“The essence of strategy is choosing what not to do.”
What Is Strategy? –
Strategy is taught in business schools, sold by consultants, and usually built for Fortune 500 companies with full-time strategy teams. For a midsize company, most of that machinery gets in the way. At its core, strategy means deciding what you will do to shape the future, and what you won’t.
We think a good strategy answers three questions:
- Where are we today?
- Where are we going?
- How will we get there?
The questions are simple; answering them well is hard work. Here is the approach we use, shaped by years at Berkshire Hathaway and Pampered Chef.
Where are we today?
Every strategy starts with a clear-eyed diagnosis. You don’t need a 200-page deck. Four lenses surface most of what matters:
- Market. How big is it, how fast is each segment growing, and who competes on what basis?
- Financials. What drives revenue, cost and profit by customer, product and geography, and how is the mix shifting?
- Customers and operations. Who is the target customer, why do they choose you over a competitor, and how do your commercial and operating processes compare with the best?
- People and culture. Are the right people in the critical roles, and does the culture support where you want to go?
Then condense it. We have each leader complete a SWOT on their own first, then work together to agree on the five to ten drivers that matter most.
Where are we going?
Two choices sit at the heart of strategy: where to play and how to win.
Where to play defines the arena: your core business, geographies, channels, products, target customers, and where you sit in the value chain. It is as much about what you won’t do as what you will. Choices that feel permanent deserve a second look; Polaroid and Blockbuster both treated theirs as settled.
How to win has two parts. Your value proposition is why customers buy from you: lower cost, higher quality, faster delivery. Your competitive advantage is what keeps well-funded competitors from taking your margins. Warren Buffett calls that advantage a moat, and we wrote about how midsize companies build one in Main Street Moats.
The two choices only work as a pair. A where-to-play option is worth pursuing only if you have a credible way to win there.
Finally, set a vision and three-year goals: a finish line that is hard to reach, and reachable only if you hold to those choices. Strategy is choice. Choosing confines you to a path, and it also frees your time, talent and energy for the few things that matter.
How will we get there?
Strategic initiatives are the workstreams that carry you from today to the goal. The best ones reinforce your choices and each other.
Aldi is a good example. It chose to be the low-cost grocer, and its initiatives all serve that choice. Roughly 90% of its range is private label, and it carries a few thousand products against 30,000-plus at a typical supermarket (FoodNavigator). Stores are small, staff are cross-trained, and products sit on the shelf in their shipping cartons. Low prices bring more shoppers, more volume lowers costs, and lower costs fund lower prices.
Three rules help when choosing initiatives:
- Less is more. Pick three to five. More than that, and nothing gets the attention it needs.
- Separate foundational from breakthrough. Foundational initiatives improve the core; breakthrough initiatives create new offers for new markets. When Cinnabon shrank portions and prices, that was foundational. Licensing its brand to coffee creamer was breakthrough. Don’t run many breakthroughs at once.
- Start with the core. The existing business almost always has more untapped potential than leaders expect.
Each initiative then gets an action plan: an owner and a sponsor, clear scope, milestones, a budget, and the KPIs that show whether it is working.
What makes it stick
- Build it together. Bring the executive team and their direct reports into the work. Minimal involvement upstream means minimal commitment downstream.
- Challenge ideas, not people. Strategy is a contact sport. Ask hard questions, then disagree and commit.
- Review it on a rhythm. A strategy that isn’t reviewed against its KPIs every month quietly turns back into a document.
Members of the Kanbrick Community receive the full version of this brief, including our two-day strategy session agenda and one-page templates. If you’re working through these questions in your own business, we’re always glad to talk.