It's a bit like Mark Up and Margin - everyone knows the words, but lots of people seem to get them confused...
*Mark Up is profit expressed as a percentage of the Cost, whilst Margin is the profit expressed as a percentage of the price...
So what is a Strategy and what is a Tactic...?
In 2014 Walmart CEO Doug McMillon stated that the Strategy for growth for the company would be...
...to win on four key customer dimensions; price, assortment, experience and access...
Translated to mean lots of cheap stuff that is fun to buy and easy to get at...
This strategy could apply to other companies too. Maybe an airline, restaurant chain even a hotel group...
How to put a Strategy together...
The major challenge I find is that Business people get it wrong at the start...
For example, a recent conversation at after one of our workshops in the bar...
How to put a Strategy together...
The major challenge I find is that Business people get it wrong at the start...
For example, a recent conversation at after one of our workshops in the bar...
"we manufacture food additives and we are getting screwed on price from cheap importers and payment terms from our customers; what should our strategy be...?"
Get out of the food additive's business...
You see, none of us are in the "XYZ" business - we choose the "xyz" business to achieve our Vision - what type of business we choose to build is part of our Mission and a fundamental aspect of Strategy...
I asked the lady at the bar what her Vision was - and she had no idea, either what she was trying to achieve or why she was doing it...
She was running her business to make money - she'd lost her passion, her raison d'etre, her why...
Get out of the food additive's business...
You see, none of us are in the "XYZ" business - we choose the "xyz" business to achieve our Vision - what type of business we choose to build is part of our Mission and a fundamental aspect of Strategy...
I asked the lady at the bar what her Vision was - and she had no idea, either what she was trying to achieve or why she was doing it...
She was running her business to make money - she'd lost her passion, her raison d'etre, her why...
Rule #1 - do not run your business to make money...!
Money is a consequence of Vision, Purpose, Passion and Excellence - build something that adds value to people and the money will show up..,
In order to define your business Strategy and Tactics you must start with your Vision - what is your "why", does your business pass the "so what*.." test...?
*The "so what..." test can be applied to a variety of business decisions and actions - "I'm in the food additives business..." - so what...?
Alternatively...
"My Vision is to change the way people relate to food and enable them to live healthier, longer and happier lives - at the moment I am achieving this by providing the worlds finest herbs, spices and natural ingredients to independent restaurants and specialist food producers..."
Money is a consequence of Vision, Purpose, Passion and Excellence - build something that adds value to people and the money will show up..,
In order to define your business Strategy and Tactics you must start with your Vision - what is your "why", does your business pass the "so what*.." test...?
*The "so what..." test can be applied to a variety of business decisions and actions - "I'm in the food additives business..." - so what...?
Alternatively...
"My Vision is to change the way people relate to food and enable them to live healthier, longer and happier lives - at the moment I am achieving this by providing the worlds finest herbs, spices and natural ingredients to independent restaurants and specialist food producers..."
A little different...?
What is your Vision for you, and your professional accomplishments...?
Having a compelling Vision does not mean you have to be in business - it's probably the toughest way to achieve anything...
Look at the first part of the Vision above - it could be achieved through Nutrition Training, Education, Restaurants, Medical Practitioners; it could also apply to Mr Jamie Oliver...
Having a compelling Vision does not mean you have to be in business - it's probably the toughest way to achieve anything...
Look at the first part of the Vision above - it could be achieved through Nutrition Training, Education, Restaurants, Medical Practitioners; it could also apply to Mr Jamie Oliver...
The Vision defines both your Purpose, Passion and Why - it's then over to the Strategy to define the What, and the Tactics give you the How...
Once your Vision is clear - then you can move onto making a strategic choice - do you build a business, a charity, lead an organisation or start a movement...?
Of course, many people think it's too late for all this - they have been in the "widget" manufacturing business for so long their very identity is defined by the "widgets" they make and the market they operate within...
