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February 2, 2015

The Four Wheels of Effective Strategy

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“However beautiful the strategy, you should occasionally look at the results.”  Winston Churchill said that.

 

Michael Porter, the godfather of business strategy, defines strategy as “deliberately choosing a different set of activities to deliver a unique mix of value.” In other words, you’re changing something about what you do.

Therefore, it makes sense that the first great task of strategy is selecting the right metrics. What are your metrics that tell you whether you’re successful? Before you take your strategy too far, you must install checkpoints and anticipate what could go wrong.

That’s why I recommend every strategy to be test-driven against four areas:

  • Your customers
  • Your people
  • Your offering
  • Your financials

 

These four elements are universal for all organizations—large and small, old and new, for profit and not-for-profit. Furthermore, like the wheels on a four-wheel-drive car, they all need to be engaged and working properly if you want to get maximum traction with your plans. When it comes to strategy, you will get some things wrong, but you have to get the big things right. That’s what Porter points out.

As for me, here are my rules of the Strategy Road.

  1. It only takes one tire to blow out and send your strategy into the ditch.
  2. It takes more than one tire to climb out of the ditch.
  3. It takes alignment and effectiveness of all four to run smooth at top speed.

 

CUSTOMER

Every organization has customers (aka clients, buyers, consumers, patients, patrons, members, investors, lenders, stakeholders, donors, or supporters.) These are the people outside of your organization who are making a decision about your value proposition. Their purchase or donation counterbalances your costs to do business. If they don’t buy in, you’re forced out.

That’s why your strategy must account for this group of people who make your organization’s existence possible.

Ask yourself…

  • What will this strategy do to impact current customers?
  • How might this strategy help us or hurt us with the new customer segments we are chasing?
  • Where will the new strategy expose us to customer pushback?
  • Which customers will need special hand-holding through the strategy implementation period?

 

PEOPLE

A new strategy is rarely people-neutral. It’s going to offer advantages to and put stresses on the employees. What will be the impact of your strategy on your people? And what will be the impact of your people on your strategy?

Consider how the changes you have in mind for your organization are likely to affect people top to bottom. They’re not cogs. They won’t automatically and uncomplainingly start turning in the opposite direction just because they’re instructed to. Before you go ahead with any new strategy, ask yourself:

 

  • How will this strategy impact our most valuable leaders and managers?
  • Do we need different talent to pull off this strategy? Where specifically are our people gaps?
  • What new training and/or intelligence is necessary to successfully implement this strategy?
  • Is our current culture supportive of the strategy or running counterproductive to it?
  • How can we create buy-in to the new strategy prior to implementation?  How can we make our people advocates for our strategy? (This HBR blog article is a good read and, among other things, mentions research that only 5% of employees know company strategy.)
  • Do we need to revamp our reward and comp system to ensure success?

 

OFFERING

Your offering is the “what” that you do, the product(s) or service(s) your people provide to your customers. H&R Block offers tax preparation. McDonald’s offers fast food. Your local humane society offers animal protection. Your dentist offers tooth care.

Any new strategy of consequence is going to affect your offering. But in what way? The greater your clarity on this topic, the less risk you make.

Consider your offering a treasure you must preserve and polish. Make sure you’re taking carefully calculated moves with the product or service you are known by.

Ask yourself…

  • In what ways does this new strategy reinforce our current core offering?
  • In what ways will our core offering be at risk with the new strategy?
  • What part of our offering will have to either be stopped or reengineered to align with our strategy?
  • How will the strategy realign us vis-à-vis our competitors and their core offerings?

 

FINANCIALS

Finally, when it comes to test-driving your strategy, follow the money. Put the strategy through its economic paces with projections and analysis. As you do so, be careful of the age-old blind spot of being too conservative with expenses (“It will not cost us this much”) and too liberal with revenues (“It’s going to generate big numbers”). Behavioral economists point out that people in business tend to be too optimistic. One article on the subject stated, “Other than professional pessimists such as financial regulators, we all tend to be optimistic, and our forecasts tend toward the rosier end of the spectrum.” Crunch the numbers now lest they crunch you later.

Ask yourself…

  • Can our existing budget support the strategy?
  • How will we fund the new strategy?
  • How long will it take to get momentum and a return?
  • What are the current cash position and the forecasted cash position for the next season?

 

Customers, people, offering, finances. Before you rev your strategy engine, check each of these four wheels. A quick check now makes a huge difference later.

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