Business strategy

Often when entrepreneurs speak about business strategies they mention growth, revenue and profit targets. While this is commendable as it serves as a guide for entrepreneurs; these are just goals, plans, targets and not a strategy. 

What is strategy?

A strategy is a set of actions taken by an organisation in pursuit of their long term objectives. As such, strategy is focused on a company’s long term plans- 5years or longer. 

 

So when talking about strategy, ideally, it should read, 'our strategy is (name of strategy). It is about (define what the strategy is about). We will emphasise these actions (state the actions to be pursued). Our expected outputs are (revenue) by (year). Check out DHL’s strategy https://www.dpdhl.com/en/about-us/mission-and-strategy.html

 

The reason most entrepreneurs cannot articulate their strategy is that they have not crafted one. In this installation, we will walk through the crafting of a strategy.

 

Please note: this is not an exhaustive exercise, and the frameworks mentioned here are interchangeable with other frameworks out there.

 

Why strategy?

 

A strategy assists a business to achieve outstanding success by identifying its sources of superior business performance and advancing actions to be taken that exploit these sources of superior performance in a world were turbulence, unpredictability and intense competition will continue to dominate, such as now with the COVID-19 pandemic.

 

The 3 steps to strategy formulation:

 

1. Analysing: 

A good business strategy considers how the company competes in its industry and location. In turn, this requires a good analysis of an organisation’s internal environment as well as the external environment in which the business operates.

 

External environment

Industry dynamics

To understand the industry dynamics and the industry’s ability to sustain profitability, analysis of the external environment is needed. Porter’s 5/6 Forces framework is a great resource to use as it considers:

(1) competitors (incumbents), 

(2) the threat of new entrants (entry and exit barriers), 

(3) customer power (switching costs, market size, etc), 

(4) the threat of substitutes (products/services that can be used in place of yours), 

(5) supplier power (the ability of suppliers to become your competitors and the power suppliers can wield over you in supplying to you), 

(6) complements (products/services that can be paired well with yours).

 

Key success factors (KSF)- Customer

 

For any business to succeed, it needs to understand the KSFs in its industry. The KSFs are gleaned from customers and can range from price, speed, quality, user experience, etc, so it is paramount that whatever product/service offered meets these KSFs.

Internal environment

One must be aware of an organisation's key resources and capabilities to exploit them to grow their business! Strategy formulation helps you dig deep into your organisation and find your strengths and if you have none, pushes you to develop those resources and capabilities.

A useful framework to use in evaluating resources and capabilities is VRIO (Valuable, Rare, Imitability, Organisation) developed by J.B Barney. Testing resources and capabilities- financial, HR, tangible and intangible (knowledge, brand, patents, data)- using this framework will reveal where the competitive advantage lies, and the resources and capabilities that need exploiting for your organisation to generate superior profits. It will also reveal the resources and capabilities with a potential for improvement.

  

2. Choosing: 

After considering your external and internal environments and determining your competitive advantage, it is time to decide how you are going to compete in your chosen domain.

A framework to use for this is Porter’s generic strategy, which posits that a business can either compete in a narrow market (niche) or broad market, and either focus on cost leadership or differentiation, though this has been amended to include an integrated cost leadership and differentiation strategy.

 

3. Implementing: 

When you have decided on the strategic direction to take, it is finally time to implement your strategy. But before you implement, test for congruency between the analysis undertaken and the choices made.

 An easy way to determine if there is congruency is to test the choices for:

Suitability: Does the proposed strategy match the needs identified from the strategic analysis. The strategy should be consistent with the environmental or resource analysis and fit the organisational objectives. 

Feasibility: How well it would work in practice and how difficult might it be to achieve.

Acceptability: How will the various organisational stakeholders feel about the expected outcomes of the strategy – typically in terms of risk, profitability, reward, ethics and the effect on relationships.

If the choices being considered meet these criteria, then go ahead and implement your strategy!

Note of caution: Strategy formulation and implementation is an iterative process, not linear, so you can adjust your strategy as you go along to take into account changes in your environments.

How to overcome -isms in business/life

I don't know whom I am speaking to today, but I just want you to know that as an entrepreneur, you shall face discrimination in your line of work. That's a given, but it's not important. What's important is how you react to that discrimination.

So today, I am going to share my experience with discrimination:

An entrepreneur I am working with made this confession to me two days after I started mentoring him:

‘Since I joined this platform, I have been reaching out to male mentors only because I was biased against women, but none of them got back to me. When I saw your profile, I decided to give you a try, and you surprised me when you responded.

I wasn’t expecting much from the sessions, but since I had signed up, I decided to turn up. I am glad I did because of the depth of your analysis of my situation and the poignant issues you are raising that I had not even thought about. Do you mind if I recommend you to my friends?

That, my friends, is called sexism! It is alive and well in every sphere of our lives.

Lessons learnt:

💥As you go about your business, know that people will judge you and cast you aside not because you are not good at what you do, but because of whom they are.

💥When you turn up, bring in your A-game. It doesn’t matter whether you are being paid or doing it pro bono. Wow the pants off your client!