Of course, many people think it's too late for all this - they have been in the "widget" manufacturing business for so long their very identity is defined by the "widgets" they make and the market they operate within...
This is really dangerous, we used to call moments of inspiration a "Jack Daniels" moment after the Gibson Guitar off site manager meeting - now we have to consider the "Uber" moment when some kid in his back bedroom who isn't as passionate about "widgets" starts a disruptive movement that wipes you out; and you won't even see them coming...
If you are already in business start being Innovative and Creative and thinking outside the "widget" - again - you are in business to achieve your Vision, not to make "widgets"...
Your Vision remains fixed - your strategy can change...
OK so we have a Vision - and at the moment we'd like to achieve it through the delivery of food additives or whatever business you like - what's next...?
Strategic Choice...
What's your Mission - what will you do to deliver on the Vision..
In military terms the Vision could be to eradicate fascism from Europe, the Mission is to secure the Normandy beaches and the Tactics are Airborne Assault followed by amphibious landings with air support..
In military terms the Vision could be to eradicate fascism from Europe, the Mission is to secure the Normandy beaches and the Tactics are Airborne Assault followed by amphibious landings with air support..
Choosing your business is just the start of your Strategic Development - it's important; but not the end of the process; we need to speak to a Mr Porter here for guidance - ref Michael Porter - Competitive Advantage LINK
Most people choose a business because it's what they know - Accountants runs Accounting Practices, Chefs run Restaurants, Beauticians run Salons...
Or they run a business because their Father or Mother started it years ago and there is a sense of loyalty, heritage and historical identity associated with it..
Or they run a business because their Father or Mother started it years ago and there is a sense of loyalty, heritage and historical identity associated with it..
These are of course natural, and when blended with practical strategic choices, they likelihood of long term success is a lot higher - there is a reason that lots of start ups don't make it - they don't know what they are doing...
So if you are starting out - or starting with a going concern, assessing your business idea strategically is a great starting point...
So if you are starting out - or starting with a going concern, assessing your business idea strategically is a great starting point...
Michael Porter defines 5 Market Forces that should be taken into consideration when developing your business; it challenges us to be critical about the environment we either will be or are operating. Remember, the market changes and this process should be carried out at least annually to take account of environmental, social and economic changes...For example - here's the model applied to a Business Coaching Business...
There is a load of Coaches out there, the barriers to entry are low and they have to be a competitive bunch...Substitution through technology is a threat, however the power of suppliers and customers is low...
So to thrive in this type of market environment - I have to choose make a number of Strategic Choices...
If you are going to go into the Coaching business - you need to go down the Differentiation Focus route for example...Walmart are going down the Cost Leadership route...
This starts to define the way you have to structure and design your business; it should guide all the decisions you make about products, services and the way you market and sell them...
You can even plot your Strategy on the Strategy Clock and mount it on the wall as a reminder of the choices and focus of the business...
Note - low value high price is destined for failure - not a real surprise but when it comes to services and products that you want to charge a premium for, at least do your customers the courtesy of being good at it...
OK - so you have made your Strategic Choices - now we can move onto developing the Tactics that will contribute towards them...
Note - low value high price is destined for failure - not a real surprise but when it comes to services and products that you want to charge a premium for, at least do your customers the courtesy of being good at it...
OK - so you have made your Strategic Choices - now we can move onto developing the Tactics that will contribute towards them...
What are Business Tactics...?
Tactics are the things you do to support the Strategies...
For example - as a Coach in order to define myself from others in my market and achieve competitive advantage through differentiation I have published 48 Books, I have worked in 25 Countries, I read a book every couple of weeks and my approach to clients unique...
Whatever business you choose to be in and whatever your Vision and Strategic choices - your tactics must lead towards them...
Tactics are the things you do to support the Strategies...
For example - as a Coach in order to define myself from others in my market and achieve competitive advantage through differentiation I have published 48 Books, I have worked in 25 Countries, I read a book every couple of weeks and my approach to clients unique...
