What a Business Strategy Really Is (And Why Your Small Business Needs One)

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A small heritage seed and nursery business decides to buy the adjoining small grocery store and combine the two businesses. A small but highly qualified drone photography business decides to switch its focus from real-estate photography to industrial applications like utilities and safety inspections. A mid-sized arborist company decides to sell its utility-clearing division to one of its biggest competitors.

These are stories of business strategy, and although business strategy happens all the time, it remains one of the least-understood and most misused terms uttered by small business owners, many who still believe that “business strategy is for big business, not for us small main-street players.”

And that’s just wrong.

What Business Strategy Is and Isn’t

It’s hard to get through a day of business conversations without someone saying something is or isn’t a good strategy, but when you look closer, these people actually aren’t describing strategies.

For something to be a business strategy, it needs two elements:

  1. A decision. You’ll notice all of the real-world examples I started this article with involved a decision.
  2. A wholesale change in direction. Strategic decisions are about changing the road you are on (or not), and typically impact every function in your business. These decisions change your business model or confirm the status quo, so yes, intentionally doing nothing in the face of significant options is still a strategic decision.

So what doesn’t qualify as a strategic decision? Well, adding a website to your marketing efforts may be a good move, but it’s not a strategy. How about incrementally improving the automation of your manufacturing facility? Well done, but it’s not a strategy. Nor is rolling out anti-harassment and anti-bullying policies. It’s a good thing to do, but it’s not a strategy.

While the first two examples involve decisions of a kind, they have little impact on a business model and don’t represent a change in direction. The third example is neither a change in business model or even a decision because anti-bullying and anti-harassment strategies are required by B.C. law.

Another way to test for strategy is to analyze the decision-making rhythm. So if an action you take is the result of decisions you make weekly, monthly or even yearly, it probably isn’t a strategic decision.

Unless you are operating in an incredibly disrupted and rapidly evolving environment, a strategic decision is usually the kind of decision made only a few times in a decade. So deciding to close your bricks-and-mortar locations to become a pure-play online retailer is a strategic decision. You don’t make this kind of decision every day or every week.

In business, growth is change. The status quo is terminal. Strategic thinking is critical to ensuring you’ll grow and thrive, so it’s important to understand what it is — and to do it deliberately.

Tips to Help Align Your Approach with Strategic Thinking

Assume your company is a day-one company, every day.

Borrowed from Jeff Bezos at Amazon, the notion here is that you should take nothing for granted or assume the way your business is run right now is the best, or even the only, way to run a business. Don’t assume the market you operated in yesterday is the same market you woke up to this morning.

Beware of tinkering

If your business is under stress even after you’ve improved different operational areas (spending a bit more on marketing, improving the talent-density in your organization), stop throwing more time and money at tinkering. Instead, ask yourself if it’s time to do something radically different. Business strategy and reinventing yourself are close cousins.

Think Bigger

Just because you are small shouldn’t mean you think small. Big daring thoughts have nothing to do with being a global corporation. They have to do with the size of your transformation, not the size of your market share. Not that anyone would complain if the big transformation led to bigger market share!

Strategy is your real job.

If you own a painting company, your main job is not to be the best painter in your market or even the best painter in your business. The belief that business success arises from the technical prowess of the owner is a form of the Entrepreneurial Myth or E-Myth articulated by author Michael E. Gerber. Your ultimate job as the owner is to be the strategic thinker. We need you in the wheelhouse setting the compass heading, not down in the engine room tinkering to improve fuel consumption. Keep doing that and either you’ll never leave harbour, or you’ll run aground once you do.

Get the broadest perspective possible.

Set aside time every quarter, or at the very least every year, for wide-open strategic visioning. Forget boring “strategic planning.” This is “if I were a fish and I knew the oceans would be gone in a year, what would I do?” stuff. Include the broadest cross-section of your team possible. As the Toyota Suggestion System has shown for decades, you can’t assume to know where the next transformative idea will come from.

 

Clemens Rettich is a business consultant with Grant Thornton LLP. He has an MBA from Royal Roads University and has spent 25 years practicing the art of management.

This article is from the October/November 2018 issue of Douglas.