Big, small, wider. Are you flexing your strategy?Feb 01, 2022
What is the value of strategy to your organisation? If you are a strategically-inclined, you would say that ultimately it makes the difference between winning and losing. If you were more operationally-inclined, you would say it was important, but less so than solving the issues that threaten the company’s immediate existence.
Both these responses are valid, reflecting the realities and tensions within every business. You plan for and try to shape the future while dealing with current realities. The data on strategy’s value, however, is unambiguous. You can consider your business to be strategically coherent if you know how to add value to customers, how to differentiate, are building critical capabilities, and are competing in markets where you can win.
Strategically coherent businesses are three times more likely to have above average growth, and twice as likely to have above average profits. In one study, 69% of the highest performing companies have a strategic planning ‘range’ of between 2 and 5 years. Only 22% perform highly when focused on the next 12 months and 9% when responding ad hoc to circumstance. On the flip side, 39% of the lowest performing companies have a 12-month planning cycle. So strategy pays off, and longer term thinking pays larger dividends.
Most start-ups are highly proficient operationally. They know their OKRs from their OODAs, and are focused on achieving a successful series of sprints that get them further away from what they were, and closer to what they want to be. How good start-ups are strategically depends on whether they have invested in strategy (i.e. do they have one) and are following the correct strategy. There has been a greater awareness that strategies can be wrong ever since the 2011 publication of Richard Rumelt’s now classic Good Strategy, Bad Strategy. Poor strategies can kill a good company quicker than a good strategy can build a bad one.
But there is very little awareness about how strategy changes over the life of a company. This can be the biggest determinant of your strategic success: follow the wrong strategy at the wrong time, and you will be exponentially reducing your chances of succeeding.
Strategy can be a bewildering arena to play in. The authors of Your Strategy Needs A Strategy reviewed 81 different frameworks in 2013. There are hundreds of different tools and models within them. Every strategist has their favourites. Broadly, the frameworks tackle five different strategic scenarios, based on the extent to which you can shape the market you are in, how predictable it is, and how much resource constraint you have. Based on these criteria, your strategy will be classical, visionary, adaptive, shaping or renewal. This is a great insight on the relevance and appeal of specific strategic frameworks and tools. It is, however, largely aimed at a corporate audience of well-established companies looking to improve their existing strategies.
Start-up founders and executives of smaller, high growth businesses, need something simpler to help them make sense of the strategic process and unlock its value more quickly. We suggest breaking down strategy into three broad phases: Big, Small and Wider.
Big strategy is foundational. It provides the intellectual rationale and framework for your business, its uncommon sense that will guide every future decision. It also provides a strong emotional motivation to achieve it. The aim of Big strategy is to out-think your competition, both current and future. It is called big because it ranges far and wide, covering not just your business, but the impact it will have on the entire world. It begins with existential questions, like why does your company exist, what is your vision for the future, and what business are you in? This is where you need to understand the competitive landscape and trends. Ideally, you identify a number of possible future scenarios. You select the most likely and desirable one for you and identify the commercial opportunity, customers, and market you want to target. You have to creativity piece together your business model and value proposition. You develop clarity on how you will compete and win in your chosen marketplace: what will make the difference and the skills, capabilities, and resources the strategy requires.
This all sounds like business planning because it is just that. You are designing and configuring your ideal business, which is only one version from an infinite number of possible alternatives. Big strategy usually happens once at the start of a business or when it seeks investment.
Small strategy is how your business will out-perform others. Every business needs to become a customer factory i.e. be more proficient at creating desirable customers than rivals. This involves using all the data and intelligence you have to reconfigure and optimise both your business model and what you offer. You do this in a way to maximise your strengths and exploit competitor weaknesses as they both become more apparent. Since you are now in market, you have more insight and potential sources of competitive advantage. You have to pass these through a strategic filter that translates them into improved operational performance. This type of strategy feels less abstract because it is more operational. You are constantly testing and reconfiguring, trying to find the strategic ‘sweet spot’ that enables you to dominate your market. It is strategic because you are still developing and choosing the best options to achieve your long-term goals. Most businesses spend most time thinking about Small strategy.
The third phase, Wider strategy, only becomes relevant once you have dominated your chosen market. Its aim is to eliminate competition. There are many ways of doing this: using scale and geographic expansion to gain a decisive advantage; monopoly; M&A; IP protection; lobbying and litigation to impede competitors; innovation; ecosystem construction; brand investment; and product diversification. These are all primarily moat building activities, aimed at securing and embedding your position of market dominance. You have to because there will be other companies following in your slipstream. But this phase also raises new far-reaching strategic questions. Now we have dominated our chosen market, what next? What else should we do? You have to look more widely at not just your market, but adjacent markets and opportunities for new businesses.
Which brings us to the crux of the matter. You need to be following the right strategy at the right time. Many people skip or don’t do Big strategy properly. Which means that however good their Small strategy is, it is unlikely to generate the results they seek. Founders stuck in the realm of Big strategy will struggle to gain the operational cutting edge necessary to churn out brilliant numbers.
Knowing these phases is not enough. You also need to know that although they are sequential in the sense you must do one before the other, they are also concurrent. They overlap. Small strategy overlays Big strategy, and Wider strategy overlays them both. Once started, they are all ongoing. You just spent more time on one area. Once you have your Big strategy, it is a mistake to file it away. You should review and update it annually, judging whether it still represents your best approach for the next five year. You should also to develop an early warning system to pick up the market signals that suggest your strategy needs to evolve. This is called strategic sensitivity. Similarly, when you are ready to look at your Wider strategy, your other strategies are still in operation and, ideally, dynamically evolving based on your latest learnings and performance.
Learn to flex your strategic approach and you’ll be far more likely to develop the kind of strategy that takes you to your promised land.
UP AND TO THE RIGHT.
Check out those frameworks here: https://hbr.org/2015/06/navigating-the-dozens-of-different-strategy-options
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