Great Small Business Ideas to Start: Clear strategy
Developing strategy is often over-elaborate and over-complicated. Strategy is simply about understanding where you are now, where you are heading, and how you will get there. It involves tough choices in three areas: who to target as customers, what products to offer, and how to implement the strategy efﬁciently. The most common cause of failure is the inability to make clear choices in these three areas.
The importance of making clear choices in the three elements of strategy—who to target, what to offer, and how best to implement— is best shown by the example of Nespresso, a simple-to-use espresso machine developed by the Swiss giant Nestlé. Though it is simple in appearance and use, Nestlé spent more than ten years developing the product. After several years of limited success, a new strategy improved proﬁtability. The system consists of two parts: a coffee capsule and a machine.
The coffee side of the operation was separated from the machine side, with the machines being made and sold by other companies. Nestlé was no longer responsible for the sales or maintenance of the machines—which was not its area of expertise—but, crucially, the machines could only use Nespresso capsules, guaranteeing future sales of coffee. The target customer was changed from ofﬁces to households, and the sales process was managed exclusively through the Nespresso Club (by phone, fax, or website, with capsules shipped direct to the customer).
To ensure a successful strategy:
- Create a unique strategic position for your company. Focus on who your customers are, the value proposition offered to customers, and how you can do this efﬁciently. (Do not confuse strategy with vision, mission, or objectives.)
- Make distinctive and meaningful choices. Combine these choices in a self-reinforcing system of activities that ﬁ t together. Common mistakes include keeping options open, enabling people to ignore choices, an approach to achieving growth that forces people to ignore the ﬁrm’s overarching strategy, and analysis paralysis.
- Understand the importance of values and incentives. The culture and values, measurement and incentives, people, structure, and processes all determine the environment of your organization. By inﬂuencing behavior, these will affect the success of your strategy.
- Gain people’s emotional commitment to the strategy. Any strategy will fail unless people are emotionally committed to its success.
- Recognize that understanding is not the same as communicating. Explain why the strategy is important to the organization and the individual.
- Do not overlook the knowing–doing gap. Individuals tend to do the urgent things and not the important ones.
- Do not assume that strategy can only be developed by “top” people. Ideas can come from anybody, anytime, anywhere.
- Keep your strategy ﬂexible. Ideas have a shelf life. Continually reassess the answers to the “who, what, and how” questions. Also, strategy requires adjustment to suit external circumstances. So allow your people to respond and to adjust, without waiting for permission.
In every industry, there are several positions that a company can occupy. The essence of strategy is to choose the one position that your company will claim as its own. If this is achieved, the ﬁrm can stake out a unique strategic position.