Does your business need a strategy?

Robert McHenry assesses the meaning of the word 'strategy' in a small business context, and the requirement to have one in place.

Possibly not. So why then is so much emphasis put on the idea of having one? Why do small business leaders feel so much pain when direct reports complain that they ‘Don’t know what the strategy is’ and that somehow the business is rudderless or that it will grind to a halt any time soon? Everyone, the complainants will tell you, is demotivated because in the absence of a strategy they don’t know what they are supposed to be doing.

Strategy has many meanings and takes many forms. At its lowest, it is simply a pretentious word for a plan and down there with other overblown words like ‘paradigm’ and ‘bandwidth’ that are currently in favour. At its highest, it is a series of moves played as in a chess game against a clever opponent. However, just as in chess, the moves may be worked out beforehand but never played because the opponent behaves in a way that was not anticipated. New moves have to be invented to cope with the changing circumstances. This is known as emergent strategy.

In between these two forms is something known as deliberate strategy. The best deliberate strategy is not really a single strategy but a series of contingencies. By making assumptions about the current state of the market, the business sets out to execute a certain plan. However, if those assumptions turn out to be wrong, it has another plan in reserve and perhaps yet another one beyond that. During the period of change from one plan to another, there is nothing more infuriating to the strategist than to be accused of ‘changing the strategy’ when it was always the essence of the strategy to adapt to change. Good strategy is dynamic and in volatile markets or sectors where products have a short life, the current plan will constantly be modified.

Different strategies; different businesses

Strategy can also serve different purposes for a business. A competitive strategy can help it win market share and a marketing strategy can harness the strengths of a business to make it stand out from other businesses in its sector and give it distinctiveness. A product strategy can help a company find uncontested market space.

Business school professors love strategy and so do many management teams. There is little more popular with both than to go off-site for a day or two ‘to work on the strategy’. The blunt speaking Harvard Business School professor Bill Reddin once confessed that one of his easiest assignments was to lead a strategy session in a company. He said, ‘Everybody loves it because it is a form of escapism; it titillates the retina but rarely leads to the need for any immediate action.’ Not surprisingly, academics disagree on the definition of strategy, the differences between strategy and tactics and the tools and analyses that are needed by a business to create a sound strategy. If you look up ‘business strategy’ on Wikipedia, you will get the sense that you are witnessing another ‘How many angels can dance on the head of a pin?’ debate.

As ever, it is the role of the academic to make things complex and the business owner to make them simple. Here is what I have learned to do about strategy in my own business over the years.

1. Articulate a simple aim for your business, ‘We want to be the best at …’

2. Make an annual plan under headings such as revenue, profit, staffing, products and expansion. Try to put this plan on a single page.

3. Share the plan by delivering it yourself to everyone within the business in small groups of around six. In my business, we share the plan in this way annually and we present quarterly updates to larger groups.

4. Do not be daunted if some people some people show little interest in the plan. There are large individual differences here. Some staff just want to be assured that a plan is in place and they do not want to know the detail (except in areas where they are directly affected).

5. If you have revealed the plan to everyone, rise above the occasional taunts that ‘No one here knows the strategy’. The plan is the current version of the strategy.

6. If you have to change the plan during the year or from year to year because of unanticipated circumstances, that is not an admission of failure. It is proof that you are being strategic. There are people who will accuse you of changing the ‘strategy’ but those are the ones who probably used the word pretentiously in the first place to mean a fixed plan.

A small business can be run successfully without a strategy as long as it has a plan that is revisited at least annually. Communicating the plan personally to everyone is helpful to employee motivation. If you grow your business successfully over five years or more, you can reflect on the fact that you are a great strategist and a master tactician because strategy, as Kierkegaard said about life, can only be understood backwards but it must be lived forwards.

Dr Robert McHenry is founder and executive chairman of OPP.

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