Category: Strategy

Keep Your Business Strategy Tight with a Ratchet Tool: Here’s How

Like a Ratchet that turns and tightens in only one direction, a strategy should proceed continuously, moving from Identify to Analyze, to Create, and then Implement

Strategy is the cornerstone for business success.
Strategy connects the present to the future.
Strategy brings focus and meaning to your tactics.
Strategy involves making decisions about the future and predicting the outcomes of those decisions.
Strategy is all these and complex too.

Question
If strategy is so important, why is it one of business’s most confusing and misunderstood disciplines?

Answer
Because strategy requires understanding, assessing, and weighing the importance of multiple variables, now and in the future.

Solution.
Reversing these challenges and understanding the strategic process starts with deconstructing the process into its essential elements.

“Simplicity is the ultimate sophistication.”

Leonardo DaVinci.

The Strategic Process progresses from Strategic Thinking to Strategic Planning to Strategic Decisions.

Strategic thinking > Strategic Planning > Strategic Decisions

Since strategy connects the present to the future, there should be a tool that helps guide and connect the parts. The Strategy Ratchet can be a helpful framework for seeing your strategy through to completion.

Like a Ratchet that turns and tightens in only one direction, a strategy should proceed continuously, moving from Identify to Analyze, to Create, and then Implement. With each loop and iteration, the strategy should align more tightly with your Vision.

Identify. (where are we?)

Complete honesty and transparency are needed here. No sugar coating. No Rose-colored glass, just the good, the bad, and the ugly. No problem-solving at this stage; identify where gaps exist. Time to see what’s “under the hood.” Look at products and services, operations, business financials, sales and marketing plans, market share, and IT. How do our products and services compare to our competitors? Is our present direction aligned with our Vision?

Analyze. (how far off are we?)

Time to quantify the problems and gaps identified. Look for sales, revenue, new products and services development gaps, and customer and employee satisfaction scores. Is market share growing or shrinking? By how much? What about financial performance, gross margins, profitability, and net income? How efficient are operations? What are gross margins, net income, and EBITDA?

Create. (what new ideas can close the gap?)

Moving forward requires seeing new possibilities. What future state and results are desired? What steps need to be taken to reach the desired goal? What needs to change to close the gaps identified in the Analyze step? Ideas and possibilities are endless; seeing them requires looking across disciplines to bring new insights and perspectives to problems. Breaking down the silos of conventional thought and replacing it with awareness and observation is a perfect place to start.

“Vision without Execution is hallucination.”
Thomas Edison

Implement. (how is action created?)

Strategies fail to reach their targets due to a lack of action and execution, not a lack of Vision and Mission. Continuous execution is essential. Strategy is a Team effort, so alignment, accountability, and rhythm are needed. Align actions by planning backward and executing forwards. Start with the goal and work backward to milestones and, finally, tasks that are accomplished daily. Accountability is required and can be used as a learning and training process. Celebrate team successes. At the same time, learn why goals were not met so performance can be improved during the next iteration. Finally, let the team establish their rhythm and develop a dashboard with key performance metrics to track progress.

Summary

Give the Strategy Ratchet a try. See if it helps you understand better this complex and confusing topic. Remember, too, your strategy must continue beyond Vision, Goals, and Objectives; execution and action bring it to life. This quote from VanGogh sums it all up the best:

“Great things are done by a series of small things brought together.”
Vincent VanGogh

 

Sharpen Your Strategic Thinking Here

Strategic thinking integrates analytical skills, problem-solving skills, creative skills, communication skills, along with management skills.

 

Strategic Thinking is the hard stuff of business.

If you are looking for a few ideas to strengthen your strategic thinking, sharpen your ability to see new solutions, think more critically, and be more analytical to help impact your business’s growth and competitiveness, then keep reading.

Strategic thinking is critical for all organizations since it charts the path between the present and the future and helps leaders shift their focus from short-term execution to the longer-term needs of the organization. For this reason, strategic thinking skills are highly desirable and worthy of improvement through learning, study, and practice. 

“Knowing the name of something doesn’t mean you understand it.”

Richard Feynman

The Skills of Strategic Thinking

Strategic thinking integrates analytical skills, problem-solving skills, creative skills, communication skills, along with management skills. These skills can tremendously impact a business’s trajectory, growth, and competitiveness in the marketplace. These skills are essential, allowing a business to achieve its objectives, overcome obstacles, and address challenges it faces in the markets.

  • Analytical skills: A strategy starts by understanding objective data from your business, markets, and stakeholders. These inputs include financial statements, KPIs, industry trends, market conditions, and vendor and stakeholder perspectives. This step helps define the current reality facing your business.
  • Problem-solving skills: Strategic planning is often used to solve problems or address challenges, such as missed financial targets, inefficient workflows, or an emerging competitor. Implementing a strategy addressing your central challenge requires understanding the problem and its potential solutions. From there, you can craft a strategy that solves it.

