For too many executives, strategy is a heavy topic. Either it requires a seemingly infinite time commitment, or it is easily mistaken for an organizational vision or (perhaps worse) a short-term operational plan.
If you’re trying to build a solid strategy, then there are a number of resources you can draw from. So many in fact, that it can get a little confusing. Do you run a SWOT analysis, draw up a Five Forces Model, or try and sail into Blue Oceans? It’s enough to confuse even the most senior leaders.
But strategy doesn’t have to be that difficult.
In their latest book, A.G. Lafley, former CEO of Procter & Gamble, and Roger Martin, dean at the Rotman School of Management in Toronto, argue that, in the end, all strategy begins with two simple questions: “Where will we play? And “How will we win?”
Where will we play?
No company can serve every customer. In the end, strategy starts with the fundamental choice of which customers to pursue. It starts by deciding which industry to be in, which market to compete in and even which position in that market to occupy. Wal-Mart might seem like a mass-market retailer, but its decided to pursue specific customer segments and doesn’t mind alienating others who aren’t looking for “everyday low prices.”
Too often, we embark on a strategic plan assuming that the industry we’re in is the one we have to build a strategy for. But you always have a choice of where to play. If the market you’re in now doesn’t serve you, don’t be afraid to pivot and pursue a new market or customer segment.
How will we win?
Depending on which field you’ve chosen, you will have to decide how you will win in that field. Mimicking the product offerings or marketing plans of established players on that field is a sure-fire road to failure. Instead, decide how to craft a specific and differentiated plan to pursue customers through activities different from your competitors’.
Zappos doesn’t offer the lowest price on shoes, but it doesn’t have to. Instead, it chose to win by offering outstanding customer service. Trying to be the low-cost leader and also offer the best customer service experience will likely result in a second-place finish (or lower) in both categories. You can choose how you want to win, but you can’t choose a plan that others already dominate in.
You can use these two choices in different ways. If you’re creating a strategy, start with these two questions and align objectives and activities to the answers you’ve come up with. If you’re evaluating existing strategy, then compare that plan with how clearly it provides answers to these questions. If you know how to ask and answer these two questions properly, then you can cut through the confusion and craft a strategy that really works.
David Burkus is assistant professor of management at Oral Roberts University and editor of LDRLB, an online resource that offers insights from research on leadership, innovation, and strategy.