We have all been there.
You’re heading to a new location only to have complete panic set in when your GPS system fails while you’re trying to reach your destination. You feel lost, hopeless, and fearful that you might take a wrong turn. Nothing is worse, especially when you need to be somewhere and you're running late.
GPS or Global Positioning System is an amazing tool that we all use and heavily rely on to get us places we want to go, but haven’t been before. It pinpoints your location with accuracy and calculates your speed, direction of movement, and estimated time of arrival.
It provides you with step-by-step directions to get from point A to point B in real time.
Running a business can often feel like you’re taking a trip without knowing how to get to your destination. This is fine if you’re out for a Sunday drive, but if you’re like most companies, you have a limited tank of gas and getting to your destination is imperative.
This is where strategy comes in.
If success is your destination then strategy is the GPS coordinating and calculating the trip.
It determines what routes to take and what pit stops are worth making.
And like a GPS unit, strategy is not a one-time event.
Strategy is an ongoing process that is constantly looked at and optimized—like finding the fastest routes to take while avoiding hazards and avoiding delays.
There are many definitions of strategy out there, so let's look at some of the most widely accepted ones and land on a useful one to use going forward with this guide.
After a quick Google search Oxford Languages defines strategy as, "a plan of action or policy designed to achieve a major or overall aim." This definition emphasizes the importance of having a plan in place to achieve your goals. While a plan is important there is a lot more to strategy than having a plan.
Lets next look at where the word "strategy" comes from to see if it’s etymology sheds some light on its meaning. The word comes from the Greek word "strategos," which can be translated to mean "to lead that which is spread out." This definition emphasizes the importance of leadership and taking an encompassing view of the situation. Good, but still not very useful in practice. Let’s keep going.
Michael Porter, a renowned business strategist and author of 19 books, including Competitive Strategy, defines strategy like this: "Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value." His definition emphasizes the importance of differentiation and creating a competitive advantage through strategic choices. Getting closer.
Richard Rumelt, another prominent business strategist and author of Good Strategy/Bad Strategy: The Difference and Why It Matters, defines strategy as "an effective mixture of thought and action with a basic underlying structure." According to Rumelt, a strategy contains three elements: 1) a diagnosis of the problem, 2) a guiding policy to address the problem, and 3) coherent actions to implement the policy. This is a solid definition of the word strategy, but while using it in practice it can be hard to answer questions like “why do this now?” or “how is the strategy performing?”
Roger Martin, a well-known management thinker and co-author of Playing to Win: How Strategy Really Works, defines strategy as “...an integrated set of choices that uniquely positions the firm in its industry, so as to create sustainable advantage and superior value relative to the competition." Martin's definition emphasizes the importance of making choices that set your business apart from competitors and create long-term sustainable advantage. This definition doesn’t take into account that strategy can be done poorly. And more often than not your bad strategy is not creating sustainable advantage over your competition
While the above definitions have their uses, this guide will use this definition. Strategy is "the necessary process of setting clear directions, allocating resources, prioritizing activities, and measuring results within a competitive context to achieve a desired future state."
This definition can be broken down further into 7 components:
Shortened version: Strategy is the process to achieve worthwhile outcomes.
Understanding what strategy is not is just as crucial as knowing what it is. There are many misconceptions surrounding the concept of strategy, which can lead to confusion and poor decision-making. Here are some things that strategy is not.
Strategy is not:
Strategy is not a plan or tactic
While plans and tactics are essential components of executing a strategy, they are not the same thing. A plan is a specific set of actions to achieve a short-term goal, while tactics are the specific steps taken to implement a plan. Strategy, on the other hand, is the overarching process that guides all of these actions and decisions.
Strategy is not a SWOT analysis
While SWOT analysis is a useful tool for identifying strengths, weaknesses, opportunities, and threats, it is only a starting point. A SWOT analysis does not provide a comprehensive strategic plan, but rather a snapshot of the current situation.
