How to Establish Your Business Strategy
How important is strategy? Whether your business is a one-person start-up or a huge corporation, a great strategy is crucial. Without a strategy, how is your business going to outperform its competitors? In fact, how is it even going to survive? How is it going to attract customers? What is it going to stand for?
In my many different businesses, I’ve spun around in a lot of circles for lack of a solid strategy. Why is it so hard? Strategy is not that complicated! Basically it’s just the few key factors that differentiate your business from those of your competitors.
But it’s easy to fall into traps. Many service business owners proclaim, “My strategy is great service,” while CEOs of product companies exclaim, “Our strategy is to produce great products.” However, these aren’t strategies at all because their competitors are often making the same claims and also producing products that—in the minds of their customers, though necessarily in their own minds—are not really differentiated at all.
So Where Do You Start?
I’d start with doing an evaluation of the state of the industry, the nature of the competition, and how the industry is changing. Then I would evaluate key competitors in depth, particularly focusing on what makes each one different from one another, how they try to distinguish themselves, how customers seem to perceive their differences (which is often quite a different story), what they do well, and what they do poorly.
I might evaluate each of their key products and services that we might be competing with. Then I would list the strategy that each key competitor appears to be using and think about how it is working.
But I would not stop there. Otherwise, the temptation is just to copy one of the competitors’ strategies and be done, and thus totally circumvent the deep thinking process, which the human mind loves to avoid at any cost.
No, instead, I would brainstorm next. What other strategies might work? What matters to customers that existing competitors could be doing a better job of delivering? Is there a niche whose needs are not being well addressed? Is there any strength we bring to the business that others lack?
I would spend a lot of time thinking about new possible strategies. I might look at totally unrelated industries and note whether there is a company outperforming in some way—could their strategy be used in my business?
Another way to come up with a great strategy is to get out and talk with some customers. Don’t just survey them or phone them, but get out and talk with them in person. Come up with some questions and try to just get them talking “off the top of their head” about what they like and don’t like in your competitors, what could be done better, and what an ideal product or service might look like.
Still another possibility is to talk with noncompetitive industry suppliers who are regularly interacting with the current players. Often salespeople regularly visiting and talking with suppliers can come up with great ideas, and of course salespeople love to talk and offer ideas.
The textbook and most systematic way to think about strategy is to create a really solid business plan, examining in depth the market, the industry, and the key competitors.
A Few Simple Strategies
How do you determine what your strategy should be? How do you weigh strengths and weaknesses?
Finding a true strategy—one that really differentiates your business from the competition—may take some energy, but believe me: it’ll be worth it. Here are a few possible strategy variables to consider:
- High quality versus low price
- Narrow versus broad product line
- High-tech versus low-tech products
- Trendy versus conservative products
- Brand name versus generic
- Customized versus standard
- Niche market versus mainstream market
For years leading consulting firms have been advising their corporate clients to get rid of any business that couldn’t become the market leader. The truth is that you don’t need to be the market leader to successfully compete. But you do need to find some area of strength and some way to differentiate yourself from the competition.
Don’t Copy Your Competitors’ Strategy
When I was nineteen years old, I decided to start a bicycle rental business on Cape Cod (with the incredibly creative name of Bob’s Rent-A-Bike) after I heard about a man earning $150,000 during the summer season renting bicycles (U Pedal It! Inc.). I copied everything he was doing. I bought 50 used bikes and lined up gas stations and motels to act as my rental agents. Then I waited for my profits to roll in—but no one was renting my bikes. The other guy’s strategy didn’t work for me. He had new bikes. I had old ones. He had the best locations. I had what was left.
In desperation, I tried something different. I put to use my competitive advantage—free use of my mother’s station wagon—and offered free delivery of bikes to campsites and motels. Now I had a strategy that differentiated my business from the competition. It didn’t matter that my bicycles were old or what price I was charging. I was the only firm delivering bicycles.