Whatever business you choose to be in and whatever your Vision and Strategic choices - your tactics must lead towards them...
I see so many companies that have a great Vision and even Strategic Clarity - but the tactics are not supporting them..
For example, some years ago, a Nut and Bolt supplier in the West Midlands had a Vision to "Transform how Engineering Components are attached to each other, making them safer, more reliable and more efficient..."
So far so good...
The Strategy was to be one Focussed Differentiation - providing specialist solutions to a specific market and being recognised as the leader within it..
For example, some years ago, a Nut and Bolt supplier in the West Midlands had a Vision to "Transform how Engineering Components are attached to each other, making them safer, more reliable and more efficient..."
So far so good...
The Strategy was to be one Focussed Differentiation - providing specialist solutions to a specific market and being recognised as the leader within it..
However - when it came to Tactics - it went wrong...
The team thought that they were a Nut and Bolt business - so just kept designing and selling nuts and bolts, that could be sourced from anywhere...
Their mindset and tactical approach was Low Added Value and Medium Price point - 8 on the Strategy Clock...
The team thought that they were a Nut and Bolt business - so just kept designing and selling nuts and bolts, that could be sourced from anywhere...
Their mindset and tactical approach was Low Added Value and Medium Price point - 8 on the Strategy Clock...
What they could have done was consider the following Tactics...
- Innovation - attaching components together does not mean a nut and a bolt. It can include adhesives, welding, 3D printing, rivets - but they decided to remain a simple "me too" nut and bolt provider...
- Naming - if you are going to lead through focussed differentiation then name your products. Having a product name of "M8x25x1.25" is not going to excite anyone - plus if you Google that you'll get thousands of places to get it from...
- Bundling - sell "kits" that solve a problem for your customers, build the "Happy Meal " of the Nut and Bolt world.
- Service - deliver the products within 2 hours of ordering, be open 24 hrs a day 7 days a week..
- Cross Sell - provide tools, training, clothing that your customers are buying from somewhere else - chase after budget share not market share...
- Partnership - work with your customers at the design stage, get specified and built into the design so they have to buy from you...
- Reputation - deliver customer service so amazing that people send you unsolicited bottles of wine, testimonials and thank you notes. Be so good that you have a waiting list of people who want to come and see how you do what you do...
- Training - recruit, train and develop your team so that the Vision, Mission, Strategy and Tactics become the DNA of your business ...
There are plenty more - but you get the picture...
There is a place in the market for a successful high growth and profitable business, that supports your Vision - all you have to do is match your Strategic Choices and Tactical implementation to be in sympathy with it and you will have no choice but to be successful...
Or you can keep selling cheap nuts and bolts to a market that wants high value innovative fastening and component attaching solutions - and get nowhere quick...
There is a place in the market for a successful high growth and profitable business, that supports your Vision - all you have to do is match your Strategic Choices and Tactical implementation to be in sympathy with it and you will have no choice but to be successful...
Or you can keep selling cheap nuts and bolts to a market that wants high value innovative fastening and component attaching solutions - and get nowhere quick...
Finally - if you ask me about Business Strategy, I'm going to ask you about your Vision...
This is the start point for everything...
David Holland MBA is Business and Executive Coach - he's also a Husband of 30 years; to the same person too, Dad to two amazing boys, an only Child (explains a lot...) a Drummer and a Biker...
His cooking sucks - apart from Christmas breakfast which is awesome, ask Jon and Rich - but he can fix cars, is kind to animals and is really good at enabling people to achieve remarkable results both personally and professionally...
He's published 48 books, (thank goodness for spell-check...)worked in 25 Countries, lives in France and has offices in Luxembourg, the UK and the USA...
His friends call him Dutch and Lynn calls him anything she likes because we all know who the boss really is...
You can come along to one of his events - click HERE to find out where in the world he'll be appearing next...
AND - you can even drop him an email to see how he can be involved - he'll even do a keynote for your conference if it's due to be held somewhere warm...
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