What is a business strategy — and how do you build and sustain one?

By Terry Connelly, past Dean of GGU’s Ageno School of Business

Businesses need to re-think their Strategy to stay competitive – and then “rinse, repeat!” In thinking about Strategy, everything is on the table – especially if our company or, especially, those we serve are not satisfied with the “Present State.”

What is Strategy?

Strategy is the game plan for getting from Present State to Future State – how we get there. This is where our Vision, Mission, Goals, and Values come in; but these may be reassessed as we formulate Strategy.

A Strategy is a set of interconnected ideas to best achieve our Vision, Mission and Goals (Future State), in the face of competition for the needed engagement of our stakeholders (all those who have an interest in our success). Put another way, who would miss us if we disappeared? If nobody, then we’ve got trouble!

STRATEGY MEANS DOING THINGS BETTER: “Best practice” is very good and necessary — but not sufficient as Strategy.

STRATEGY IS ABOUT DOING THINGS DISTINCTIVELY: either doing things differently or doing different things. Think Apple, Uber, Netflix, Tesla, or Facebook. Strategy must start with, and be built around, a Distinctive Competence – something real, not just a “brand.” Distinctive Competence is what Warren Buffett says can create a “moat” around our activities, or a “franchise” (by which he means, in business, the ability to raise prices and profits without losing customers or market share). Because Strategy is a kind of intellectual property (that is not generically patentable), we need to always think freshly but also with discipline. Brainstorming is not Strategy!

Preliminary Questions

ESTABLISH WHERE WE ARE

  • What “business” are we in? What is the core purpose of all our activities? Whom do we serve?
  • How are we doing? Are those we serve satisfied? Are we?
  • How do we define “success”?

DEFINE CURRENT REALITY AND THE DESIRED IDEAL

  • What is our Present State of affairs?
  • What is our desired Future State?

Five Elements of Successful Strategies

VALUE

Make those we serve believe they are getting MORE than their money’s worth. Develop and sustain our core stakeholder relationships through our distinctive ability or mix (They can’t get it as good elsewhere.). Establish measures and metrics to show value: share of the potential audience, persistence, and continuity of engagement, consistently documented results: growing stakeholder engagement and support.

FOCUS

Focus is our distinctive Value Proposition. There are three kinds:

  1. Unique value delivered in terms of a particular kind of service (e.g., Midas Muffler: quick, reliable replacement for anybody who needs it).
  2. The unique value for a particular audience (e.g. AARP: cheaper insurance for seniors or ESPN: all sports 24/7).
  3. Both kinds [1 and 2] (e.g. Southwest Airlines: cheap point-to-point flights for those who need just that, no complex connections or business class amenities.)

FIT

Strategic “Fit” means all facets of the game plan reinforce each other and make sense both individually and together (e.g., the players on the Golden State Warriors team).

Fit revolves around Distinctive Competence as the organizing principle of the game plan. Do not stray far from an established well-earned reputation for excellence and distinctiveness – best to add new offerings accretively, not as “one-offs.” Instead, experiment with pilot projects.

New initiatives should not undermine or cannibalize (with some exceptions) the core offerings or the brand, but rather naturally grow out from them. However, activities past their use-by-date should be cannibalized and even ruthlessly abandoned (often the hardest thing for non-profits to do).

TRADE-OFFS

The mindset to say ‘no’ to new lines of business that don’t have Strategic Fit – no matter how bright and shiny they are. This requires discipline and “no flinching.”

CHANGE MANAGEMENT

Find one thing that can change everything.

Three Tools for Strategic Thinking

ENVIRONMENTAL SCAN: Sketch of the Present State of the relevant market for our services. Look at:

  • Unmet needs: customer points of pain
  • Suppliers and other stakeholders
  • Competitors, even if only for attention
  • Potential substitutes for us and what we do
  • Brand – what we’re known for – it should be consistent with our Strategy and what we consider our Distinctive Competence.

S.W.O.T. ANALYSIS:

  • Strengths: We better remember to include our people; check that they are all in their “highest and best use.”
  • Weaknesses (the PC business term is “Challenges”): ruthless honesty – look in the “too hard” basket for these!
  • Opportunities: what we could/should be doing but aren’t, what the market is offering to us, what we see that others don’t – but check “Fit”!
  • Threats: existential and temporary; what others see that we don’t – often the other side of the Opportunities coin.

SCENARIO ANALYSIS

Scenario Analysis presents alternative, internally consistent sketches of potential Future States of our marketplace and those we serve. This provides a big picture of the ways differing from (but somewhat predictable) changes in the Environmental Scan could affect our activities for better or worse.

Scenario Analysis also helps define key Change Drivers and Success Factors. These should tell us what things will likely determine whether our Strategy succeeds or fails in reaching Future State. Scenario Analysis also tells us what to pay attention to, measure, and benchmark (in addition to tracking outcomes) in order to assure Strategic Success.

The Scenario Analysis also helps identify important elements of the S.W.O.T.

Three Double-Checks

  1. Revisit VISION, MISSION, and VALUES to align with Strategy … and vice versa.
  2. Align all internal incentives, rewards and internal systems reporting with Strategy.
  3. As I mentioned at the start, “Rinse, repeat” at least every three years.

About Terry Connelly

Terry Connelly is an economic expert and Dean Emeritus of the Ageno School of Business at Golden Gate University. With more than 30 years experience in investment banking, law and corporate strategy on Wall Street and abroad, Connelly analyses the impact of government politics and policies on local, national and international economies, examining the interaction of global financial markets, the U.S. banking industry (and all of its regulatory agencies), the Federal Reserve, domestic employment levels and consumer reactions to the changing economic tides. He holds a law degree from NYU School of Law and his professional history includes positions with Ernst & Young Australia, the Queensland University of Technology Graduate School of Business, New York law firm Cravath, Swaine & Moore (corporate, securities and litigation practice in New York and London), global chief of staff at Salomon Brothers investment banking firm and Cowen & Company’s investments, where he served as CEO. In conjunction with past Golden Gate University President Dan Angel, Connelly co-authored Riptide: The New Normal In Higher Education (2011). Riptide deconstructs the changing landscape of higher education in the face of the for-profit debacle, graduation gridlock, and staggering student debt, and asserts a new, sustainable model for progress. He is a board member of the Public Religion Research Institute, a Washington, DC think tank and polling organization, and the Cardiac Therapy Foundation in Palo Alto, California. Connelly lives in Palo Alto with his wife.


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