Strategy is not about management
While management plays a crucial role in executing a strategy, it is not the same thing as strategy itself. Strategy is about making high-level decisions that guide the organization towards its long-term goals.
Strategy is not about being reactive
A reactive approach to strategy is short-sighted and can lead to missed opportunities. Strategy is about being proactive and anticipating future challenges and opportunities.
Strategy is not prescriptive nor is it vague
A good strategy should provide clear direction and guidance while allowing for flexibility and adaptation to changing circumstances.
Strategy is not easy nor is it overly complex
Developing a sound strategy requires careful analysis and decision-making, but it should not be so complex that it is impossible to execute.
Strategy is not static nor is it ever-changing
A good strategy should be flexible enough to adapt to changing circumstances while maintaining a clear direction towards the organization's long-term goals.
Strategy is not a mission or vision statement
While a mission or vision statement is an essential part of a strategic plan, it is not the same thing as strategy. A strategy is a detailed plan that outlines the specific steps required to achieve the organization's long-term goals.
Strategy is not about optimizing the status quo
A good strategy should be designed to drive growth and innovation, not just maintain the status quo.
Strategy is not about obsessing over the competition
While it is essential to understand your competitors and market trends, a good strategy should focus on creating unique value propositions that set your organization apart from the competition.
Developing and implementing a sound strategy is easier said than done. To make it more manageable, you can focus on the three C's of strategy: context, creativity, and choices.
Setting Context
Setting context involves creating a framework for your strategy that takes into account the internal and external factors that will impact your business.
Cultivating Creativity
Cultivating creativity means generating new ideas and approaches to achieving your strategic goals.
Making Choices
Making choices means deciding on the best course of action to achieve your strategic objectives.
Clear and well-defined goals and objectives
To develop a strong strategy, it's important to have clear goals and objectives that are specific, measurable, achievable, relevant, and time-bound. This ensures that everyone is aligned and working towards the same outcomes.
Deep understanding of the internal and external environment
To create an effective strategy, you need a deep understanding of your organization's strengths, weaknesses, opportunities, and threats (SWOT) as well as the external market and industry trends.
Effective allocation and utilization of resources
A good strategy must allocate resources effectively and efficiently to maximize impact and achieve the desired outcomes.
Flexibility to adapt to changing circumstances
A good strategy must be adaptable and flexible to changing circumstances, ensuring that the organization is able to pivot and adjust to market changes or unforeseen events.
Actionable and achievable action plans
A good strategy must have actionable and achievable action plans with clear timelines, responsibilities, and milestones to ensure progress towards the goals and objectives.
Continuous monitoring and evaluation of progress and results
A good strategy requires continuous monitoring and evaluation of progress and results to make adjustments and course corrections as needed.
Strong leadership and commitment from all stakeholders
A good strategy requires strong leadership and commitment from all stakeholders, ensuring buy-in and support from everyone involved.
As important as it is to understand the elements of a good strategy, it is equally important to recognize the signs of a bad one. A bad strategy can result in wasted time, resources, and ultimately, failure. Here are some elements of a bad strategy:
Lack of clarity or coherence in goals and objectives
A bad strategy lacks a clear and concise statement of the goals and objectives that it aims to achieve. This results in confusion and lack of direction among team members.
Failure to address key internal or external challenges
A bad strategy overlooks or ignores important internal or external challenges that could significantly impact the success of the strategy.
Neglect of crucial resources or capabilities
A bad strategy fails to take into account the resources and capabilities that are required to achieve its goals. This can result in insufficient or ineffective implementation plans.
Ignorance or denial of potential risks or threats
A bad strategy disregards potential risks or threats that could derail the strategy. This leads to a lack of preparedness for potential challenges.
Insufficient or ineffective implementation plans
A bad strategy lacks actionable and achievable implementation plans, resulting in poor execution and failure to achieve desired outcomes.
Failure to adapt to changing circumstances or new information
A bad strategy is rigid and inflexible, unable to adapt to changing circumstances or new information. This results in missed opportunities or failure to address emerging challenges.