💥Don’t get mad at the –isms thrown your way; get even by being the best version of yourself

What has been your experience with -isms and how have you dealt with them?

Employee onboarding

Dear entrepreneur,

While it has become fashionable for companies to want to hire someone who can ‘hit the ground running,’ the reality is while they know how to do their job well, they do not know how to do it your way!

Every company has got its own operating systems, its own unique way of delivering on a service/product, so you really can’t hire someone today and let them loose in your organisation without training them.

It is imperative that you arm them with the skills and tools they need to succeed in your organisation, otherwise, they will be frustrated and leave you or you will be frustrated and fire them before they have brought to you their A-game.

Sometimes, arming them with the skills involves meeting with them weekly and directing their efforts in a way that meets your core values, vision and goals. Take the time to indoctrinate in your employees your ethos, values, culture, so that they can align their skills with your corporate persona. A garrulous but highly performing employee will destroy your company. Do not sacrifice your future for short-term wins. 

So before you have someone go out and represent your brand, make sure that they understand what your brand is about and they embody your values, otherwise, they will alienate your customers and stakeholders.

What employee onboarding systems do you have in your organisation to ensure that you get the best out of your new hires?

Everyone a marketer

Dear Entrepreneur

Everyone in your organisation is a marketer. And yes, that includes your support staff, i.e. cleaner, driver, etc. Before you look at me askance, wondering how your cleaner could be your marketer, consider the proliferation and growth of the network marketing industry estimated to reach US$160 billion dollars by 2021. No special skills are required for one to become a network marketer- in fact, being a great salesperson is usually an impediment to success in network marketing. People join network marketing from all walks of life, and yes, some of them were cleaners in their previous lives. So, this beckons the question, why are you not leveraging your employees to market your company?

Marketing is concerned with attracting customers, building relationships, communicating service/product benefits in a bid to influence perceptions. While the marketing department can and is capable of handling these tasks, one notes that building relationships is not solely the preserve of the marketing department. If anything, the marketing department’s interaction with customers is limited when compared to interactions the whole organization has with customers. So, does it not make sense then to turn everyone in an organization into a marketer, albeit, a part-time one.

If we look closely at our own interactions with companies we buy from, we will note that we have progressed from first time buyers to advocates because of the product elements and also the service quality we receive when dealing with the company. For most of us, our interactions with the marketing department personnel are limited, if not non-existent. We deal with the operations teams, the sales teams, the delivery guys, finance teams, receptionists and sometimes when we visit- the cleaners. It is these interactions that determine whether we buy from a company; deepen our relationship with them and/or even refer them to our own network. It behoves you, therefore, to ensure that every client interaction with your company adds shows your company in a positive light. Does it therefore not make sense to make every staff member a de facto marketer?

Network marketing’s success is premised on turning everyone who joins them into a marketer. The business runs on repeat business because the industry provides the requisite training to their recruits (most of them at least do), and the previously unskilled workers thrive. This, therefore, means that to turn your organisation into a mean marketing organisation training on customer service, client relationships, service quality etc is paramount. A receptionist who disrespects a client will cost you revenue, a driver who is rude to a client will cost you business, and likewise, an accountant who fails to provide a client with a refund on time will cost you business. Is it therefore not worth it to arm your staff with requisite skills to turn them into a marketer?

How many of you have all your staff as marketers? How did you manage to get everyone to rise up to the challenge?

Growing your business

'I thought running a business would be hard to start but would get better over time. We've increased our revenue, hired more people, ..., so why am I overwhelmed?' Does this resonate with you as an entrepreneur? This is a common refrain from entrepreneurs wondering how turning their idea into an exciting venture resulted in them wanting to pull out their hair in frustration and working all hours to resolve issues.

According to Steve Blank (the father of modern entrepreneurship), there are 3 stages from startup to a large company:

Steve Blank

50% of startups fail within 5 years of inception

If your business is at this stage- the search stage- you beat the odds stacked up against you! Most startups fail here because they lack a good product/market fit, have cash flow issues, etc. You will, however, note that your organisation is agile- pivoting in response to changes in the environment- risk-taking; has few processes and does whatever it takes to get the work done. You run on adrenaline!

71% of businesses fail to make it past year 10

In this period, startups move from search to build stages, and while the reasons for failure at this stage are varied, startups tend to grow beyond the capacity of the founder to handle every aspect of the business. Also, their sources of competitive advantage in the search stage i.e. overly customised product/service, founders involvement in everyday tasks, whatever it takes mentality and one centre of power, become their Achilles heel when they progress to the build stage. 

Systems and processes

To succeed in the build stage, installation of systems and processes in a startup is vital. Systems and processes allow one to (1) understand clearly how their business operates, (2) tease out the important processes from the unimportant ones, (3) offer a consistent product/service, (4) focus on idea generation and (5) take time off work confident in the knowledge that the business will continue to run in their absence, Yay! 

If you are ready to enjoy running your business again, here are a few simple steps to instituting systems and processes in your organisation:

1. Analyse your transformation process 

Determine what your inputs are, how you source them, how you transform them into your final product, etc. Ask yourself which of the steps you are taking are working, what's not, how long does it take to move from input to output and what you would change? 

