Category Archives: Step 1: Strategy

Set Your Strategy

“The essence of strategy is choosing what not to do.” 

– Michael Porter

Pull back from the keyboard. Put down that pen. Don’t write anything, please, until you’ve thought through your business’ strategy. Start your lean plan with practical strategy.

It’s harder to write about strategy than just to do it. They give out PhD degrees for strategy studies, which can be extremely elaborate. People spend entire careers studying strategy as it applies to large corporations.

Strategy is Like Sculpture

Strategy is like driving and sex — we all think we’re pretty good at it. But simplifying, doing today what will seem obvious tomorrow, is genius. I say the best strategies seem obvious as soon as you understand them. Furthermore, it seems to me that if they don’t seem obvious after the fact, they didn’t work.

I chose the Michael Porter quote above because I believe it’s a great way to see strategy in real world small business and startups. Strategy is what you’re not doing. My favorite metaphor is the sculptor with a block of marble — the art is what he chips off the block, not what he leaves in. Michelangelo started with a big chunk of marble and chipped pieces off of it until it was his David. Strategy is focus.

Strategy has to be easy to define. In this chapter I start with my own identity-market-offering (IMO) method, which is pretty simple. But I’ve also worked in depth, during my consulting years, with several competing strategy frameworks, and every one of them works well if it’s applied correctly and executed. In fact, I say you can also define strategy with a story, or a small collection of stories, which I explain in Lead with Stories.

And let’s be clear about this: Methods don’t matter. Use my IMO method, or use stories, or some other method. What matters is focus, what you do and don’t do, and whether it works.

This chapter includes the following:

I should add, however, that I have a lot more about strategy – if you like thinking about this, as I do – in the More About Strategy chapter in Section 6, additional information. That includes stories as strategy, SWOT, growth models, strategic positioning, defining strategy statements, and how to do a mission statement. I left all of that towards the back, in that additional information section, so you can read it if you want and it doesn’t slow down the step-by-step portion.

Start with Simple Strategy

LivePlan Strategy Method

Start your lean plan with practical strategy. It’s harder to write about strategy than just to do it. The best strategies seem obvious as soon as you understand them (and in the real world, if they don’t seem obvious after the fact, they aren’t going to work). Strategy is like driving and sex — we all think we’re pretty good at it. Strategy is what you’re not doing. Think of the sculptor with a block of marble — the art is what he chips off the block, not what he leaves in.

Strategy is focus.

I’ve dealt with dozens of strategy frameworks, and every one I’ve known works pretty well if it’s applied correctly. Still, my favorite is the one I developed: IMO. Identity, market, and offering (product or service).

Think of it as the heart of the business, like the heart of the artichoke: it’s a group of three core concepts that can’t be separated: identity, market, and business offering. Don’t pull them apart. It’s the interrelationship between them that drives your business. Each affects the other two.

The Problem You Solve

We forget too often, so start with this: Your business is not about you, what you like to do, or what you want from it. It’s about your customers. And, most important, the problem you solve for your customers.

Theodore Levitt changed marketing with his pivotal piece Marketing Myopia, which includes this important reminder:

People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.

And this also famous quote, about railroads:

They [the railroads] let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.

Real businesses solve problems and for business strategy they have to know what problem they solve. In a social media company that posts updates for its clients, the problem it solves is not social media; it’s getting the word out; getting people to know you. My favorite restaurant doesn’t just feed me a meal; it gives me healthy, delicious food, in a comfortable environment, a place I like to be for an hour or two with my wife.

Decades ago, when I started developing business plan software, I had to remind myself that people don’t want business plan software; they want business plans they can have and execute and work with.

Every business better be solving a problem. If not, it’s continued existence is threatened.

Here’s an example, from a lean business plan related to a subscription soup business:

The Problem You Solve

And another example, from a retail bicycle shop:

Sample Strategy Proble

 

Your Business Solution

Your business solution is your product or service. You can already see with the bike shop example how one shop needs one kind of inventory and the other needs a different kind. That’s strategy at work. Your identity influences your choice of market, which influences your choice of product. Your choice of product influences your choice of market. They have to work together.

Understand that you can’t do everything. The bike shop that caters to families and racers is likely to fail. You can’t credibly offer high-end bicycles at bargain prices in a family-friendly atmosphere.  If you say you do, nobody believes you anyhow. The subscription soup business can’t compete with normal fast foods or established sandwich delivery on price and convenience alone. So it offer healthy organic cooked soup delivered to the desks of office workers. In both cases, you see strategic focus.

Seth Godin’s book The Dip is about being the best at one thing. That’s the point of your focus. Since you can’t do everything and even if you could, your customers wouldn’t believe you, then you need to focus on something that you do well, that people want. Be the cheap and practical bars of soap that sell in volume in the big chain stores, or be a finely- packaged, expensive and sweet-smelling soap that sells in boutiques. Don’t try to be both.

Here’s an example from a subscription soup business:

Strategy Solution Example

And another example, from a bicycle retail shop:

Garretts Strategic Solution

The Market

Your identity influences your choice of target market. The bike racer focuses on attracting enthusiasts, offering expensive high-end bicycles and equipment. The couple focuses on attracting parents with kids, concentrating on medium-level bikes, trailers, and family-friendly accessories.

Keep your business focused on specific target markets. That bike racer shop owner has to know his products are too expensive for the families, and the families bother the high-end enthusiasts. The family bike shop can’t scare away its target market with very expensive racing bikes.

