All good leaders want their companies to achieve profitable growth. To get there, you need much more than a set of goals and a business plan. You need a fresh look at your current business situation and an honest assessment of where you can really differentiate.
If you don’t have a clear strategy, here’s what you won’t know about your business:
- How do we win?
- When we win, why do we win?
- What’s our target market?
- What’s the differentiating factor that allows us to win?
- How will we leverage that differentiating factor?
It’s not always easy for teams to answer these questions realistically. I can’t tell you how many organizations say, “We win because we have a better sales force,” or “Our product is the best.” Well, no company wins all the time. So if you have the best sales force and the best product, then why do you lose sometimes? Why do you perform better in some market segments than others? And you need to look deeper than just dismissing those segments as the “stupid” customers who don’t see your offering's value, as one of my clients did for several years,
Strategy is about knowing why you’re making a choice to pursue a course of action. And it’s about making that choice when reasonable people could easily have chosen to pursue an entirely different course of action. “Profitable growth” is not strategic – it is the reason you exist as a company. And if you have people on your team who would prefer “unprofitable shrinkage,” you have bigger problems.
A good strategic plan is rooted in reality. Or, put another way, it’s rooted in microeconomics. If you can’t differentiate somehow, you won’t like your profitability. You need identify 1) the source of your differentiation, 2) which customers value it, and 3) why they value it. Plans that sound like “try harder” may work in the short term, but will eventually fail if not grounded in an objective view of your current business.
A good leader knows that companies can’t do everything. In fact, you’ll probably get better results if you pare your focus down to just a few critical things. At the end of a strategic-planning process, you want to be able to tell your team, “We’ve decided we want you to focus on doing these two things. Every day, I want you to think about these two things, all year long.” If your output looks like a 24-point improvement plan, you still have some work to do.
Choosing to do some things and not others is scary to some people. Good leaders help their teams commit to choices that seem difficult. As a leader, you always want to know the logic behind why you’re pursuing certain course of action before you ask the team to fall in line. This understanding starts with an honest assessment of what activities and choices got you to your current state, and how likely those activities and choices will continue to work in your favor.
Have you led a successful strategic planning process? How did insights into the current situation inform your choices? Share your story in the comments section.