Thinking Your Way Through Strategy Improves Your Tactics

Strategy – One of the Keys to Success

By Scott Ford

Strategy is one of the most important aspects to growing your company. There are a couple of reasons to grow: 1.) To keep great hires on your team, you have to be able to provide a growth trajectory, and 2.) You need to reinvest in your business in order to bring value and serve clients better.

There are three life cycles of a company. A company is born, it matures and then often, the company reaches a stage in which it becomes too big. Companies are started by an energetic founder with a great idea, who works hard and grows revenue to the point at which the company becomes profitable. However, many companies don’t make it through this phase.

If the company does make it through the start up phase and becomes self-sustaining, it typically struggles to get to the next step. Companies enter into the middle market, which we define as being worth between $5 million to $500 million. These are companies growing at 20 percent or more annually for three years or more in a row. We classify these companies as Gazelles.

Start-ups generally receive the most funding, but Gazelle companies in the mid-market typically generate the majority of new jobs and sustainable economic growth. It is critical that these companies continue to scale and grow, and that is exactly what the strategy tools are designed to help them do.

When we talk about strategy, we are really talking about top line revenue growth. The question to consider is, can you state your firm’s strategy in a sentence? If you have a great strategy, your top line revenue will reflect that, but if your top line revenue is flat or declining, this may be indicative of a strategy issue.

One of the most useful things to do is to look at the strategies of other successful businesses. For example, take Nordstrom, which is famous for its customer service. This is an example of its core value system.

Very few other retail stores are capable of reproducing the customer service experience that Nordstrom offers. This is because from their hiring practices to their training programs, they have honed their core competency for years. Their outstanding customer service is a product of years of experience, which is very difficult for competitors to duplicate.

In his book, Customer Intimacy and Other Value Disciplines, Michael Treacy outlined three different business strategies: operational excellence, customer intimacy or product leadership. Operational excellence means being a low cost provider, with all processes and systems designed to drive down costs and increase efficiency.

Customer intimacy is all about the experience, and systems and hiring practices are focused on providing customers with the best possible experience. Product leadership centers around innovation and staying on the cutting edge.

There are three tests of a core competency. Does your business strategy have potential access to a wide variety of markets? Does it make a significant contribution to the customer’s perceived benefit? Is it difficult for competitors to imitate?

Strategy can be a complex decision, but once you have it right, you should be able to write it down in a sentence or a simple phrase. Jack Welch has said, “Strategy is not a lengthy plan. It is an evolution of a central idea through continually changing circumstances.”

Take Southwest Airlines as an example. Their simple strategy phrase is “Wheels up.” If the wheels are up on Southwest’s 737 fleet, they are making money. Their strategy is to do everything possible to keep their planes full of happy passengers in the air. Another example is General Electric under the leadership of Jack Welch. This company was first or second in every market, and if they were not, they would exit the market and not compete at all. This strategy is simple, clear and compelling.

Another leader is Michael Porter, a distinguished Harvard Business professor who brings well researched perspectives of strategy to business leaders. His definition of strategy, based on his research of successful companies, is that, “Strategy is the creation of a unique and valuable position, involving a different set of activities (from competitors).”

In his book, Hidden Champions, Herman Simon, an accomplished senior consultant, author and professor, recommends focusing on a niche as an effective way of developing strategy. Simon believes that exceptional management needs to focus on doing fewer, smaller things better than the competitors.

The key attributes of strategic thinking are typically three to five senior leaders that can include leaders and advisors from the outside, a senior council organized by the CEO that convenes for two hours weekly, tools that are available on the Gazelles website, and the ability to look beyond the current one year plan.

The key attributes of execution planning are a day-to-day operational management team, meeting rhythms, SWOT (strengths, weaknesses, opportunities and threats) and one-page strategic plan (available on the Gazelles webpage), and a focus on executing the current business year’s plan.

The one page plan is especially useful because it is very effective to get all of your business strategy on one page. Three key areas on the one-page planning sheet are “Who and Why a Company Exists,” “Company Strategy” and “Company Strategy Execution Plan.” It is useful to develop these so that they can be shared with everyone in the company. This way everyone knows what the goals are for the year and beyond, and everyone can work together to achieve those goals.

Keep in mind that you can start with any section in the one-page plan. Additionally, this could take a couple of years to really master so you should not rush. Many times the process is non-linear and can be frustrating, but it’s worth taking the time to work through this process.

Through time, the strategic decisions have synergistic effects that are exponentially worth the effort. Not enough companies take the time to pin down what their differentiating factor is or what their strategy is in simple terms. As a result their top line revenue growth suffers.

The one page plan core values are a handful of rules that your company has in place, which it lives by. Most companies do not take the time to define them, but they do exist and you operate within them everyday, whether you know it or not. The more clear and deliberate you are about your core values, the better your culture is and the easier your path is to go from good to great.

Core values are not who you want to be as an organization; they are who you are today. Too many companies post core values of whom they want to be, but then live quite differently from them.

The problem is that this hypocrisy can alienate team members and create a rift between management and team members. Be brutally honest about who you are and what your core values truly are. Your core values should remain constant and should not change over time. They are the things you stand for.

As a test of whether or not something is really one of your core values ask yourself, “Would I fire a team member that consistently or blatantly violated one of our core values?” Ask yourself, “Would my company be willing to take a financial hit in order to maintain the integrity of a core value?” And finally, ask yourself “Is the core value alive among my team today?” If you can say yes to all three, then that is an example of a core value of your company.

A simplified one-page plan is also available on the Gazelles website, and can be a good starting point for companies that want to begin the process of developing their in-depth one-page plan.

We start by articulating core values, company purpose, and brand promises, and then move on to the Big Hairy Audacious Goal or the BHAG. This is the major goal you have for your company for 10 to 30 years. From the BHAG, we move on to strategic priorities, which are broken down into quarterly priorities, one-year priorities, and three to five year priorities. For each of these sections, it is best to narrow your goals to one top priority per time period, with a maximum of three.

Additionally, it is important that everyone on the team identifies his or her own key performance indicators to ensure that everyone knows the quarterly or yearly goals to ensure healthy growth. Everyone should know the company strategy and what needs to be done to stay on track. As a leader, you can identify where you need to focus to grow your company.

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Scott Ford is Founder and CEO of Cornerstone Wealth Management Group in Hagerstown. He is the author of Financial Jiu-Jitsu, based on his many years of martial arts training. He is a Certified Gazelles Coach and helps entrepreneurs and business owners operate profitable and efficient firms. Scott can be reached by email at scottf@cornerstonewealthgroup.com, via phone at (301) 739-8505 or on LinkedIn at www.linkedin.com/in/scottdford.

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