Dealing with strategy

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Dealing with strategy
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If you want to become a top manager, you have to show you can handle a strategic discussion. Fortunately, you do not need to have an MBA to think strategically. Remember that most of the world’s billionaires did not even finish university, let alone do an MBA.

MBA students are taught to believe that they can fix a company’s strategy overnight by reading some case notes and analysing a few sheets of data. Reality is not that simple. There is always ambiguity and uncertainty. But you need to know how to handle a strategic discussion in your organisation. In practice, the discussion never leads to a flash of insight where the old fashioned metal basher realizes it should become a brilliant internet company. Instead of having smart answers, you need to have smart questions.

The process of strategy formulation is mainly about seeing things from a series of different perspectives, and asking the right questions about each perspective. Each perspective not only gives you a different view; each perspective may be in conflict with each other. There are no simple answers, so the discussion is important and you need to be able to contribute to it intelligently.

Here are the six main perspectives you need to think about and the typical sorts of question you need to be able to ask:

  • Customers:

    what do they want? Are there underserved segments? Are there unfilled needs? How big and profitable is the potential of each market segment? Can we change our pricing or product for different customer segments (types)? How can we serve our existing customers better, retain them more and make more money from each one? How can we acquire new customers more effectively and efficiently? What can we learn from our heavy users and from customers who defect? Can we grow into any new geographic markets?

  • Competitors:

    have they left any unserved segments or markets? Can we build any barriers to entry? Do we have any advantage (costs, brand, location, service) which the competitors can not copy? What is their advantage over us? Do they have any profit sanctuaries we can disrupt? How will they react to any move we make? How fast and well can they copy us?

  • Channels:

    what is our best route to market both for acquiring new customers and for serving new customers? What is the cost and effectiveness of each channel? Are there any new channels or partnerships to test and to build?

  • Product:

    can we use or adapt our product for another market or territory? Are there other offerings in other markets or from our competitors which we can learn from or improve? What is wrong with existing products? How easy or hard is it to copy our product and how can we defend it? Can we adapt develop our existing products further and can we extend our brands any further? Are there any disruptive technologies out there which are either a threat or an opportunity for us?

  • Economics:

    what is the cost to serve (and potential profitability) of each segment? Can we be lowest cost sustainably? How can we play with our cost structure (fixed and variable) and pricing structure to cause maximum damage to competition? How can we use our suppliers and supply chain to better effect? Can we reduce our cost base through efficiency, re-engineering, outsourcing, partnerships? Should we look at game changing acquisitions: to fill out our product portfolio, to gain market access or to reduce costs?

  • Corporate perspective:

    This is where theory meets reality. You may be asked to dream the dream and be creative, but ultimately you will be rewarded not for taking a massive risk but for finding the incremental gain which drives the business forward: business is risk averse. Second, from a corporate perspective you will be rewarded for following the vision and agenda of the top team: your brilliant idea will remain a pipe dream if it does not fit with the corporate agenda.

Keep pushing at different perspectives and you will eventually find a new insight. Chase the insight, not consensus. Consensus will lead to a me-too strategy where you follow competition. Insight will drive you to a new place altogether.

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