Bike Shop Market Strategy

Business Identity (Why Us)

Every business has its core identity. How are you different from others? What are your strengths and weaknesses? What is your core competence? What are your goals? What makes you different?

Tip: Think of a business identity as answering the question: Why Us? Why are we the right people for this business? How do we relate to the problem, solution, and market?

As an example, imagine the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like bicycles as a family activity. The first one will probably stock and sell expensive, sophisticated bicycles for the racing enthusiast and extreme long-distance or mountain biking hobbyist. The second will probably emphasize bicycles for children, bike trailers, carriers, and accessories for families.

Part of your identity is what you want from your business. Some businesses are about your lifestyle or pursuing your passion. Some people want their businesses to grow as big and as fast as they can and are happy to work with investors as owners. Others want to own their own business, even if it has to grow more slowly for lack of working capital. What’s your case? If you’re committed to a second income in a home office, incorporate that into your identity. Don’t look for generalized formulae; let your business be unique. That’s differentiation, and it’s important.

As an example, imagine the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like bicycles as a family activity. The first one will probably stock and sell expensive, sophisticated bicycles for the racing enthusiast and extreme long-distance or mountain biking hobbyist. The second will probably emphasize bicycles for children, bike trailers, carriers, and accessories for families.

Notice please how the owners’ identity affects strategy in strengths and weaknesses, knowledge and focus, and choice of product and target market. The strongest teams set the business identity to reflect vision, ideals, preferences, and skills and backgrounds too. Consider how this team sets the identity for a retail bicycle business:

Bicycle Store Identity Strategy

And our sample soup subscription business sets strategy based on its identity that is a combination of foodies, restaurant experience, values related to local and organic, and startup experience. Compare this team to the team for the bicycle shop:

subscription soup strategy identity

You don’t have to tie identity to specific people. Here’s another example from a more generalized strategy, for the soup subscription business, without the pictures:

Sample why us in strategy

 

Roll Them Up Together

These three things are your business strategy. Don’t pull them apart. Don’t take them one at a time. Don’t ever stop thinking about them. Remember, in planning as well as in all of business, things change. Keep watching for change.

 

Business Strategy Brainstorming

The following might help you develop your business strategy. These are topics, tools, and suggestions related to identity, market, or offering.

Problem

  • What business are you really in?
  • Define the problem you solve.
  • What are you doing that needs doing?
  • What are you going to fix that needs fixing?
  • What are customers getting from you? How are they better off for spending money with your business?
  • Who needs your solution to that problem?

Solution

  • What’s your solution to the problem above?
  • What are the benefits to the target market?
  • What features do you offer?
  • What is different about your solution (think about what they call the secret sauce)?
  • What don’t you do that makes you different? (For example, not all restaurants offer takeout food and drive-through.)
  • Why is your offering better than others?
  • What’s your value proposition? (That’s the benefit you offer, to what target market, at what relative price. For example, the restaurant offers fine dining for people who appreciate the special occasion, at a price premium.)

Market

  • Describe your imaginary ideal target buyer. It’s like writing about a character in a story. Think of gender, occupation, home, car, favorite media, education, age, and economic situation. Know this person (or, if you are selling to other businesses, do the same for a business).
  • Identify your target market as a group of people, kind of buyer, type of company, combination of factors, things people want. It might be “parents of K-6 children,” for example. Or small business owners, or knowledge workers, or women over 50.
  • Define the problem you solve.
  • Who needs your solution to that problem?
  • Who isn’t in your market? For example, if you are an expensive restaurant with white tablecloths and fine gourmet food, you don’t want your market to include families with young children.
  • Who doesn’t have the problem you solve?
  • Who will pay for what you offer?

Identity

  • Do a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s brainstorming, so first list as many points as you can in each category, then pare them down. It’s better with a team, but you can do it yourself too.
  • Identify your core competence. What do you do better than anybody else? What do you like to do? What are you uniquely qualified to do?
  • What makes you different?
  • What’s special about your brand, your logo, your mission, or your vision?

Sample Strategy Descriptions

Since this is a first step towards a lean business plan, here’s a reminder: The lean business plan is for internal use only. Don’t sweat the text. Just do very simple descriptions you can keep track of and use as reminders. Here are some examples to help. These are the strategy summaries in the lean business plans of a small business social media consultant, a local bicycle retailer, and a soup subscription business. In each case, you can see how the strategy fundamentals of problem, solution, and market, and the identity in the tag line or mantra at the top. They all work together to define a business strategy.

Sample 1: For a small business social media consultant:

Have Presence Strategy Summary

Sample 2: For a bicycle retailer

LivePlan Strategy Summary

Sample 3: A Soup Subscription Business

Soup Subscription Strategy Summary

Strategy is Focus

There is a very real business use for a strategy summary as part of every business plan, even a lean plan. Since strategy is focus, it leads to some difficult decisions as time goes on. New opportunities arise. Some new opportunities are great additions, offering healthy evolution and growth. Others are dangerous distractions that dilute the business, blur the focus, and bring the business down. The owner, owners, or real core management team have to make these decisions, and they are hard. Normal entrepreneurs want to go into every new market to please everybody they can. So a good strategy summary helps to frame the new opportunities right.page-focus-istock-46789594

There’s no obvious formula for making these decisions. They don’t teach it in business school. It’s something business owners have to do for themselves. There is always risk and opportunity. So you refer to your strategy summary first, and then think about it.

This should come up in the monthly review sessions I recommend for every lean business planning process for every business. That’s in Section 3, Keeping it Live.