“A real strategy is a coherent mix of policy and action designed to overcome a significant challenge” 

Richard P. Rumelt

  • Creative Skills: An excellent strategist can integrate data analysis with problems and challenges to generate new approaches and ideas. Developing your competitive advantage requires understanding your firm’s unique resources and capabilities and leveraging them in new ways not previously available in the market. These new approaches require one to see “between, around, and through” the obvious to find a new path forward.
  • Communication skills: Implementing a strategy for your company requires exceptional communication skills. Strategy can appear complex making it essential that all stakeholders understand and are aligned, so everyone works toward the same goals and objectives. Building teamwork, consensus, and collaboration make communication critical to strategic success.
  • Management skills: Strategy isn’t just about thinking of solutions; it requires action to achieve results. Once data has been analyzed, the problem is understood, and a solution has been created and communicated, you need strong management skills to bring everything together.

With the core Strategic Skills outlined, let’s work on improving them. The good news, like any skill, your strategic thinking skills can improve with focus and practice.

TO IMPROVE YOUR STRATEGIC THINKING SKILLS…try the following.

  • Ask the hard questions. To improve your strategic thinking skills, ask more challenging questions. These questions can relate to products, markets, management, or any question that points to adding value for the customer. Doing so allows you to become adept at spotting opportunities, and exploiting opportunities is what strategy does.
  • Observe and analyze. Use Reality Testing to see things as they are rather than how you would like them to be. One of the most effective ways of accomplishing this is to observe and reflect on your current situation, ensuring any strategy you conceive is objective and grounded by facts.  

“The first principle is that you must not fool yourself and you are the easiest person to fool.”

Richard Feynman

  • Play the Devil’s Advocate. Before implementation, your strategy requires thorough analysis, evaluation, and testing to ensure other possibilities are noticed. Play the Devil’s Advocate with your ideas, assertions, and analysis will make any weaknesses or shortcomings evident. You need to be able to defend your strategy when questioned by others. Defending your strategy against other Team members further hones your thinking and logic, helping you better communicate and execute the strategy. Considering opposing ideas, perspectives and opinions further enhances your strategic thinking skills by forcing you to step back and look at the short and long-term views.
  • Always keep learning. The body of knowledge related to strategy is massive. Learn from your work and the experiences of others, as well as books, references, journals, society memberships, presentations, and conferences. Be committed to constant learning and self-improvement.

THE TAKEAWAY

Strategic thinking is essential for business today, regardless of your role or industry. Remember, you can practice these skills in your daily life as well. Try exercising these skills as you plan and face challenges in your own life. Finding an effective solution or alternative will be easier.

 

5 Key Mindsets for Business Growth

It turns out that achieving profitable growth comes from the “choices” a Leader makes.

Growth is essential for a business; leaders aspire to achieve it, yet for most, it remains elusive. McKinsey states that 25% of companies show no growth, and over the last decade, only 1 in 8 achieved more than 10% annual revenue growth. It turns out that achieving profitable growth comes from the “choices” a Leader makes.

Do you, as a leader, make a conscious choice to grow? Or do you pay lip service to your growth ambitions and let your resolve fade if profit isn’t immediate?

Sustainable growth is challenging, but choosing a growth mindset is the essential first step, and it’s readily available to every leader regardless of the industry, economy, or business size. These growth mindset leaders think, act, and speak differently. They seek to align strategy and capabilities with customer needs, wants, and desires. They explore and invest in opportunities both within and outside their core business. They maintain their direction, commitment, and growth vision despite unexpected turbulence and surprises.

A recent article by McKinsey and Company (see reference) explores the characteristics of these leaders who make a purposeful choice to grow and follow through on that choice. 

“…changes in thoughts and actions arising from choice can make the difference between sustained standout growth and remain with the pack.”

Although McKinsey’s research focused on C-Suite leaders of large corporations, there are actionable ideas that any entrepreneur interested in profitably growing their business can use immediately. Leaders who display at least 3 of the following five characteristics (see infographic) are 2.4 times more likely to outgrow their competitor’s profitability. 

GROWTH LEADERS…

1. Emphasize ACTION over PERFECTION.

2. Are WILLING to FAIL.

3. Know their CUSTOMERS as a PERSON.

4. FOCUS on LONG-TERM growth.

5. COMMUNICATE their SUCCESSES.

Action over Perfection. 

With clear strategic goals, objectives, milestones, and metrics, it is easier for leaders to make decisions in the face of uncertainty. This focus helps leaders maintain momentum even through turbulent times. Seeking more information or waiting for the perfect timing are merely stall tactics designed to put off making a decision. 

“Perfection is the enemy of progress.”

Winston Churchill

Be Willing to FAIL. 

