What is business strategy? Whether you are totally new to strategy or have been around it for years, there can be a lot of confusion and misconceptions about real business strategy. Many make the mistake of equating business strategy with market strategy, focusing strategy efforts on “how to get and keep customers” while ignoring some of the foundational strategy prerequisites. Others confuse business goals and planning with strategy itself. Talon uses three simple rules for building a strong strategy foundation.
Rule One: Know Thyself
Strategy begins with self-assessment. Start big: What does your organization do? Determine all the activities that go on within your business. Then start to narrow it down to find your skillset: What are your core competencies? These are the activities that you do really well—areas where you have successfully invested time and resources to create efficiencies or expertise. Use economic filters and research to validate your claims. Core competencies are only those activities that you do well and produce a real measurable economic impact for your firm. Keep narrowing down: What is your competitive advantage? These are core competencies that you do better than anyone else. An understanding of your competitive advantage is the foundation for understanding your true value proposition.
Rule Two: Know Thy Competition
If you think you have no competition, you’re not starting broad enough. Most firms define competitors as only the “me too” look-alikes. Like self-assessment, competitive analysis means starting big and narrowing down. You can expand the competitive landscape by using a tool like Porter’s Five Forces to really explore barriers to entry, substitutes, and customer loyalty factors. Once you see the wider range of true and potential competitors, you can narrow down by determining where each is positioned in relation to you. Knowing your competition and your industry is an important step in finding your Blue Ocean Strategy.
Strategy is often what you say no to rather than yes. Build on your company’s self-knowledge by defining what you do (mission), how you do it (vision), and your reason for being (core values). Filter decisions and opportunities through these definitions and through your core competencies. The best strategic decisions are those that are both in line with your organizational identity and work to your strengths.