The key to developing an effective strategy lies in your ability to set a goal and then make logical choices which give you the best possibility of reaching your goal. Sounds easy, right?
I’ve long advocated that we make strategy far more complicated than it needs to be. There is a simpler and far more effective path that this article will outline.
Strategy is about making choices. This article discusses two choices that are more critical than all others and that form the foundation of a good strategy. If you haven’t made them, your chances of making the right choices down the line are significantly reduced.
Before moving on, this is the second of four articles I am posting on how to create an effective strategy. The first article focused on how to set your worldview which explains the “Why now?” behind your strategy and builds the context for making the decisions in this post. If you haven’t read it, I’d recommend you start there.
Let’s start with an inconvenient truth: most organizations don’t actually have a strategy. What they often have is a proxy statement they use as strategy. Some examples might sound familiar, such as “Our strategy is to be:
1. the best provider of X products or services.”
2. the leader in X market.”
3. the dominant provider of X.”
These are all aspirations. They may or may not be good, but they’re not strategies.
Unfortunately, companies that develop a strategy may not be much better off than those that don’t. The authors of the book Profit From the Core found that while 90% of large enterprises they studied had comprehensive and detailed strategies, seven out of eight actually failed to achieve profitable growth.
You might be wondering, “If large enterprises can’t create an effective strategy, why should I even attempt it?” I can guarantee you that the right strategy will propel your organization forward.
Let’s start first with a definition of strategy. Borrowing from military historian John Lewis Gaddis, strategy is the way an organization aligns “potentially unlimited aspirations with necessarily limited capabilities” to create the best outcome possible. That is the key to strategy—to make choices that focus your aspirations on something achievable (a goal) and then build and align the resources, capabilities, and actions to reach that goal.
In this article we focus on the two choices that will help you define your aspiration and that will lead you to making the right choices of how to use your resources, a topic for the next post.
Defining Your Strategic Objective
Defining one or more strategic objectives is the very foundation of an effective strategy. As the rabbit said in Alice in Wonderland, “If you don’t know where you’re going, any road will take you there.”
The simplest way to answer define it is to ask, “What does winning look like to us?”
This is the stage where leaders tend to lean into a product category, aspiring to be the dominant provider of one product or another. There are a few issues with that approach. First, it’s not inspiring to most people. Second, it also locks you into a product, not an opportunity. Third, it’s subjective. What does dominant mean?
The right strategic objectives should be:
1. Aspirational. At this stage it should be a stretch and somewhat lofty.
2. Centered on the customer. This is what inspires your team.
3. Objective. Know with certainty that you’ve reached your objective. Revenue is my preferred quantitative objective—it’s simple. You can add others that indicate winning to your organization.
4. Time bound. This defines your sense of urgency and tempo. An annual delimitation has advantages, but you can pick something further out.
These objectives should flow naturally from your worldview (see previous post) which will define the context for your customer and help identify opportunities for your organization.
A strategic objective that defines winning can look as simple as something like this, taken and modified from a company I have worked with.
Our strategic objective:
Our goal is to become a $20M revenue company in 2022 by meaningfully helping customers to identify, manage, and mitigate their digital risk.
You might question why I include revenue as a strategic objective. You are defining what winning looks like; the point is to create objectivity: you should be able to state with certainty if you achieved it or not. I advocate revenue is a powerful and objective, especially for startups.
This strategic objective, your definition of winning, which naturally lead you to the question, “How will we do it?” But first, it’s important to define your unique position in the market—where you will choose to play.
Defining Where You Will Play
Next comes a critical decision: where you will play? It’s one of the most critical decisions to make, and one that few companies are willing to consider.
The considerations for where to play can include focusing on a specific market, customer, geography, channel, product position, product category, and even use case. Your decision of where you will play should come from your understanding of the market the best possible playing fields. The trends, shifts, and opportunities you defined from setting your worldview should guide you to the best plays available.
Where you will play matters because it can create open opportunities that you can consistently win. Redbox created a nearly $2 billion business for video rentals with a unique “where to play” strategy built on convenience of time and location.
Defining where to play doesn’t limit your opportunity, instead it solidifies your opportunity by defining the playing field that you know you can win. Too often startups especially try to be all things to all customers. Their customers are spread across geographies, industries, and use cases, creating steep learning curves and dragging their ability to consistently win.
Recently I met with the senior leadership who resisted this notion of where to play. To illustrate the importance of this concept we spent time talking through each of their competitors, their products, go-to-market, and what customers they were targeting. By the end of the exercise they realized that all their competitors had carved out a “where to play” position for themselves and concluded that they needed to do the same.
Where to play strategies do not lock you into a niche. They give you a playing field where you will build unique capabilities and strengths to win consistently and grow your business, expanding your playing field or moving to others.
Together, your choice of strategic objectives and definition of where you will play will lead you to the core, actionable decisions of your strategy: “How will we win?”
In the next post we will talk about how to lead your team to create actionable strategic plays that will focus your organization on key priorities you need to win. I’ll also introduce one of the best and most insightful exercises that will help your team agree on what to do, and importantly, what to stop doing, to be successful.
William Kilmer is a managing partner at C5 Capital, former CEO and managing director at Intel Capital. He is the author of the upcoming book, Transformative: Build a Game-Changing Strategy, Retool Your Organization, and Innovate to Win. For more information, visit Williamkilmer.com
Research shows that 95% of employees are unaware of, or do not understand, their company’s strategy.
No better, only 21% of board members say they understand the company’s strategy.
