Having an idea is a far cry from building a useful product people want and need, which is still many steps removed from executing a strategy to build a viable company. Countless innovative even ingenious products have failed to gain a foothold in the market due to poor strategy (or no strategy, as is so often the case).
We love to talk strategy. There isn’t enough of it. More often that not, what passes for strategy is warmed-over fuzzy thinking about the future. Indulge me, if you will, in this fictional strategy discussion with an aspiring founder.
A Typical Strategy Breakdown
My strategy is to be the best in my industry.
That’s good, but a goal is not a strategy. It’s just a hoped-for outcome.
But shouldn’t I want to be the best solution?
Of course. However, wanting to be the “best” isn’t informative. I figure you don’t want to be bad or even mediocre. Everyone else wants to be the best, too.
Oh, you want me to think bigger?
Maybe. But vision is not strategy, either. It’s a more audacious goal. But you do need to identify specific outcomes. Otherwise, what’s your strategy for?
You want me to describe what I believe in?
Values are helpful, but they are not strategy, either. Again, I presume you are an ethical person, so I’m not sure I need to hear about your “no a-hole rule” or “being honest with each other.” Getting specific helps more than lofty ideals or basic expectations of doing business.
Hah! I get it. You want me to lay out the steps of what I’ll do.
That depends. Why are you going to take those steps?
Because they support my vision, mission, goals, values…
In that case, no. That’s not a strategy, either. That’s a checklist.
Then what is strategy if not those things?
It’s what positions you to gain and exploit an advantage in your particular situation.
Got it. My strategy is to have first-mover advantage.
To do what with it?
You know, be first, get the most users, the strongest brand. All that.
If being first is an advantage for you. Is it?
Well isn’t it?
Facebook wasn’t first. Neither was Google. Or Youtube. Or Southwest…
Fine! Ugh. I guess it isn’t one advantage, right? It’s got to be a whole set of them. I do plan to vertically integrate several product lines, develop channel partners, add a brick-and-mortar franchise concept to my online concept and probably sell sponsorships to big brands. That’s totally strategic.
All of that. That’s a pretty complex strategy.
You think having lots of options is a strategy? Sounds like the opposite, to me.
I give up.
Good Strategy Has Three Parts
The kernel of a strategy contains three elements: (1) a diagnosis that defines or explains the nature of the challenge, (2) a guiding-policy for dealing with the challenge, and (3) a set of coherent-actions that are designed to carry out the guiding-policy.
This, according to Richard P. Rumelt, author of Good Strategy/ Bad Strategy: The Difference and Why It Matters, is how you define your plans in a way that allows you to engineer your organization as a means to create an outcome that is important to you.
Note that I used the word “organization,” not just “activities.” You can’t take for granted that any organization could plug-and-play a different list of activities and do them well. You must purpose-build your organization for the challenge you seek to address.
Unlike goal-setting, or visioneering or defining values, true strategic planning is about digging deep on the challenges you face, deciding what policies will guide your choices, and then assembling your resources in a coherent way to carry out that policy in response to the challenge.
Good strategy is also specific. To achieve anything worthwhile, you have to say No to a million other things. If you try to build a strategy that’s “inclusive” for a bunch of team members or stakeholders, then you’re not tackling a problem, you’re avoiding lots of little ones (like hurt feelings). Every option you keep in the mix is a bet against your biggest opportunity.
So get specific on the nature of the challenge you face, clarify the policies that will guide your choices and build a coherent set of actions that directly address the challenge. Do these things well, and you will position yourself and your team to gain and exploit an advantage others simply can’t overcome. That’s good strategy.
For a clear and in-depth summary of Rumelt’s thinking without digging into the book yourself (though I highly recommend it), check out this talk he gave at the London School of Economics.