Growth leaders understand that their core business maintains their current financial results but is unlikely to achieve profitable growth. Expanding the business by innovating into new markets, creating new businesses in adjacent markets, or building businesses through mergers and acquisitions is essential for long-term growth.

Know your Customers as a Person.

Market offerings must meet the needs of the customer. Capabilities and Competitive advantages must always relate to the customer, with all products and services providing customer solutions. 

Growth leaders can improve their chances of achieving growth by committing to innovation while identifying and understanding the needs and wants of their customers. Only by knowing the customer can the correct value propositions be developed that will appeal to them. 

“Don’t find customers for your products, find products for your customers.”

Seth Godin

Focus on Long-Term Grow.

While achieving excellence in current operations is critical, growth leaders rely less on historical budgets that feel “familiar.”, choosing instead to explore how to ignite growth. They adapted their operating model for the long term while understanding the risks inherent in the new businesses and markets they were developing. At times these “growth choices.” came at the expense of a few quarters of earnings while always envisioning their long-term growth aspirations. 

“Overnight success stories take a long time.” 

Steve Jobs

Growth leaders accelerate their results through strategic shifts to higher growth pockets within their current markets, innovate core products and services, and improve execution capabilities. They actively track and measure leading and lagging key performance indicators (KPIs) that align with organizational goals and incentives.

Communicate their Successes.

Growth leaders generate 80 percent more shareholder value than their peers over ten years. Beyond creating shareholder value, growth attracts top talent, fosters innovation, and creates jobs. Growth becomes the lifeblood of an organization, feeding the culture, elevating ambitions, and inspiring a sense of purpose. This growth story must be shared repeatedly by all, both inside and outside the organization, to continue to attract the star performers that will perpetuate the growth mindset.

“When you have a winning culture, employees can speak genuinely and convincingly about why your organization is a great place to work. And that naturally attracts people who are seeking exceptional workplaces.” Gallup

Choose the Growth Mindset today.

Making the deliberate choice to grow creates powerful momentum that drives the entire business toward its vision and creates alignment between executives and frontline employees. The 5 Mindsets for growth highlight essential elements leaders need today to achieve profitable, sustaining growth. Focus diligently once they have made a deliberate and purposeful choice to grow.

5 Key Mindsets for Business Growth

REFERENCES:

https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/choosing-to-grow-the-leaders-blueprint

https://www.gallup.com/workplace/237368/culture-wins-attracting-top-candidates.aspx

 

What Separates Good Strategy from Bad Strategy

Strategy’s primary objective is finding a path to overcoming obstacles a business faces.

 

Know as Strategy Strategist Richard Rumelt speaks powerfully regarding how Strategy’s primary objective is finding a path to overcoming obstacles a business faces. He emphasizes that Strategy focuses a firm’s resources and capabilities against opportunities. In contrast, today, what is thought to be Strategy is instead a combination of ambitions, desires, fluff, and buzzwords mashed up to sound intelligent.

“Fluff is superficial restatement of the obvious combined with a generous sprinkling of buzzwords.”
Richard P. Rumelt

On a recent podcast episode of Inside the Strategy Room by McKinsey & Co, Rumelt dives deep into what separates good Strategy from bad. He emphasizes a recent trend towards bad Strategy as CEOs, executives and boards copy what they see others doing. For Rumelt, many so-called strategies are actually a list of ambitions and desires, not strategies. Ambitions and desire feed and inspire your vision and mission, but not your strategy. Strategy is problem-solving, and Strategy is overcoming obstacles and barriers faced by businesses.

“Many bad strategies are just statements of desire rather than plans for overcoming obstacles.”
Richard Rumelt

Rumelt reminds us that if what we are doing is easy, it probably is not Strategy. Strategy is complex; it requires making choices and commitments that leave things behind. These choices and decisions are what make good Strategy so hard. Many Executives believe that Strategy must include everyone, but Strategy is not a democratic process. Traditional Strategy focuses on Product/Market performance along with Customers and Competition. It emphasizes the numbers and financials rather than understanding the problem. Leaders commit resources where they have a competitive advantage to increase market share or sales revenue. Strategy done in this manner leaves out Organizational Functioning and other inward-facing challenges a business faces. Many times these obstacles are just as significant as those of your competitors.

Strategy is about what is important and what challenges you face! Not just about products and services. A Strategy must be focused to be effective and achieve the results desired. Strategy must be challenge-based, not goal based. If your problem were easy to solve, you or your competitor would have done it already. All stakeholders must get honest and talk about what people don’t want to discuss.

A good Strategy must have a response to these questions:

What’s wrong?
What has gone well?
What are the challenges we face?
What are the big opportunities?
What are the obstacles?
What’s failing? What’s not working?
Why do some customers choose our competitors?

