Define Strategy for Dynamic Growth
Written by Megan Scanlon
Understand your market and customers to define a strategy that sets you apart from the competition.By Margaret Reynolds
In the first four articles in this series, we have laid the groundwork for the selection of strategy. As we engage in the development phase of growth planning, we define the strategic direction that will guide your company in the coming years.
What is strategy? Strategy is an integrated overarching, externally-oriented concept for how you will obtain your business goals.
Strategy is the driver for all key operational decisions and must work successfully in the environment created by the market and the culture.
Strategy is by definition a choice. It rules out certain paths and includes others. It will define where you invest, who you hire and how you sell.
A strategy is a focus for how you will compete.
Wal-Mart competes on low price and wide selection. Southwest Airlines offers the best value, featuring a combination of low fare and service. FedEx is about reliable service. The strategy is the core principle from which all other decisions flow.
Growth Strategy
A growth strategy is created in two parts. The first, which we deal with here, is determining the space in which you will compete. What you sell, whom you serve, how you are different, how you deliver and how you will obtain your return are key decisions which, collectively, capture your strategy.
The second part of developing a plan for growth is determining the specific initiatives you will pursue to achieve your targets. We will cover that next month.
Before you start on defining your space, there are two key things you need to decide. First, what overall strategy can you best compete with. This is largely determined by a combination of what the market opportunity is and what your company strengths are.
Secondly, once you have determined the best space in which to compete, you need to determine what will make you stand out in that space. What is your basic promise to the customer? For Fed Ex, it is about delivery by 10 a.m. the following morning. For Nordstrom, it is their legendary return policy. Once you have defined those factors you are ready for the next steps.
Develop a Strategic Positioning Statement
This statement need only be one sentence long to capture the essence of the strategy. It defines your company’s role in the market and describes what you “sell.”
Stay away from generic statements that can fit you and everyone else. Far too often companies have statements similar to this one: “Be world-class at making the highest quality widgets and offering exceptional customer service.”
Instead be specific, such as: be the best family-friendly great-value airline; best at running a bank like a business.
Identify Your Target Customer
You know by now that all customers are not created equally. You did your homework and discovered what portion of your customer base is contributing a disproportionate share of profits. Your strategy needs to be right for your target customer. After all, who they are and what it will take to appeal to them will, to a large extent, define the solutions you will offer in the marketplace. Be sure to determine who they will be tomorrow, not just today.
Create a Value Proposition
Be specific in defining the benefits you deliver to the target audience that supports your strategic position. These are the specific ways you put your positioning into practice. It is what the customer experiences that causes them to agree that you are indeed what you claim to be. A company that is going to offer best value airfare, for example, might have the following benefits:
- A simple and easy to understand fee structure
- No fee for ticket changes
- No extra or add-on fees
- Customer service with the customer in mind
- On-time and efficient travel
- On time arrivals
Set the Distribution Plan
Determine how you will get your product to market. It used to be fairly simple: bricks and mortar or direct selling (door-to-door). Now there are many more alternatives and combinations, including catalogs and the Internet. Many companies combine all of them. Some companies market through some channels and distribute through others.
Once you determine your distribution plan, you can determine your channel mix goals. If department stores were a large part of your bricks and mortar volume in the past, will it stay that way or be replaced by big box stores or Internet sales? Getting a handle on where your goods will be sold will help you make important investment decisions.
Clarify the Economic Driver
In order to be successful, you must consider how you intend to make money repeatedly and consistently. Your economic driver and your strategy need to work hand-in-hand to maximize return. If you have low margins you are going to need to sell volume. What does that suggest for your strategy? If your economic driver is return-per-customer, how does that cause different business decisions than if your driver is return-on-item-sold?
Defining a strategy is admittedly not easy. It is highly dependent on having a good knowledge base about your market and your company, with a handle on the anticipated changes expected in your industry.
Margaret Reynolds is managing principal of Reynolds Consulting, LLC. (816) 350-7680
