more for it? And the Y-axis – how can you do what you do for less? These are the only two things that matter. By focusing on them, you’ll position your business through the lens of the problem you’re fixing for your customers. Either you charge more or deliver it for less than your competitors. You have a series of choices around how you’re going to do that now and in the future.
Here’s an example – the airline industry. Do you want to be like Emirates who make all their money through business and first-class? A premium product at a premium price? Or will your business be more like budget Ryan Air, with low pricing per seat and extra charges for any add-ons, however small? Your competitive advantage will come through the profitability of the model you choose. If you’re trying to charge more, you will have a higher cost structure. The output of this should be net profit that you can then compare to the rest of the industry. Once you can see this, ask whether you’re doing it better. Does your strategy give you a higher net profit than your competitors? If it does, you have a sustainable competitive advantage.
Decide where and how you’re competing
Spend time working out your core customer, their needs and which price point you’re going to adopt. Get a clear picture of your competitors now and in the future. You might see a change over time. When I was MD at Rackspace, AWS wasn’t even a thing. By the time I became MD at Peer 1, AWS had emerged and started to change the hosting market completely. So any strategy needs to allow for the changing way your customers might solve their jobs to be done.
Try to stop looking from the perspective of the widgets you supply. You need to think more about the unique value you can offer your customers to solve their problems. It might be how you niche or package your solution or even how you deliver it through partners. Whatever it is, you need a unique value proposition that underpins willingness to pay. And your strategy should explore how you sustain this advantage or unique value over time. It needs to be ring-fenced and grown to its fullest potential.
Beware of casting your net too widely – it’s all too common to see this. We ask potential clients who their customers are, and they say, ‘Anyone with a pulse with money to spend.’ Big mistake! The other day, I saw an Instagram ad for a Danish sportswear brand. The gist of their message? Whether you’re a professional athlete or have just hauled yourself off the couch, we’ve got something for you. Massive face-palm moment. I’m not interested in wearing the same socks as some lardy bloke who gets out of breath running around the park. Now, if the ad had told me that four out of five professional Danish marathon runners wear their brand… quite different entirely, suddenly their brand becomes aspirational. And I’m interested in buying.
Put together a strategy sub-team
Strategy is hard. Friggin’ hard. That’s why business leaders often shy away from spending much time on it. It’s easier to get lost in the day-to-day busyness of your company rather than stepping back and thinking. Not everyone in your leadership team will have the right strengths for strategy work. We use Patrick Lencioni’s Working Genius tool to get a handle on who’s in the right seat on a leadership team. Some people are more than happy at 30,000 feet. These are the ones who will thrive at strategy. Others get twitchy when they go over 500 feet.
So don’t see strategy as a whole team sport. Pull together a small sub-set of your best strategic thinkers to ponder the status quo and work on new ideas and priorities. Weekly strategy sessions are practical – Jim Collins found these alive and well in all the great companies identified in his book, ‘Good To Great’ (a must-read for anyone looking to grow their business).
Identify the key capabilities of your business
Use an Activity Fit Map to work out your business’s three to five key capabilities. These are the strategic pillars on which you will build the future.
Through a process of Value Chain Analysis, you can work through each of these pillars. Let’s say you’re a service business and you’ve identified ‘People’ as one of the pillars. So, what unique activities can you see in HR that support this? Are you recruiting differently from your competitors? Is your retention rate the best in the industry? Have you done something different with your cost base? Or have you off-shored some elements of your delivery without negative consequences for customer satisfaction? If ‘People’ is genuinely one of your capability pillars, there needs to be evidence in your Activity Fit Map. If you can see nothing unique in there, it’s not going to be a strategic differentiator. Just because it’s best practice doesn’t mean it’s better.
Look for unique activities, and then make sure your strategy doubles down on these over the next three years, strengthening them by leveraging their unique attributes.
In this way, your Value Chain Analysis and Activity Fit Map will identify which functions in your business create sustainable competitive advantage around these three to five capabilities. It will give you a framework. And a way of thinking that you’ve never had before. Suddenly, you’ll be focusing only on the things that support your strategic position and nothing else.
Make a plan around one key metric
Finally, and importantly, work out the one key metric that will drive your strategy forward. Also known as ‘profit per X’, this metric has the most significant and most sustainable impact on your economic engine. Then build a plan around this metric.
Pep Guardiola would never have been successful as manager of Bayern Munich and Man City without his relentless drive to improve possession. Time on the ball was his crucial leading metric. He had the vision to take the team from mid-table mediocrity to the Premier League Championship. And his plan was meticulous, even down to the length of grass on the pitch. Find the same attention to detail and focus on the things that drive improvement, and you’ll break new ground for your business in 2022.
- NAVIGATING AND COMMUNICATING CHANGE
- BUILDING COMPANY CULTURE
- CHOOSING THE RIGHT OPPORTUNITIES
- ORGANISING YOUR A-TEAM
Written by business growth coach Dominic Monkhouse. Find out more about his work here. Read his book, ‘F**k Plan B’ here