What problems and challenges can you make progress on; commit and make an action plan. Like a physician diagnosing a patient, stakeholders must first diagnose their business’s problems and challenges. For an organization to expend valuable time and resources on a problem, the problem must be:
1. important, and
2. capable of being solved.
Realize that maybe the thing we thought was a problem wasn’t a problem to be solved (because problems have solutions); maybe it was simply a situation or even a dead end.

“A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them.”
Richard P. Rumelt

Rumelt talks about “The Crux,” the most challenging part of a mountaineer’s climb, in his most recent book with the same title. Don’t climb if you can not handle The Crux. Similarly, with Strategy, don’t tackle a problem if you can not handle the most challenging part, and every problem has a hard part. Strategy is best formulated by those that know the business best, the CEO, Managers, and Stakeholders. Outsiders and consultants focus on what they all understand best, Financial Accounting and Financial Statements. This emphasis on the financials slants Strategy and goals to numbers rather than obstacles and problems.

Your summary and takeaways.

Strategy does not require sorting through the differences between visions, missions, goals, strategies, objectives, and tactics. It does not require that Strategy be split between corporate, business, and product levels.
Rumelt states the “kernel” of Strategy contains three elements:
1. A diagnosis that defines the challenge or obstacle.
2. A guiding policy for dealing with or overcoming a challenge or obstacle.
3. A set of coherent actions designed to carry out the guiding policy.
So how does your Strategy compare? Do you have a good strategy? or do you need to reevaluate, recraft and redirect your resources to achieve the desired results?

References for the interested reader:

https://podcasts.apple.com/us/podcast/135-richard-rumelt-on-what-separates-good-strategy-from-bad/id1422814215?i=1000580323004

https://www.goodreads.com/book/photo/11721966-good-strategy-bad-strategy

https://www.goodreads.com/book/show/58895961-the-crux

1172196658895961. sy475

 

 

Got Strategy?

Strategy is complex; it involves making tough choices, choosing what to do, and choosing what not to do. Good Strategy changes the actions and behaviors of the organization’s workforce.

Every company says they have a Strategy; many do not, including those that believe they do.

Let’s start by seeing what Strategy is not. When the redundant, non-essential, and distracting elements are removed, what remains begins to look more like Strategy.

Strategy is critical to business success. Creating and executing an effective business strategy is a task that the CEO and C-Suite cannot readily delegate to others. When Strategy is weak, objectives are unclear, resources are not properly allocated, communication and marketing are inconsistent, competitive advantage is eroded, and financial goals are not met. Operating with a flawed strategy that is not a strategy at all will lead to poorer outcomes for the business.

Richard Rumelt in Good Strategy/Bad Strategy concisely states that to detect bad Strategy, look for one of the following:

1. Fluff: Bad Strategy is a simple statement of the obvious combined with a generous sprinkling of buzzwords creating the illusion of high-level thinking. It may sound Strategic but lacks any actionable direction.2. Failure to face the challenge: Bad Strategy does not define or recognize the business’s challenge.
3. Mistaking Goals for Strategy: Goals or desires are not strategies. Goals support the Mission; Strategy supports and directs how the Goals are to be achieved.
4. Bad strategic objectives: Strategic objectives are set by the leaders. Strategic objectives are wrong when they do not address critical issues or challenges.

Strategy is not Vision or Misson.
Strategy is not Goals or Objectives.
Strategy is not a Powerpoint presentation or slide deck.
Strategy is not a mashup of words with Strategy added to it.
Strategy is not just another good thing to do.

Strategy is complex; it involves making tough choices, choosing what to do, and choosing what not to do. Good Strategy changes the actions and behaviors of the organization’s workforce.

“Strategy brings relative strength against relative weakness.”

Richard Rumelt

Making these decisions is hard. It requires focusing on what you are building and letting go of that which no longer serves your objectives.

Letting go is hard.

So, how good is your Strategy?

Anticipate customer needs: a Strategic Choice

Creating unique market offerings begins with a strategic directive that is focused, a focus that requires knowing what resources are required to create your competitive advantage.

Predicting the future is not easy. Tarot Cards, Magic 8 Balls, and Crystal Balls are not strategic initiatives you would invest in.

Let’s consider the following instead.

Happy customers… are created when their needs are met.
Happy customers… tell others and share their stories about your brand.
Happy customers… leave clues.

Clues are customer needs.

By anticipating these needs, you can precisely position a product or service to meet those needs. Creating unique market offerings begins with a strategic directive that is focused, a focus that requires knowing what resources are required to create your competitive advantage. Magnify what makes you different.

“Strategy involves focus and, therefore, choice.  And choice means setting aside some goals in favor of others.  When this hard work is not done, weak amorphous strategy is the result.”

Richard Rumelt

Use this to win and delight your customers. Stand out in the marketplace; it will be easier for your customers to find you. With this combination, all stakeholders will be happy,  and so will your bottom line.