Lack of accountability or commitment from leadership or stakeholders
A bad strategy lacks strong leadership and commitment from all stakeholders, resulting in a lack of motivation and buy-in from team members.
As you embark on creating a strategy for your business, it's essential to understand the different types of strategies available to you. Here are the four main types of strategies:
Corporate Strategy
This type of strategy is concerned with the overall direction of your organization, including your mission, vision, and values. It involves decisions about which businesses to invest in, how to allocate resources among them, and how to manage the portfolio of businesses to create value for shareholders.
Business Strategy
Business strategy is about how your business will compete in a specific market or industry. It involves decisions about what products or services to offer, which customers to target, and how to differentiate yourself from competitors.
Functional Strategy
Functional strategy is concerned with the day-to-day operations of your business, including marketing, finance, human resources, and operations. It involves decisions about how to best use resources within each functional area to achieve the overall business strategy.
Operational Strategy
Operational strategy focuses on the tactics and procedures used to execute your business strategy. It involves decisions about how to design, produce, and deliver your products or services to customers.
In today's fast-paced business environment, there's no room for aimless wandering or half-hearted efforts. Without a clear strategy in place, you risk wasting time, money, and energy on initiatives that don't move your business forward.
Every business is limited to three critical resources: time, money, and energy.
Time
Time is the ability to invest and prioritize what matters. Time is the most precious and non-renewable resource. You can't make more time, so you must use it wisely.
Money
Money is the expression of power in the world (love it or hate it). Money is the lifeblood of your business, allowing you to invest in resources, hire employees, and grow.
Energy
Energy is the willingness to perform the work needed to achieve a goal. You must cultivate and protect your energy levels to ensure your business thrives.
Without a clear strategy, one or more of these resources will start to be pulled out of balance, putting a huge strain on your business.
It can be easy to get caught up in the day-to-day tasks and lose sight of the bigger picture. However, failing to have a clear strategy in place can lead to a host of problems that can severely impact your business.
Here are five lingering symptoms of a company without a strategy:
A stagnant brand
Without a clear strategy, it can be difficult to differentiate your brand from the competition. This can lead to a stagnant brand that fails to resonate with consumers.
Aging consumers
A lack of strategy can also result in an aging consumer base. Without a plan to attract younger consumers, your business may struggle to stay relevant and grow.
Uncompetitive products
Without a strategy that focuses on innovation and staying ahead of the curve, your products may become uncompetitive and fail to meet the changing needs of your customers.
Strong competition
The absence of a strategy can leave your business vulnerable to strong competition. Competitors who have a clear strategy in place may be better positioned to outmaneuver and outperform your business.
Momentum in the wrong direction
Finally, a lack of strategy can lead to momentum in the wrong direction. Without clear goals and objectives, your business may find itself heading down a path that doesn't align with your long-term vision.
On the other hand, a great strategy can help your company imagine what might be in the future, and then set into motion making it happen.
Here are five key benefits of having a great strategy:
Allows for forward-focused thinking
A great strategy provides a clear direction and roadmap for the future, allowing you to focus on what's important and plan accordingly.
Allows you to track progress
With a well-defined strategy, you can measure your progress towards your goals and adjust your approach as needed.
Allocates scarce resources
A great strategy helps you prioritize and allocate your limited resources, whether it's time, money, or manpower, to the areas that will have the most impact on achieving your goals.
Dictates actions taken toward goals
A great strategy outlines the actions needed to achieve your goals, providing a clear framework for decision-making and ensuring that everyone is working towards the same end.
Removes bias from decision-making
By basing decisions on a well-thought-out strategy, you can avoid personal biases and emotions that can cloud judgment and lead to poor decision-making.
Given the proper attention, the right strategy can get your business in the HOV lane–destination Success City.
Like your GPS unit, strategy provides you with step-by-step directions to get from point A to point B in real time. Strategy is not like printing out a couple pages of MapQuest on your way out of town and calling it good. Strategy is a process. A process with guidelines and checkpoints that build upon one another. One that is constantly catered to and re-optimized.
