How does a business owner decide on their next move during a time of turmoil?

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On the 21st October 1805 Britain faced a high-stakes challenge.

33 Franco-Spanish ships threatened the weaker 27 ship British fleet. This could have been the end of Britain’s defiance of Napoleon’s dominant land armies.

But at the end of the Battle of Trafalgar 22 ships were lost. All were French or Spanish.

Admiral Nelson lost none, and his legend as Britain’s greatest naval commander was secured, even though he lost his life. 

Nelson’s strategy...

He worked out the critical challenge in his situation.

Then he worked out a way of coordinating and focusing actions to deal with it. He won.

No strategy means losing...

In business, at sea and just like in chess, having no strategy means losing. Bad strategy won’t help you either. Instead, get clear on good strategy:

“The term ‘strategy’ should mean a cohesive response to an important challenge.”
– Richard Rumelt, author ‘Good Strategy Bad Strategy’

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Strategic lip service...

Good strategy is not a shopping list of desirable goals and objectives – even if they’re supported by smart-sounding words.

And if you avoid the hard work of diagnosing the challenge you face, then all you’re doing is paying lip service to strategy.

Good strategy is a coherent set of analyses, policies, and actions in response to a high-stakes challenge.

Good strategy is rare...

For example – 26 CEOs of some the world’s largest electronics companies were asked about strategy by Andersen Consulting. They were less than clear on their strategy:

“They were making alliances, they were doing 360 degree feedback, they were looking for foreign markets, they were setting challenging strategic goals, they were moving software into firmware...”

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Contrast this with Steve Job’s two timely strategies...

In 1997 Apple was just weeks away from bankruptcy. Then Steve Jobs returned!

Job’s initial strategic challenge was keeping the business alive.

His coherent action? Cut 15 desktop models back to 1. Cut all laptop models back to 1. Cut all printers. Cut development engineers. Cut software development. Jobs cut many more things to reflect the reality of having less than 4 percent of the personal computer market at that time.

Clear challenge. Clear strategy that perfectly suited Apple’s situation. 

Longer term...

With Apple’s survival secure, Jobs then got clear on his longer-term strategy too:

Unlike the 26 other leaders of electronics companies, Jobs avoided getting side tracked and was happy to wait. Jobs prepared to quickly pounce on the next big thing.

The rise of MP3 players, the Ipod, Itunes and the Iphone transformed our world. And Apple went from a value of $3billion to $1trillion! 

Nelson breaks with tradition

The well-developed sea-battle tactics in Nelson’s day were for the two opposing fleets to stay in line, firing broadsides at each other. At Trafalgar being outnumbered 27-33 made this risky.

Instead Nelson broke the British fleet into two columns and drove them at the Franco- Spanish fleet, hitting their line at 90 degrees.

The lead British ships took a great risk, but Nelson judged that the less-trained Franco- Spanish gunners would not be able to manage their guns in the heavy swell that day.

Nelson worked out the critical factors in his situation and designed a way of focusing actions to deal with them.

As a business leader your most important responsibility is to identify your biggest challenges and devise a coherent approach to overcome them.

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Small business or big business, matters not...

It doesn’t matter whether you’re a Government, a multinational business, a military unit, a sports team, a small fleet of 27 ships or a small local business!

No strategy or bad strategy risks losing, badly. Especially when facing economic turmoil or big shifts in working patterns and expectations.

Good strategy shines a light in a storm and gives you chance to both survive and thrive. But first it pays to...

Avoid bad strategy

Richard Rumelt’s lifetime of strategy experience shows up in his book – ‘Good Strategy Bad Strategy’. Bad strategy mistakes goals, ambition, vision, values and effort for strategy.

So, be sure to steer clear of the 3 major hallmarks of bad strategy:

1. Bad strategy fails to recognise or define the challenge you face. If you cannot clearly define the challenge you face, how can you work out a strategy that will work? All you’ll be doing is wishful thinking and investing time and effort in misdirected strategy.
   
   
2. Gibberish can often masquerade as strategy. For example, when a retail bank’s internal strategy statement says: 
   
   “Our fundamental strategy is one of customer-centric intermediation.” 
   
   It might sound smart, but ‘intermediation’ means that the bank accepts deposits and lends money to others. In other words, they have a strategy statement that says:
   
   “Our bank’s fundamental strategy is being a bank.”
   
   
3. A shopping list of desirable goals and objectives is not strategy.
   
   “Bad strategy is long on goals and short on policy or action.”
   – Rumelt.
   
   Good strategy is not a stand-alone decision or goal. Stating goals is relatively easy!
   
   

Thankfully, good strategy involves the hard work of diagnosing key challenges, and then making strategic choices, giving focus and coherent action.

It’s possible that your competition will avoid this hard work. Will you?

Your competitive advantage

Although it’s hard work, Rumelt points to strategy as a lever that magnifies the force of your actions and efforts.

Diagnosing key challenges and developing good strategy gives focus. And focus means choosing what to ignore and what to act on.

But do this hard strategy work and you gain a competitive edge. You’re then more likely to win.

Implement good strategy

1. Diagnose, define and explain the challenge your business faces.

How does a local grocery store simplify the complex reality of their business? Get clear on what’s going on? Get clear on the critical issues that can help define policy guidelines and actions?

For the full case study check out the download tools. Here’s their simplified challenge:

“How do we win customers away from a national store that opens 24/7 with much lower prices?”

2. Set out your guiding policy for dealing with the challenge.

What overall approach helps overcome the issues you face?

A good guiding policy tackles the obstacles that show up in your diagnosis. And like the guardrails on a motorway your guiding policy directs and constrains your actions (brings focus and choice).

The grocery store might choose a policy that focuses on ‘the busy professional who has little time to cook’. Rather than serving the ‘the many students in the area with all their groceries’.

If you’re missing a good guiding policy, there is no principle of action to follow.

3. Next choose coherent actions that overcome your diagnosed challenge and follow your guiding policy.

A 2nd checkout would help handle the burst of busy professionals at 5 pm. Space used for selling munchies to students should be used to offer high quality pre-prepared take-home foods. And there’s no need for very late hours.

When actions are coordinated like this, they build on one another for greater focus and leverage. 

TIME TO DISAGREE

Your 'Make It Happen' checklist:

Is now a good time to take good strategy seriously for your business?

It’s easy to avoid the hard work of building good strategy. Instead, do the work and put your business on the road to a sustainable competitive advantage that sees you win.

The four steps sound like they are stating the blindingly obvious, but most businesses fail to take all four steps – what will you do?

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