Do you ever see Apple Inc. and Google Inc. and wonder how did the two companies grow so big while in the same market? Or see Walmart and Amazon competing for the same market and think how the two companies still grows. The basic difference starts from their business model, but there’s also a huge difference in their business strategy – which is how they reach their customers.
Most new businesses fail because their business strategy is vague. Often when entrepreneurs are asked What is their strategy, their answer sounds like the following:
1. Our strategy is to grow 10X
2. Our strategy is to become most loved apparel brand in the region
3. Our strategy is to become a customer-first company
None of the above is a strategy. These are tactics to achieve short- term and long –term goals. Business Strategy, on the other hand, takes an organization into account and creates a path to reach targeted customers fast and generate revenue. The success of a business strategy is measured in the form of consistent long term profits.
Defining a business strategy
Business strategy takes business goals, available resources, and time frame into account and creates a plan to generate consistent profits. Generally, a business strategist is responsible for creating and overseeing implementation of a business strategy. At small businesses/start-ups, a CEO is mostly responsible for creating a business strategy and communicating it to stakeholders.
As businesses grow and diversify, companies add business strategy teams to oversee and implement business strategy.
Ask these Four Questions to Clear Your Business Strategy
The responsibility of creating and communicating a business strategy lies with the CEO. A good business strategy answers these four questions properly.
1. Where to compete?
2. What unique value are we brining to the table?
3. What resources, technology, and talent does the company need?
4. How will the company sustain itself amid the competition?
Let’s discuss each of these questions in detail.
Where will you compete?
An important aspect to understand in business is that everyone is not a customer. You should be ready to decide customers who will not be happy to buy your product. You should answer these major questions:
- Which customers will your serve?
- What is the price of your product for those customers?
- What needs will your product fulfil?
The answer to these questions will decide the customer segment you serve and ultimately the market you will be serving. This will lower your competition and make entry to market smooth.
What uniqueness do you offer?
Understand the difference between Uber and Lyft. Both are ride-hailing services, but have something unique to offer. Lyft is more personalized than Uber and has better cost –structure. There are two ways to create advantage:
- Offer something differentiated that customers are willing to pay more for
- Have a lower cost structure than your competitors
If your cost remains same as your competitors, you are likely to generate less returns. One of the ways to create a differentiated offering is to improve underlying capabilities of the product. For instance, you can decide to drop off one of the features and sell it for lower cost. A strategy here is to tradeoff a capability for a lower cost, so you can deliver a product that your competitors can’t.
What resources and capabilities do we need?
Operating a successful business requires resources. A business needs talent and other tangible and intangible resources. Your business strategy should answer which resources it would need to deliver the required products.
How will you sustain the competitive advantage?
Once you enter the market and turn in significant profit, competition will eventually increase. In that situation, what will your business do to sustain the competitive advantage. Final words
A business strategy maps business goals with resources; it gives a direction in which stakeholders can think and act to deliver products and services profitably and consistently. In a nutshell, business strategy is a blueprint to grow a business sustainably.