Having a solid strategy is crucial for success, but what exactly does a good strategy entail? Here are the four key features of a successful strategy:
A Worthwhile Goal
Your strategy should have a clear and compelling goal that is both achievable and aligned with your overall vision.
A Plan for Your Road Trip (answers what, where, when, who, and how)
You need to know what you want to achieve, where you want to achieve it, and who your target audience is in order to create an effective strategy. Your strategy must outline the specific actions and tactics that will be taken to achieve your goals.
An Assessment Before Leaving
You should have a deep understanding of your business's current state, including your strengths, weaknesses, opportunities, and threats. This will help you identify areas for improvement and focus your efforts on what matters most.
The Manage and Measure—did you efficiently get where you wanted to?
Finally, your strategy should include a plan for managing and measuring progress. This means setting key performance indicators (KPIs) and regularly tracking and evaluating your progress toward achieving your goals.
Setting goals is an important part of any successful strategy. However, not all goals are created equal. To create an effective strategy, a goal must be worthwhile. What does this mean? Simply put, a worthwhile goal is one that is worth the sacrifice required to achieve it.
Setting and working toward a goal takes time, effort, and resources. This means sacrifices must be made. Therefore, it is crucial to ensure that the goal is worth the investment.
So how do you determine if a goal is worthwhile? Ask yourself: does this goal align with your vision and mission? Is it something that will bring your customers fulfillment and satisfaction? Does it have the potential to positively impact the lives of others? If the answer to these questions is yes, then the goal is likely worthwhile. If not, keep trying.
Having a well-defined and worthwhile goal helps to answer the question, "Why do this now?" It provides a sense of purpose and direction for everyone involved, creating a context for the actions that need to be taken. Without a clear goal, it is difficult to prioritize actions or make informed decisions about how to allocate resources.
The goal serves as a rallying point for employees and stakeholders, providing a shared sense of purpose that helps to align everyone towards the same objective. A goal also allows a company to stay focused and avoid distractions, helping to ensure that the actions taken are aligned with the desired outcome.
A clear and worthwhile goal also helps to define the scope of the strategy. It provides a framework for decision-making, enabling you to determine which activities are most relevant to achieving the goal and which are not. This helps to reduce ambiguity and increase clarity, which can lead to more effective implementation of the strategy.
Developing a strategy is like planning a road trip—a long and expensive road trip. Before you hit the road, you need to know where you're going, how you'll get there, and what you'll need to make it happen. Let’s break these four components further.
What you will do
Before embarking on your strategy road trip, it's important to identify what products or services you will be offering, and what channels you will use to reach your consumers. Consider the following:
Offerings:
Channels:
Where and when you will do it
When it comes to executing your strategy, two important questions to consider are where and when. Where refers to the specific markets or regions you plan to operate in, while when refers to the timing of your entry into those markets.
Where:
Where to execute your strategy depends on your target audience and the competition in each market. Consider factors such as population demographics, cultural norms, and purchasing power. You may also want to conduct market research to identify trends and opportunities in each market.
When:
When to execute your strategy depends on a variety of factors, including market conditions, consumer behavior, and internal factors such as your production capabilities and capacity. Timing is crucial, as entering a market too early or too late can impact your success.
Who you will do it for
To develop an effective strategy, you need to identify who your target audience is. This means defining the characteristics of the people or businesses who are most likely to benefit from your product or service. Consider your ideal customer—who are they, what are their needs, and how does your product or service fit into their lives? Use this information to create a profile of your target market, including demographic information such as age, gender, income level, and location, as well as psychographic information such as interests, values, and lifestyle habits.
How you will do it
When creating a strategy, it's important to remember that you're making choices. Strategy is not just about figuring out what you will do, but also about what you won't do.
