Hereare five of the most important profit strategy considerations I’ve encounteredin a long career using strategy and advising building and trades companiesabout it:
Strategy is not about the long-term
Thinkingabout strategy as some kind of long-term commitment can blind you to the factthat strategy is not about the long term or the short term, but about the fundamentals ofhow the business works: the sources of value creation, the drivers of the costto deliver it, and the basis of competition. To get a grip on strategy,we do not need to lengthen the time horizon of our thinking, but its depth. Farfrom being about things we are going to do in the future, strategy is aboutwhat we are going to do now in order to shape the future toour advantage.
Become an Influencer
Yourclients will pay you in direct proportion to the amount of confidence they havein you. How can you give them confidence in you and thereby increase your paygrade? The key is to demonstrate your skills and industry knowledge in everyavailable way at every available time in every available forum. Soundchallenging? Your results are a lagging indicator of your habits so if you’renot happy with your results you know what you need to do … become an industryinfluencer.
Competitive advantage is essential
Thetruth is that you need to rely on multiple advantages rather than just the one.What do you have that allows you to compete at an unfair advantage? Is itlocation, is it skills, is it unique processes, is it cost advantages? Findwhat these things are than focus your business on maximising your unfaircompetitive advantage in the market.
Being agile won’t compensate for strategy
Agiletrade businesses – especially start-ups – are always turning on a dime and theycertainly don’t seem to be following any kind of plan. Easy enough, then,to assume that what you see an agile firm doing – acting at high speed,maintaining a high tempo, being highly responsive – is all there is.
Agilityis not a strategy. It is a capability, a very valuable onewhich has immediate operational benefits, but that cannot permanently affect a firm’scompetitive position unless there is a strategist taking the right decisionsabout where to direct that capability. And the seeming absence of a plandoesn’t mean that successful start-ups don’t have strategies. A strategyis not a plan, it is a framework for decision-making, a set of guidingprinciples which can be applied as the situation evolves. And moststart-ups fail because being able to turn on a dime doesn’t mean that you’llturn in the right direction. Successful start-upsactually do a lot of hard thinking about fundamentals, questioning and testingbasic assumptions with a rigour that older businesses would do well toemulate. Start-ups have to, because their resources are extremelyscarce. If they don’t have a coherent strategy, they will make poorresource allocation decisions, and for them that will not mean a fall inearnings, but death.
You need a digital strategy
Digitaltechnology is a way of collecting, storing and using information, andinformation is everywhere. In its early stages, it enabled us to do whatwe did already but better. Then it enabled us to do it a lotbetter. Then it enabled us to do things we had never done before. Buildingtrade businesses without a digital strategy will never maximise their profitpotential.
Inour uncertain world, fundamentals are changing so we need to think about them,whether they are valid in the short- or long-term. Think how you candeploy the capabilities you have and build new ones you need to defend yourcompetitive position. Add them in layers to create barriers. Be clear aboutwhat will make a difference so that you can make rapid resource allocationdecisions. Think deep to act fast. Strategy is still what it has always been:the art of taking action under the pressure of the most difficult conditions.
Adapted HBR April 2019 Bungay