Whether your business is just an idea to talk about with friends or a mature, publicly traded icon of industry, having a clear strategy is essential to survive in a competitive market. To adapt one of my favorite quotes from Ping Fu, it is more important to be clear than to be right.
I’ve compiled the core ideas from my favorite HBR articles on strategy, listed at the bottom of this post (plus an idea that I think is from Jack Welch but I can’t attribute) into the 9 critical questions:
- WHY does the business make money? i.e., what gap in the market does it fill?
- HOW does the business make money? i.e., what are the transactions that generate cash flow and margin for the business?
- What is our specific objective?
- What is our scope?
- What is our competitive advantage? i.e., how are we better, cheaper, or different than the alternatives?
- What is our strategic sweet spot? (see diagram)
- What are the relevant products in the market and their geographic coverage?
- Who are the buyers, suppliers, competitors, substitutes, and potential entrants?
- What forces control profitability? (see diagram)
Michael Porter’s Five Forces
If the answers to these questions aren’t clear for your current business–no matter how big or small–think about it and spark some conversation. The answers will help you focus and might surprise you.
If you have questions, feedback, or know where #1 & #2 come from, leave a comment!
References
[…] Like any tough problem, the answer will be obvious in retrospect. It might be helpful to answer key questions on your strategy first and then generalize it. Also Jim Collins has written some great books comparing companies and […]
I particularly like this statement “it is more important to be clear than to be right”. It is similar to one of my strong beliefs – “A well-executed mediocre Strategic Plan will yield better results than a poorly-executed excellent Strategic Plan.” If one believes this, then the PROCESS used to develop the Strategic Plan should be focused around making sure the key players who have to implement the plan are totally committed to what it says. This is more important than the details of the Strategy itself.
[…] Business Strategy: While Michael Porter has a longer answer, Jack Welch defines strategy (in his book Winning) as “making clear cut choices on how to compete.” In a previous post, I compiled the 9 Critical Questions on Strategy. […]
This is a great summary Ryan. You pulled together a lot of good ideas into these 9 questions. The final question pointing off to Porter’s 5 forces is a nice finish. I hadn’t seen the “sweet spot” model before looks good.
[…] takers: Once the fireworks around the deal have faded, someone’s got to execute the strategy. The owners of any business, ranging from a sole proprietorship to a limited liability company to a […]
[…] strategy is about trade-offs. A business must choose to specialize in a certain market, geography, or product domain in order to […]