It's easy to get caught up in a multitude of good options and opportunities to pursue, but a lot harder to prioritize those opportunities and stay focused. By making choices, you can create a clear path forward and avoid distractions that could derail your progress.
note—Keep in mind that choosing not to do something can be just as important as choosing what to do. Saying "no" to certain opportunities or ideas can be difficult, but it's necessary to stay true to your strategy and goals. Focus on what you've identified as most important, and let that guide your decision-making process.
Doing a successful assessment of your current state requires three key steps:
To manage, measure, and evaluate the success of your strategy, you need to create systems that support the goal. This means setting up processes to monitor progress, track data, and analyze results. You should also establish clear metrics to measure success and evaluate your strategy's effectiveness.
Measuring your strategy is an essential component of achieving success. You need to collect data regularly to determine whether your plan is working or not. This data could include sales figures, website traffic, customer feedback, or any other relevant metrics.
Once you have collected the data, you need to analyze it to determine the impact of your strategy. This will help you to identify areas where you can improve and where you need to make changes.
Evaluating the success of your strategy requires you to compare your current performance against your goals. If you're achieving your targets, you're on the right track. If not, you need to adjust your plan to get back on course.
Example of Fake Coffee Company Strategy:
A Worthwhile Goal or Destination:
Our online coffee company's worthwhile goal is to become the go-to source for premium, sustainably sourced coffee for environmentally conscious consumers. We want to offer a unique and memorable experience that connects customers with the farmers who grow their coffee beans.
A Plan for Your Road Trip:
What: We will offer a wide variety of premium coffee blends and flavors, sourced directly from sustainable and fair-trade coffee farms.
Where: Our online store will sell and deliver coffee to customers in the United States and Canada.
When: We will launch in six months with a soft opening to a select group of customers to gather feedback before expanding.
Who: Our target audience is coffee enthusiasts who value sustainability and ethical sourcing.
How: We will differentiate ourselves through our commitment to sustainability and direct relationships with coffee farmers, providing a unique and memorable customer experience.
An Assessment Before Leaving:
We have audited our current activities and outputs, and compared them against what it will take to achieve our goal. We have the necessary resources, such as a website, partnerships with coffee farms, and a team of skilled employees, to successfully launch our online coffee company.
The Manage and Measure:
We will track our progress through key performance indicators such as website traffic, customer feedback, and sales. We will adjust our strategy accordingly to optimize results and achieve our worthwhile goal of becoming the go-to source for premium, sustainably sourced coffee.
Other Examples of Strategy:
How Linktree grew to 3 Million Users in 3 Years
Fandom Acquires TV Guide, Gamespot, and Metacritic
How MANSCAPED Saw A Gap In The Space Of Male Hygiene
How Misfits Market saw customer demand grow fivefold
Strategy is like a GPS unit
A well-crafted strategy is like a GPS unit that guides a business towards its destination. It helps to set a clear direction, prioritize resources, and stay focused on the end goal. Just like a GPS, a strategy must be updated regularly to ensure it remains relevant and effective.
Strategy is made of context, creativity, and choices
Effective strategy creation involves understanding the context of the business, identifying creative solutions, and making informed choices based on available resources. Successful strategies are those that can adapt to changing conditions and remain relevant over time.
Strategy is important because it supports the business tripod
Strategy helps businesses optimize their use of resources by supporting the three-legged "business tripod" of time, money, and energy. A well-executed strategy helps businesses make the most of their time, efficiently allocate their financial resources, and direct their energy towards the most effective actions.
The four key components of strategy
The four key components of strategy include: having a worthwhile goal, creating a plan for your road trip, conducting an assessment before leaving, and managing and measuring your progress. By utilizing all four components, a company can create a solid and effective strategy leading to business success.
Here are some future trends for strategy:
Strategy is an essential tool for businesses that helps them achieve their goals and objectives by utilizing their resources efficiently. Like a GPS unit, a well-designed strategy guides businesses towards their destination, helping them make informed decisions and stay on track. Without a clear strategy, businesses risk losing focus and direction, wasting precious time, money, and energy.
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