Times Are Tough
As I write this, the US government is working on a $700 billion financial rescue package to avert an economic crisis of unprecedented proportions. The outcome is uncertain. But what is certain is that the economy is slowing and things will get worse before they get better.
Strong Value Proposition
The implications for business are clear. In economic downturns buyers are more careful than ever to buy only products and services that fully address their specific needs. As a result, companies offering an attractive value proposition to a well defined market will get through the hard times better than others.
That being the case, if you’re responsible for a product or service, one of the best things you can do today is to make sure you have a compelling value proposition for a well defined market segment (or segments). This is the essence of strategy.
Describe Your Strategy
Let’s say you’ve already done this on your own or with some outside help. If so, it’s time to put the strategy into words. Consider the approach recommended by David J. Collis and Michael G. Rukstad of the Harvard Business School in their recent HBR article entitled “Can You Say What Your Strategy Is?” They stress 3 elements: objective, scope and advantage. I like their approach because, if you can address the 3 elements, it means you’ve constructed your strategy diligently. Furthermore, it makes the strategy much easier to understand and therefore more actionable by the rest of the company.
1 - Objective
This is the “why” of strategy. It’s the end point; it’s what the strategy is designed to accomplish. A strategic objective that is specific, measurable and time bounded increases organizational focus and motivation. Here are some examples: “To serve 50% of the Fortune 1000 by 2020” or “To grow revenues to $100 million by 2015.”
2 - Scope
When describing scope, consider three dimensions: customer or offering (i.e. product/service), geographic location, and vertical integration. According to Collis/Rukstad, scope defines the boundaries of your business so that your managers know what to do and, more importantly, what not to do. If your scope is HVAC system design in the Southeast then your HR managers know to direct employee development dollars to HVAC training, and no one should be bidding on electrical system design in the Southeast or on HVAC design in the Northwest.
By the way, Michael Porter, also of the Harvard Business School, refers to scope as focus. By narrowing market focus, companies can sometimes find new sources of competitive advantage because it’s easier to identify (and serve) a unique combination of common needs in a small market than in a large market.
3 - Advantage
As noted above, a competitive and sustainable advantage based on a clear customer value proposition is the essence of strategy. In your Strategy Statement the advantage section describes the (unique) combination of product or service attributes that help differentiate you from your competition. Attributes to consider are: price, quality, innovation, lead time, selection, functionality, relationship, service and image. An example of advantage in a strategy statement might be: “Our cars are the safest.”
That being said, sometimes it’s difficult to differentiate your offering in a crowded market. In the end there are only so many ways to do things. In these cases, the best companies compete by delivering more completely and consistently than their competition on a clear, albeit mostly undifferentiated, value proposition. In other words, they win on execution.
Pulling It All Together
A well crafted Strategy Statement that is communicated throughout the organization helps employees focus their attention on activities that move the company forward to its strategic objective. Collis & Rukstad recommend that the approximately 35-word Strategy Statement be accompanied by a document that describes the elements of the strategy more fully to avoid misinterpretation. They also recommend that the Strategy Statement be supplemented by a Value Proposition Chart and an Activity-System Map that lays out the activities necessary to support the strategy. These are clearly helpful. In fact, both are good inputs to a Strategy Map, part of the Balanced Scorecard strategy execution methodology devised by David Norton and Robert Kaplan, also of the Harvard Business School. As Collis & Rukstad point out, the Strategy Statement is how you communicate strategy and the Balanced Scorecard strategy-focused management system is how you implement and monitor it.
A Strategy Statement Example
Collis & Rukstad offer the following brokerage firm Strategy Statement as an example.
Edward Jones’s Strategy Statement: To grow to 17,000 financial advisors by 2012 by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions, through a national network of one-financial-adviser offices.
What Now?
Try writing your company’s Strategy Statement as Collis & Rukstad have suggested. How did you do? Are you happy with it? Now ask your colleagues to give it a try. Are your statements the same? If so, it’s time to share your company’s Strategy Statement with your managers and employees.
On the other hand, if you had trouble writing down your Strategy Statement, or if your colleagues disagree on what it should contain, then you probably have some work to do; it’s time to update your strategy and express it clearly. The market will reward you for having done so.
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