Ask 10 “consultants” what strategy is and you’ll get 10 different answers. Behavioural Economics Strategist Erik Vermeulen takes a strong behavioural approach to facilitating strategy using a 7 Step process. We look at how you need people to think and feel in order to get them to “team” with you and your organisation.
Essentially, decision makers at every level of an organisation seeking to steer their business to sustained success need a succinct and pragmatic response. After all, it can only help executives to have a shared definition when they are creating, communicating, and implementing a strategy for their business.
So, what is a business strategy? Strategy is different from vision, mission, goals, priorities, and plans. It is the result of choices executives make, on where to play and how to win, to maximize long-term value.
“Where to play” specifies the target market in terms of the customers and the needs to be served. The best way to define a target market is highly situational. It can be defined in any number of ways, such as by where the target customers are (for example, in certain parts of the world or in particular parts of town), how they buy (perhaps through specific channels), who they are (their particular demographics and other innate characteristics), when they buy (for example, on particular occasions), what they buy (for instance, are they price buyers or service hounds?), and for whom they buy (themselves, friends, family, their company, or their customers?).
Having a differentiated approach to a target market can be a source of great advantage. Southwest Airlines Company is a case in point. Early in its development, Southwest defined its target market to include regular bus travelers — people who wanted to get from point A to point B in the lowest-cost, most convenient way. In contrast to the industry’s hub-and-spoke standard, Southwest’s point-to-point operations and hassle-free service model offered a compelling value proposition for people who would otherwise choose bus travel. This gave the company a unique growth path compared to the traditional airlines.
“How to win” spells out the value proposition that will distinguish a business in the eyes of its target customers, along with the capabilities that will give it an essential advantage in delivering that value proposition. Choices must be made because there is at least one way to win in every market, but not everyone can win in any given market. With good choices, a business gains the right to win in its target markets. The target market, value proposition, and capabilities must hang together in a coherent way. And good strategies call for the right amount of “capabilities stretch”: not too much or too little change from the capabilities a business already has.
Every company faces innumerable options for where to play and how to win. Often it has to sort out seemingly conflicting objectives, such as the need for both long-term growth and short-term profitability, to choose which options to pursue. To “maximize long-term value” means — when there are mutually exclusive options — to select those that will give the greatest sustained increase to the company’s economic value. We once heard a corporate leader ask, “But how can you ever know when you have maximized value?” The fact is, you can’t, because you can never know with certainty if there’s a better option than those you’ve considered so far. To “maximize long-term value” is to never stop looking for those higher-value options.
Erik Vermeulen’s process has helped mobile phone companies sell 60 000 handsets in under 3 weeks in a saturated market.
Contact him today to stir up your industry and your strategy.