No, not SALES!
Today this post is going to address STRATEGY and why small business owners fear it so much, and why they shouldn’t.
I was inspired to write this post as a result of my attendance on numerous personal development, business workshops and seminars around the world, talking with entrepreneurs, customers and business owners.
I found when they were asked about their business and then what their strategy is? It would often stun most entrepreneurs into silence, and this is the extrovert ones!
So, why is it when this word is used in a sentence it causes most small business owners to be distressed or worse disinterested.
My goal for this post is to ensure you as my fellow Entrepreneur and small business owner no longer struggles with the idea of strategy, and recognise that it’s your friend.
What is Strategy?
I believe the problem lies in the definition of the word. But, before we outline a few definitions I want you to bear in mind this quote from Michael E. Porter, who is a Harvard University Professor and a leading authority on company strategy “Sound strategy starts with having the right goal”.
How is the word strategy defined anyway?
The Oxford English dictionary defines it as:
- a plan of action designed to achieve a long-term or overall aim. For example, time to develop a coherent economic strategy.
- the art of planning and directing overall military operations and movements in a war or battle. For example, he was a genius when it came to military strategy.
In Wikipedia it is defined as:
“A strategy is a plan of action designed to achieve a vision. Strategy is all about gaining (or being prepared to gain) a position of advantage over adversaries or best exploiting emerging possibilities. As there is always an element of uncertainty about future, strategy is more about a set of options (“strategic choices”) than a fixed plan”
And Johnson and Scholes authors of the book Exploring Corporate Strategy define strategy as:
“Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations”
Based on the definitions above you can be forgiven for not totally getting it! Let’s face it they sound like they were written by an academic for academics.
However, for me this quote by Michael E. Porter provides clarity and totally makes it simple, understandable and practical. “The essence of strategy is choosing what not to do.”
So, what does this mean? To me it means focusing your business operations so that it provides the services or products to meet the needs of your target market, in order to meet your goal (make a profit!).
As a business owner you can appreciate the hardest decision is deciding what customers not to service, or what services not to provide.
Let me illustrate this in an example below.
Photo Source: Nathalie Magniez
Example of Small Business Strategy
Meet Mr Washer who operates his Plumbing business A Washer and Son from Peckham, South London.
The current situation is that Mr Washer has been running his business for 18 months, and has been picking up plumbing jobs from both commercial and domestic clients all over London and the home counties.
At this time he works alone and gets most of his work from domestic customers, however, when he gets commercial work he can charge a premium.
Mr Washer’s 12 month business goal is to generate an income of £60,000. However, the most he has made to date is £30,000.
Well, what strategy can Mr Washer employ to meet his business goal? A number of questions would have to be answered to get an idea if the goal can be met, or if operations within the business have to be changed to fulfil it.
Please note the questions below are not exhaustive and are for illustration only.
- Who is your target customer? In this case, Mr Washer has to decide whether he wishes to continue to service both domestic and commercial customers.
- Why should your target customers do business with you? In short, what is your unique selling proposition (USP)? What sets you apart from your competition?
Mr Washer will need to get a handle of his USP, and it can take months or years to establish. For example, will he differentiate himself from his competition by superior customer service, or ensuring that he is onsite within 30 minutes of every call.
He should ask his existing customers why they do business with him, and also research the competition and see what makes him special.
- What market(s) are you going to compete in? Is Mr Washer going to provide a full plumbing service? Or specialise in unblocking drains? This is a great question to answer as Mr Washer may find that he is spreading himself too thin. He may even decide to only operate within a 5 mile radius of his office in Peckham, South London.
- What resources do you have available to compete in your chosen market(s)? Mr Washer needs to consider if he has the skills, competence and human resources to operate in his chosen markets. He may find that by focussing within a more concentrated area his marketing will become more focussed and will be better able to target the customers he wishes to service.
- What external, environmental factors affect the businesses’ ability to compete? Is Mr Washer’s business going to be impacted by political, economical, social or technological changes?
For example, if the government or local authority were to pass some law or regulation, which meant all Plumbers must pay an annual license fee of £10,000 to operate in the UK. This may impact the choices Mr Washer makes in terms of customers and services offered, or if it was still worth his while to continue trading.
Other Great Michael E. Porter Quotes on Strategy
As you will see from reading the quotes below strategy is all about you, the small business owner (Chief Executive Officer (CEO)) making choices about how your business is best going to meet your business goals, based on your chosen markets.
“The chief strategist of an organization has to be the leader – the CEO”
“Strategy 101 is about choices: You can’t be all things to all people”
“The company without a strategy is willing to try anything”
”Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different”
Admittedly, what I have presented in this post is a very simplistic view of strategy, however, a view, which will serve you well as an entrepreneur. Let’s face it, the entrepreneur you most admire has a knack for presenting their business ideas simply. So, why shouldn’t you!
Key Take Aways
- When you next create or review either a marketing strategy, website strategy, social media strategy or any other strategy. All you as a business owner have been challenged to do, is to go through the process of choosing the path your business is to take in order to meet your business goal.
- It’s worth restating Porter’s quote “Sound strategy starts with having the right goal”. So, what is your goal for your marketing, website or social media strategy?
Don’t be intimidated. The next time you hear or read the word strategy in a sentence it means you need to make a choice in how your business operates in its chosen market(s).
As one of my business heroes Keith J. Cunningham said “Business is an intellectual sport”.
What this means to me is, if you jump in and get on with “doing business” sooner or later you’ll have to stop and think – am I focused and operating in the right markets? Servicing the right customers or producing the right services? To meet my business goals? Assuming you’ve set a goal from the outset
I’d like to hear your comments on what strategy means to you and your business? I’d also like to hear from you if this post has inspired you to revisit any of your strategies?
Leave your comments below.
Category: Small Business