by Neil Kuvin
A simple enough word. Does anybody disagree with the fundamental meaning of strategy: “a carefully devised plan of action to achieve a goal, or the art of developing or carrying out such a plan.” (Encarta Encyclopedia)
Why does this very basic construction of a “road map,” if you will, cause so many disagreements among serious management thinkers? Those in executive positions have struggled to steer their businesses, or clients to some form of sustained success. And the succinct, pragmatic response to describing a “Plan” escapes through holes caused by disagreement. Having a shared vision or definition of strategy is not simple, but essential. Let’s give it a shot.
BIZCEOS requires me to focus on business first, so let’s explore that only for now. So, what is a business strategy? First off, it is different from vision, mission, goals, priorities, and plans. It is the result of choices executives make, on where to play and how to win, to maximize long-term value.
“Where to play” specifies the target market in terms of your company or the customers and the needs to be served. The best way to define a target market is highly situational. It could be defined in any number of ways,
1. target customers (in certain parts of the world or in particular parts of your agency’s focus),
2. how they buy (very specific channels),
3. who they are (their particular demographics and other innate characteristics),
4. when they buy (for example, on particular occasions),
5. what they buy (for instance, are they price buyers or service hounds?)
6. or for whom they buy (themselves, friends, family, their company, or their customers).
Having a differentiated approach to a target market can be a source of great advantage in its own right. Southwest Airlines is a case in point. Early in its development, Southwest defined its target market to include regular bus travelers — people who wanted to get from point A to point B in the lowest-cost, most convenient way.
In contrast to the industry’s hub-and-spoke standard, Southwest’s point-to-point operations and hassle-free service model comprised a compelling value proposition for people who were choosing bus travel. You win (first) and obviously Southwest does by filling their airliners.
Tried booking a flight on Southwest lately? Their destinations, availability, generally lower costs and personal attention are just a few of the elements that make them desirable. This gave them a unique growth path compared to the traditional airlines. And latest attempts by most other carriers to raise additional revenue by charging serious money for extra bags, blankets, schedule changes, etc. have been positively rebuffed in a terrific PR and advertising campaign. That’s strategy!
The “where to play” was probably the most successful element of their strategy. What they did about it: essential for success. But without very carefully selected playing fields the message could have been expensed on millions of non, or occasional flyers.
A good strategy calls for the right amount of “capabilities stretch”: not too much or too little change from capabilities already existing.
Every company faces innumerable options for where to play and how to win. Often they have to sort out seemingly conflicting objectives, such as the need for both long-term growth and short-term profitability, to choose which options to pursue. To “maximize long-term value” means — when there are mutually exclusive options — select those that will give the greatest sustained increase to the company’s economic value. How do you know when you’ve maximized value? You can’t, because you can never know with certainty if there’s a better option than those you’ve considered and promoted. To “maximize long-term value” is to never stop looking for those higher-value options.
“Winning” is the value proposition that will distinguish a business in the eyes of its target customers, along with the capabilities that will give it an essential advantage in delivering that value proposition and identity. Choices must be made because there is at least one way to win in every market. But not everyone can win in any given market. With good choices, you, or your business clients gain the right to win in your target markets.
The “value proposition” simply stated, for air travelers, using the Southwest conditions, is essential from a “give me what I need” perspective. Southwest has landing rights in many cities where travelers want and need to go. And they “win” against an industry that maintains the status quo in marketing and advertising.
So, in the end, to define the fundamentals of yours or a client’s business strategy, here are some topics to consider as you answer three questions:
1. Who is the target customer?
2. What is the value proposition to that customer?
3. What are the essential capabilities needed to deliver that value proposition?
4. What’s “winning” look like?
Without clear and coherent answers to these four questions, you may have an exciting vision, a compelling mission, clear goals, and an ambitious corporation with many actions under way. But you don’t yet have a strategy.