In my strategic planning work with small and mid-market B2B companies, I often see management teams struggling with the key concepts of business strategy and strategic thinking during the development of a strategic plan. Operational thinking is often prevalent. The term ‘strategy’ is often used rather loosely for anything that involves some kind of planning, whether it’s truly strategic in nature or not.
In this post, I’ll try to provide some clarification. Let’s take a look at the essence of strategy and strategic thinking, its characteristics, and how it’s different from tactical or operational thinking.
Key Characteristics of Business Strategy
Take the Initiative
No organization, not even a Fortune 500 company, has the unlimited resources to go after each and every opportunity that looks attractive. In particular, small business needs to be smart about how and where to deploy their limited resources to achieve growth. They can’t afford to waste time and money.
A good business strategy involves focusing on specific markets, the specific products and services to sell, and deploying distinctive sales and marketing activities. Resisting the temptation to go after every ‘shiny object’ is a key element of strategic focus.
It is just as important to decide when to say “No” to an opportunity as it is when to say “Yes”, perhaps even more so. Pursuing too many opportunities leads to dilution of management’s attention and company resources, increasing the risk that none of the goals will be achieved.
Standing out from the competition in a meaningful way is a key objective of developing a sound strategic plan. It is important to occupy a unique position as perceived by your target market. A position that is of value to your customers and that the business ‘owns’ and can defend against the competition. Trying to be all things to all people is simply a bad idea, is counter to a differentiation approach, and lacks the power of focus.
Another objective of formulating a business strategy is to identify or create a sustainable competitive advantage that can be leveraged. However, keep in mind that no competitive advantage lasts forever. Everything in business, or life, for that matter, is temporary. If you’re successful, a competitor is bound to move in, copying your business model, products, and services, and probably at lower prices. You can never rest, you need to keep innovating and find new ways to stay ahead of the competition.
Outperform the Market
A well thought-out business strategy involves smart decision-making to enable the company to outperform the overall market. Simply coasting along and having the business move up and down with the market is not an option if you want to be in control of your future.
An innovative strategy may involve avoiding the competition altogether, rather than fighting the competition head-on. This is called ‘blue ocean strategy’: creating an entirely new market or segment, instead of competing in an existing market.