2. Evaluate your processes

Analyse your processes and (1) determine their efficacy in achieving your end goal, (2) get rid of processes that add no value to your transformation process (3) reduce the time it takes to complete a process, (4) reduce the number of people needed to complete a process and (5) identify where in the process value is created and whether that value accrues to the customer or the business.

3. Create process maps

These help you identify all the necessary steps in your transformation process and ensure that each process feeds seamlessly into the next. Starting with the desired outcome and working backwards will help in highlighting the necessary processes. When done, compare this to your current processes, look for the most efficient steps and eliminate any unnecessary ones. Write down the process; that way, everyone in the organisation has access to it and can implement it. 

4. Test your process

The only way to find out if your process makes sense is to test it and tweak it where the results are not as desired. While testing your process, also decide on which steps in your process can be automated and automate them.

5. Test-run with your employees

This goes without saying. Since your employees are at the forefront of delivering to your clients, train them on how to use the set process map and encourage them to adhere to it to avoid variances in outputs. 

6. Systems improvement

A system is a living thing and, therefore, should be adjusted in light of new information. Staff should feel free to suggest changes to the processes.

Note:

1. There is no need to wait until you are in the build stage of your business to implement systems and processes. They can be implemented as soon as you work out your product/service delivery process. 

2. The move from search, build, grow is not linear and there are no hard and fast rules about how long a business spends at any of these stages. It very much depends on the nature of the business. 

What systems/processes do you have in your business? When did you implement them? If you do not have any, consider looking at implementing them and get in touch if you need help navigating the process.

Taking businesses online

Covid-19 has come and upended the way we have been doing business. Talk to any business owner and the conversation will veer towards taking their businesses online. The global lockdown has had business owners rethinking their marketing channels and so it is not surprising that almost everyone whose business can be moved online is looking to do so.  Those still holding out on taking your businesses online because your business has not been affected by covid-19, know that you are missing out on an important constituent for your business that is online and should make plans to engage them.

But, before one thinks of taking their business online one should come up with a digital marketing strategy, and in this article, we will look at some of the issues you as an entrepreneur should consider.

1. Target market & segmentation

It is vital that you have a clear understanding of whom your target market is. To do so, you should be able to clearly break them down by demographics, geography and psychographic elements. You will also need to understand your customer buying process, i.e. how long it takes them to move from need awareness to purchase. Once you are clear on whom your target market is, you will find reaching them becomes easier and cost-effective.

2. Channel

Tied to the target market is knowing where your target market congregations online. When you sold your wares in a shop, you relied on footfall for your clients, with an online business, you have to be clear on where your target market spends its time or searches for your products. Here you could be thinking of using a website to drive sales, online shop like Shopify, e-Bay, Amazon, FB, etc or you could use social media, mobile apps to reach your target market. However, given the many social media platforms available there is a need to decide on which of these you will use- FB, Pinterest, Instagram, LinkedIn, etc.

When thinking of the channel(s) to use and how to use them, consider what purpose that channel will fulfil. Are you using the channel for informational purposes where you share content? If you are, how engaging will your content be? Or is the purpose to convert your leads into sales? Also, consider whether you would like your channel to be interactive and how responsive will you be?

3. Reach

Determine how you are going to reach your target market. Will you do so organically or use paid ads? If you plan to use paid ads, do you have a budget for this and what outcomes would you consider as successful utilisation of your budget? If using organic growth what activities are you going to engage in that will allow you to reach your target market at the level you want? Who will be responsible for engaging with your followers- you or a hired social media manager?

4. Goals and expected outcomes

Set SMART goals that are aligned to your business objectives. This will guide your actions and ensure that you focus only on activities that lead to your expected outcomes. Once your goals and expected outcomes are set out, you will want to track your performance, so you need to decide on which metrics to measure e.g number of followers, the number of shares, engagement, post reach, mentions, conversion rate, click-through rate, bounce rate, testimonials, etc, There are many metrics out there that you could use but focus only on the ones that help to meet your marketing objectives and by extension your business objectives.

5. Payment systems

For some businesses, the payment systems they used while offline will be redundant while operating online, so it is important to device payment systems that will suit your online clients. The beauty of living in 2020, covid-19 excepting, is that there are myriad of ways that payments can be made, so select the ones that are convenient to both you and your customers from mobile money, to Paypal to stripe, credit cards, etc.

6. Returns

Selling products brings its own challenges with regards to the inability of customers to try on a product (clothes, shoes, etc) before buying and the same is true for services too. To counter this problem, some service providers offer free trial periods during which time a client decides whether or not the service meets their needs before they splash money on it. So, determine how you are going to deal with clients wanting to return products they had purchased. How you handle this will in part determine your customer's satisfaction with your service.

6. Listen to your followers

Finally, the most important point I would live you with when operating online is to listen to your customers. Client feedback has never been more important and easy to get than now. Act on their concerns.

Let me know what other strategies you would add or subtract to these in your online business.