Specializes in governance, strategy, finance, and M&A. Author & Experienced Outside Director. Kona Advisors LLC.
Many business owners think of strategy as complicated, where consultants create 80-page PowerPoint decks to explain what they should do and why. In larger public companies, this is often true since the forces at play are so complex and intertwined.
Yet, most private companies have only a few product lines, pursue limited channels of distribution, are confined to a domestic reach and are either capital and/or management constrained. This reduces the difficulty of creating an effective competitive strategy. If revenue is generated mostly through e-commerce, the strategy questions are even simpler.
While we have been led to believe that a competitive strategy needs to be complicated, for most private companies, history has shown that a simpler approach is likely to be more impactful. You should be able to articulate your growth strategy in just a few pages, and it should be easy for everyone in the organization to understand. After all, they are the people who have to do the work. You want them to easily connect the big picture to their daily activities. This approach creates organizational leverage and enhances their engagement by making their efforts more meaningful.
Army companies have between 60 and 200 soldiers since, at that size, one captain could manage those relationships. This may or may not be true in your organization. The biggest challenge of leadership is to deliver business results through others, especially when there is no personal relationship or direct communication to rely upon. Remote work makes this even more challenging.
A succinct, well-developed strategy document is as much a communications tool as it is a business planning event. Here is what it should look like.
1. Includes Well-Defined Goals Set By Owner
Business owners are responsible for providing directives to the board and management on what it expects the business to achieve and what constraints they wish to impose on how the business operates.
Metrics should include revenue, EBITDA (earnings before interest, taxes, depreciation and amortization), increased valuation, market share or something similarly concrete. When this information is confidential, translate it into the operational metrics already in use. Whenever possible, goals should be SMART (specific, measurable, achievable, relevant and time-bound).
2. Has A Time Frame To Measure Results
It is hard to plan much past three to five years, as the world will change your situation by then. If ownership sets a five-year objective, break it down into annual steps. It is hard to solve a complicated problem in one step. So, break it down into smaller, more solvable problems, and then roll up your results. Years become quarters, quarters become months and months become weeks.
3. Links Strategic Objectives To Operational Tactics, From Top To Bottom
Annual and quarterly business goals need to be broken down into the quarterly, monthly, weekly and daily tasks for each decision-maker in the organization. Everyone, from top to bottom, needs to be connected. You will want to do this in concert with the people you are relying on since you need their buy-in to get results. Have these discussions to identify the constraints on growth, and then do something to remove the constraints.
4. Is Consistent With The Company’s Culture And Persona
Organizations don’t usually tolerate decisions that conflict with their inherent values. You know who you are, for better or worse. Don’t fight your own DNA.
5. Is Crafted For What The Management Team Can Actually Get Done
Once you figure out what needs to get done, be realistic about what can be done. If you lack the talent or bandwidth, figure that out first before launching a campaign that is destined to go nowhere fast.
6. Holds Management Accountable
Traditionally, management develops a strategy to be reviewed and approved by the board. Ownership has given a clear mandate to the board on what it expects from the business. Then, the board holds management accountable for delivering the approved plan. If these bodies are the same few people, who ensures accountability? For smaller organizations, this is often the most difficult issue to grapple with.
7. Provides A Timely Feedback Loop
One of the shortcomings of the PowerPoint method is that the reports have a short half-life. A strategy piece should be a living document; it evolves over time as conditions change. An annual review is always a good starting point but may not make sense for your industry. What is the rate of change in your industry? Be sure to stay ahead of it.
In business school, many of us learned that strategy development is a fixed process, then deployed into action. But for most private companies, it is more important to take action, learn and adjust in real time. If you maintain pace, you have time to adjust without taking too much risk. This is why most software is now developed with the agile or scrum method versus the traditional project planning method.
Strategy development and execution is a process, not an event. Someone needs to manage the overall process since everyone already has a full-time job. That may be the most important decision of all.