If you think this describes your organization, read on. I’ll show you the best way to engage your team in building an effective organizational strategy in four steps covered in four short articles.
Be assured that organizations that don’t know how to build and communicate an effective strategy eventually fail, losing to companies that are better able to evaluate their environment and make important choices.
An effective strategy is one that aligns the company behind one or more goals, focuses the team on a small number of things they must get right to win and motivates and engages all stakeholders to innovate to achieve it.
Many organizations feel like they have a strategy when they don’t. More on that later…
In this and the next three posts we’ll cover four key steps to get you there:
1. Creating a worldview. Setting a contextual overview with your team that comprehends the company’s environment and brings the “why now?” forward, painting the canvas for the strategy and choices you make.
2. Setting your strategic goal and playing field. Identifying your strategic objective and your field of play to clearly delineate where you play.
3. Defining strategic plays. Strategy is about making choices of what to do and not do to win. A simple exercise will get your entire team involved in that process and develop organizational focus.
4. Increasing your clockspeed. Because strategies are meant to be active, I’ll show you how to track and manage your strategy and performance and accelerate the clockspeed at which you accomplish your goals.
Step One: Create a Worldview
In the next article I describe what a strategy is, and what it isn’t. First, it’s important to lay the groundwork for creating a great strategy. That foundation starts with cultivating and codifying contextual awareness, something I call a worldview.
A worldview is simply your organization’s unbiased description of the current operating environment and what you accept as observed truth that leads to why you are doing what you’re doing. It includes the factors that lead up to the problems faced by your customers, their needs and challenges, trends, and the opportunities they create. It leads you to define a “Why now?” that will motivate your team and open your organization to new innovation.
Great leaders start with a worldview because it grounds the entire organization on how you look at the world and provides a why to your story.
A worldview also gives your team the opportunity to contribute to it, overcomes biases, and provides the opportunity to challenge that view in the future as trends change.
Microsoft CEO Satya Nadella, who has presided over one of the most historic company transformations, has mastered the ability to set a worldview for Microsoft. Watch him absolutely nail the Microsoft worldview here in under five minutes. https://www.microsoft.com/en-us/Investor/events/FY-2018/Satya-Build-2017-our-evolving-worldview
Nadella advocates that his teams “know where the world is going”
He focused his turnaround at Microsoft by creating a profound sense of Microsoft’s ability to intersect the world around them to develop solutions that customers are looking for. In Nadella’s own words, “We must always ground our mission in both the world in which we live and the future we strive to create.”
If you’re a startup, setting your worldview collaboratively with your team is essential, and documenting it is fundamental to aligning your organization with an understanding of customer problems, opportunities, and challenges. Without it, many organizations believe they are on the same page as to what is happening in the world around them when they are, in fact, working under different assumptions.
Start by challenging your leadership team to build a concise worldview for your organization. It can be as short as three to five bullet points or a full multi-page document.
The easiest way to build your worldview is to invite your team write it with you. Explain the exercise to your senior team and your objective is to create the canvas of the market.
Break the team into smaller groups of two or three people and ask them to work together to develop and present the views on the current state of the market and the trends you expect to impact it. They should include:
1. What are our basic assumptions of the market in which we play?
2. What are the trends most likely to impact us? How sizable is the impact?
3. Where are new or emerging opportunities enabled by these trends?
4. What are current threats we face?
An essential tool for identifying and analyzing trends is a PESTEL analysis. PESTEL is a mnemonic covering significant trends: Political, Economic, Social, Environmental, and Technological.
Give your teams time to write these out on their own and create an outline to present to the other teams. Debate what the team agrees with and they don’t to draw from the presentations a collective narrative that team agrees is your worldview.
You won’t agree on everything, so collect those trends and their potential for impact that are less certain—that’s your watchlist for your team to verify and the degree of impact in the future.
Recognizing contextual changes drives the creation of great opportunities. The initial impetus for the creation of Netflix 1.0, the company’s DVD mail-order business, may have come from Reed Hasting’s displeasure over a $40 video late fee. However, the real foundation for the solution came when a friend told Hastings of the coming trend of movies moving to the digital video disk, or DVD. Understanding this trend, Hastings created and tested the hypothesis that this more durable media could be mailed without damage. Hastings purchased several music CDs and shipped them to himself to prove his hypothesis.
At the time DVDs sold for $20 while Blockbuster was buying VHS cassettes for $45. Hastings recognize these fundamental changes meant that he could purchase inexpensive and durable DVDs and mail them cheaply. This allowed Hastings to develop a competitive offering by using regional distribution centers to distribute the DVDs by mail. This new trend opened up a new opportunity and built the “Why now?” narrative.
Building a worldview may not present a billion-dollar opportunity like Netflix, but it is effective at getting your entire team on board and ready to design your strategy for the opportunity in front of you.
One CEO I worked with exemplifies an effective use of contextual awareness to identify what trends were impacting her organization, how they were affecting customers, the opportunities created, and what capabilities the company needed to build to take advantage of the opportunities. In every board meeting and company meeting, she would display that slide of assumptions which gave her team the “Why now?” and then explain the problems it created for the customer, and why her company was uniquely positioning themselves to fulfill their needs.
This short exercise will unify your team together to a common vision and allow you to communicate it to the entire organization.
With that in place you will be prepared to explore your own strategy including a definition of what winning means and how you will achieve it. We’ll cover that in the next post.
Feel free to comment below or reach out if you have any thoughts.