(0:00) I would much rather reward an employee who pursues three actions and generates a million dollars in (0:06) value than an employee that pursues 50 actions and generates $500,000 in value. So it's better (0:13) to pursue fewer actions with a bigger upside. Welcome to Business Strategy, where we talk (0:18) about how to craft winning strategies, how to implement them, and build highly profitable (0:22) and iconic companies along the way.
I hope you enjoy and subscribe. So often strategy is overly (0:30) complicated. Today, I'm going to keep it very simple and explain what strategy is and how it (0:36) combines with finance in order to drive value in organizations.
So let's go ahead and get into it. (0:41) Strategy comes down to this. It helps an organization to focus its attention on solving (0:47) the number one constraint that the business is facing.
That's it, right? So strategy helps (0:52) organizations to focus on the most important thing in a world where there are a ton of distractions (0:59) and there's a lot of complication, especially in business. Business leaders are overloaded, (1:04) they have too much on their plates, and oftentimes CEOs introduce the flavor of the day, confusing (1:10) the crap out of their employees, right? So when it comes to strategy, it's all about having a system (1:16) to drive results. That's what I want to talk about today.
So when it comes to strategy, (1:21) the first thing you need to do is to identify the strategic problem your organization is facing. (1:27) This is the number one constraint that's holding your organization back from growing. (1:33) If you don't solve this constraint, guess what? The constraint doesn't go away.
(1:38) And if you scale your organization, all you're doing is scaling your problem. So you have to (1:44) solve the problem. Otherwise you're going to stay stuck, spinning your wheels, spending a ton of time, (1:49) energy, and capital on your business until you resolve this problem.
That's why I spend so much (1:56) time upfront on identifying what is the strategic problem. So I know we have a new year coming up (2:02) and a lot of organizations are going to be engaging in strategy. I would say the biggest miss when it (2:08) comes to strategy is that leaders, they just want to jump in and they want to get into the tactics, (2:13) right? They want to get into the actions, but that's so far down the line.
That's after you (2:18) have a strategy in place, you identify your initiatives, your actions, and your results. (2:23) That's what I refer to as IARs. But leaders, oftentimes they want to get into the actions (2:28) because it's fun, right? You talk about recreating a website, redoing the brand, (2:34) hiring a business development manager, implementing this project management software, whatever it may (2:38) be, those are all actions that roll up under initiatives.
So the first thing you need to do (2:43) when it comes to strategy is you have to identify what is the problem you're trying to solve (2:49) with your strategy. Once you identify what the problem is, it's time to move on to exploring (2:56) strategic options. This is where you look at a variety of options and you ask yourself, okay, (3:01) what does winning look like? What's the shared aspiration? What's our market focus and position? (3:06) In other words, what geographies are we going after? What channels are we going to use to (3:11) get to our customers? What stage of production are we entering in when we position ourselves (3:16) in the market? So that's market focus and position.
Then you move on to competitive behavior (3:21) and you have to understand, okay, are we going after a differentiation strategy, (3:25) after a cost leadership strategy, or after a focus strategy? And then you evaluate the resources and (3:31) returns by pursuing this specific strategic option. And at the center of all this is your (3:37) ideal customer profile. So you iterate over and over again.
You look at a variety of options (3:42) and you look at which option is going to be most desirable, practical, and economical, (3:47) and will allow you to overcome this problem that your organization is facing. (3:52) So that process is really critical. Once you have options narrowed down, it doesn't mean you have to (3:57) just bet the whole entire company on one option.
You may have two options you're considering. (4:01) I would say, then just go out there and perform tests. That's the key.
You just want to go out (4:06) there and experiment as quickly as possible to determine whether or not an option, like I said, (4:11) is desirable, practical, or even economical. Once you have a strategy in place and you're (4:17) really clear on where you're going to compete, how you're going to compete, and ultimately how (4:21) you're going to win, and the returns are attractive enough to pursue that option, (4:27) then you're ready to define your initiatives, your actions, and results. (4:32) Your initiatives do four things.
They, number one, help you to overcome your strategic problem. (4:36) That's why beginning with the problem is really critical. Number two, they help you to enhance (4:40) the customer experience.
Number three, to foster innovation. And number four, to build competitive (4:45) advantages. Once you have your initiatives in place, and I would recommend no more than five, (4:51) five's a lot, I'd do like one to three to start out.
You could always add on and remember your (4:56) initiatives are long-term in nature, typically three to five years in duration. Then it's time (5:01) to get into the actions. This is where you hypothesize and you think what action, if pursued, (5:06) will move the needle? In other words, what has the biggest upside? (5:10) What will advance our initiative forward? This is where a lot of companies go astray because they (5:15) list out a ton of actions, and I don't know if they just like having a lot of things on their (5:19) plate or what, but there's no prize for the number of actions you complete.
Really, the prize is in (5:26) the value that you create along the way. So I would much rather reward an employee who pursues (5:32) three actions and generates a million dollars in value than an employee that pursues 50 actions (5:39) and generates $500,000 in value because they're going to be wasting a lot of time. There's going (5:44) to be a lot of meetings, a lot of resources that are soaked up pursuing all those actions.
(5:48) So it's better to pursue fewer actions with a bigger upside. So like I said, when it comes (5:54) to designing your strategy for this upcoming year, avoid going right towards the actions, (5:59) right? Don't get into the tactics. Take a step back and start with the process that I outlined (6:05) for you.
Remember, define your strategic problem, explore your strategic options, (6:10) determine whether or not an option is desirable, practical, and economical, (6:14) and once it is, define your initiatives, actions, and results, and then go out there and build, (6:19) measure, learn, and adjust along the way. When you follow the system over and over again, (6:23) your probability for success will be incredible. I wish you all the best.
If you need any help (6:29) with this in your organization, you could always reach out to us at coltivar.com. Be sure to share (6:33) this. If you found value, that would mean the world to me. And until next time, take care of yourself.
(6:38) Cheers.
