How often have you heard people say, “Our strategy is to become the biggest and the best?” This is not strategy. Strategy is not the what. Strategy is the how – how will you become the biggest and the best? Of course, within the realm of the definition, there are good strategies and bad ones. Good strategies help to define a company or a brand’s point of difference. But that seldom happens without sacrifice, without giving up something to strengthen the chosen niche.
You Can’t Be All Things to All People. Or Can You?
Today, shareholder and customer demands have never been greater. Leaders and managers are expected to do more, to do it better, faster, and at lower costs. Strategic focus is taking a backseat because people find strategy constraining. They won’t admit it, but they secretly want to be all things to all people. Hence, their quest to seek every opportunity to boost sales and profit.
Most of these opportunities fall outside of the core competency of the company and/or the positioning of the brand. The fallout? An organization taken in several non-strategic directions.
Business Models Change and So do Core Competencies
By its very nature, strategy is constraining. That said, business models need not be static. At one time every brick and mortar merchant keen to enter e-retailing had to figure out digital commerce. Many, like Wal-Mart and Target, sourced the competency from 3rd parties. Although late to the dance, Walmart and Target are now making huge strides as their own know-how develops.
Social media is a new model in which brand positioning is not only misunderstood, it is ignored. When social media types talk strategy, they talk media strategy – who to target, how to reach the target, and how to maximize engagement. Engagement is critical, but not at the expense of sticking to brand/company’s character and core positioning. This is what guides content. Inherent in that is content constraint – for good reason. Those who thrive on creativity need not be deterred. These constraints better define the brand’s relationship with customers.
Today’s business world is a complex place. Strategy cuts through the clutter. Here are 5 reasons why great strategies withstand the test of time:
1. Great strategies define the playing field. To some, a playground without boundaries is glorious. That’s what you get without strategic clarity. Now, try to run a company in which people can pursue any opportunity they like. Your organization will become dysfunctional, bloated, and ill-defined by employees and customers.
2. Great strategies tell you what not to do. Back in the 1980’s Coca-Cola divested everything in their portfolio that you could not drink. This strategy of category constraint continues. Coke isn’t wasting time assessing non-beverage markets or searching for food acquisitions. They’re using that time to get better at non-alcoholic beverages. The proof is in the numbers; Coke’s profit and market cap consistently outpaces their beverage and food rival, PepsiCo.
3. Great strategies enhance expertise. At one time I worked on a global assignment for beer giant, Interbrew, the precursor to Anheuser-Busch InBev. This gig afforded me the opportunity to meet CMOs from all over the world. Never did we discuss anything other than beer. Imagine the know-how that emanates from giving 100% of your attention to one category than juggling the needs of ten others. This is the power of focus.
4. Great strategies create long-term stability. When strategic intent is clear and concise, it provides the impetus for uncovering long-term opportunities. Because Nestlé defined their core competency as convenience coffee rather than instant coffee, they were able to pioneer an entirely new category rather than flog a dead horse. Today, the Nespresso innovation generates $5+ billion in new revenue.
5. Great strategies guide short-term execution. Promotions that drive short-term sales ought to be connected to the brand’s positioning. Red Bull does an awfully good job of this. In keeping with Red Bull’s image, every event goes to the extreme, from thrilling space jumps to daring sports stunts. These promotions fortify the emotional claim that “Red Bull gives you wings.”
Of course this is all for not without disciplined leaders with the passion to guide their team in the direction indicated by the strategic compass.
Originally posted on CEO Afterlife Blog.