Whether we are talking about developing strategy or creating a business model, common methods share a BIG limitation – they only define your “position”.
What the heck is “position”!?
… simply a definition of “where” you plan to compete …
- who do we aim to serve (exactly which types and segments of customers)
- what will we offer them (exactly what products/services, meeting which of their needs)
- how will we do that?
Clearly we could aim to serve more than one segment – e.g. to take our restaurant example from earlier posts, we might aim for younger couples, and older couples, and families with kids. And we could offer both casual can’t-be-bothered-to-cook meals, and special-occasion meals.
Let’s look at example frameworks against each of those questions. And summarise how some might work for Beyond Meat Inc. [BM] (a business offering non-meat products to consumers thro’ both stores and restaurants, from our standard strategy course).
… after SWOT [!] maybe the best known strategy framework of all?
The “5 forces” framework basically says that our ability to make high profitability is limited by other actors who will likely compete away that profitability. The stronger are those forces, the lower is average profitability in the sector, and the harder it is to do better than that average. So … we should choose a “position” (answers to those 3 questions above) where those forces are not too strong or can be mitigated.
Those forces are really tough for BM – powerful competing food product firms, large powerful customers (store chains), plenty of new entrants and substitute products, and big powerful suppliers.
The value curve framework shows the importance customers place on various benefits or “values” offered by our kind of product, and compares those against what they feel our product actually offers. Here’s what BM might believe its target consumers want, and what they aim for …
Business model canvas
The business model canvas lays out a set of business model elements that need to be consistent with each other in order to capture and retain customers. Here’s how BM’s canvas might look, highlighting elements needed to attract target consumers.
These frameworks ARE useful – but not enough
Yes, we do need to know how tough it will be to be profitable in our chosen “position”, and figure out how we might mitigate pressures from those other actors. Yes, we need to match what we offer to the benefits customers seek. Yes, we need to ensure all parts of the business and its 3rd-party allies work together well.
But once we have got that right none of this changes! – at least not much, or very often. An extreme example – furniture store-chain IKEA would get exactly the same findings from these frameworks today as they did 50 years ago!
So what’s the problem?
None of this tells us what to do. “Strategy” is a continuing stream of actions and decisions that should build the business and its performance, not a one-time choice of where to compete.
None of this gives us any numbers. There is no way from these frameworks to calculate or even estimate how customers and sales might grow, how much of what we need to develop to capture those customers, what costs will arise from building and operating what is needed, and thus no way to estimate future profit growth.
So what must we get from our strategy away-days?
Specify and quantify the key business factors – products, capacity, staff [by type], customers [by segment], intermediaries [if relevant], and how their scale and quality is changing
Estimate how each factor needs to grow over time, checking for consistency [e.g. is projected growth in capacity and service staff enough to support projected customers and sales?]
Develop a timed-action plan to make all of those things happen, which will include significant initiatives and improvement programs
… and “strategy” is not an annual ritual! – it is a constant stream of well-worked-out decisions, actions and initiatives. So we need to continually return to that plan to check it against what has actually happened, and adjust plans and projections accordingly.
We explain all of this – and more – in our Strategy for Leaders course. We explain these and other frameworks, with examples, and with Worksheets to apply to your own case. AND … the 2nd half of the course is dedicated to that timed action-plan that is so critical to successful strategy implementation.
There is a low-cost “essentials” option for the course at the same page, covering just the key parts of each class – refundable if you upgrade to the full course.