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Strategy From The Outside In Or Inside Out

As a business owner you have a simple choice.

You can:

  1. Run your business opportunistically, jumping from one thing to the next which looks as if it could make you money; or
  2. You can develop a strategy to create success in your market and then which guides your actions and decisions.

The first may work but the second increases your chances of success.

But where do you start?

Strategy (and business management) is about:

  • using your resources and capabilities to create products and services
  • which are bought by customers in preference to competitors
  • to meet their wants and needs and
  • make you a profit
  • while at the same time your business is being affected by the wider business environment.

That’s five things that have to be lined up for a winning strategy:

  1. Your resources and capabilities;
  2. Your products;
  3. Your customers’ wants and needs;
  4. Your competitors; and
  5. The wider environment.

The first two are internal and the remainder are external.

Where Do You Begin In Your Strategic Thinking

Do you start with your products and ask yourself who else may buy them?

Or with your resources and capabilities and ask what else can you make which customers will want?

Or do you start with customers and decide first who you want to serve and then find out what they want to buy?

Or should you focus on competitors to spot weaknesses where you can defeat them and capture their customers?

Or do you recognise that your strategy is not about today’s markets but those of tomorrow and you need to understand how things will change in the next 2 to 5 years so that you are better prepared than your competitors for what is most likely to happen?

It’s tough to know where to start in your strategic thinking.

I laugh when I see business strategy advisors present a wonderfully linear process – first you do this, then that and then third…

Effective strategy in the real world isn’t like that.

It’s messy.

Yes strategy is messy

You’ve got to cover all five factors and perhaps a few others as well. (For example a subsidiary may be constrained by what its parent company management want to do, a family business may have to think about the retirement of the founder and the transfer of ownership within the family or outside it.)

But what you learn in one area affects what you think in another.

You can button down what you think customers want and then when you do the business environment research, you realise that customer needs are likely to change. And you look at your competitors and see who is strong for today and notice a small competitor who seems well positioned for the future. The competitor who you thought you had to beat has been replaced by another who is already ahead of you in the race to the future markets.

Make Strategy By Peeling the Strategy Onion

I encourage you to think of peeling the strategy onion (but with segments like an orange).

Start to see strategy as a process where you can go down to different levels in the different areas depending on what looks relevant and interesting (i.e. it is a source for competitive advantage and increased profit).

Strategy can seem very daunting if you think you’ve got to get all the way to the middle in each area. It’s time-consuming and mentally exhausting.

But it doesn’t have to be like that.

Some strategy is better than none

A direction gives you guidance, even if you don’t have it planned in great detail.

As an analogy, think of it as going on holiday.

Until you decide key factors like when and where, it’s very difficult to focus your thinking.

Pinning it down to June and Spain makes the number of choices much more manageable.

Deciding a budget and what you want to do on the holiday (go to see the sights, lie on the beach or a bit of both) again narrows down your options until finally you have a choice of a few alternatives and you can pick the one that feels best or offers the best value for money.

Some people will leave their holiday planning at that level while others will go to the next level and start scheduling out their days – what they will do and where they will go. Some will even create a schedule for each day based on what’s open when, so they don’t leave anything to chance.

The important thing is that you start and finish your holiday planning by doing enough to have the kind of holiday you really want.

It’s the same with business strategy which is designed to help you to get the business you really want.

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