3 things you need for a successful business strategy

Strategy is only complicated if you make it that way, says author Vaughn Evans.

by Vaughn Evans
Last Updated: 12 Feb 2018
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Down to business

Why the mystique about strategy? Why all the jargon?  Why is strategy seen as the preserve of business school academics or overpaid consultants?

Strategy need not be that complex. Sure, if you work in a company with many different businesses operating in many different sectors, regions and countries, strategy would be complex. But if yours is an SME or a start-up, it need not be mystifying.

Here are three simple steps to build a winning business strategy.

1. Understand your market

For a business strategy to be successful without a thorough understanding of the market is possible: it is called luck. For those who don’t want to rely on that, time spent researching all aspects of the market will be well spent. On the demand side, how big is your addressable market?  Is it growing? How fast? What is driving that growth? Will those drivers change? On the supply side, who are your competitors? Who are your indirect competitors? Are there too many of you? What barriers are there to more coming in? Balancing demand with supply, is market pricing going to rise or be squeezed in the next few years?

Questions you need to ask yourself:

  • How big is your addressable market?
  • How fast is the market growing?
  • Will competition get tougher?

2. Gain a competitive advantage

Step two in building a business strategy is to establish a strong competitive position within that market. You need a competitive advantage that can last.  You have a product or service that is either highly differentiated from the other players or one that can be delivered at lower cost. Or, if you focus exclusively on one niche segment of your market, you have a product that is both differentiated and low cost.

How to differentiate, you may ask. Well that depends to an extent on the business, but your product may have a quality or features or functionality others don’t have, you may have a distinctive range of services, or a critical expertise in, say, R&D or marketing, or a special and defensible route to market. Whatever the differentiation, you need to convince your backer that it is both valid in the marketplace and defensible.

Questions you need to ask yourself:

  • What type of advantage are you seeking – differentiation, low cost or focus?
  • What are your resources or capabilities which underlie that advantage?
  • Is your advantage sustainable?

3. Manage business risk

The third step is to look at your strategy objectively, from the perspective of a potential backer.  What risks are likely to most weigh on their minds, be they market demand, competitive, strategic or operational? How can you mitigate those risks? Of those that cannot be mitigated, how can you demonstrate that they are of little significance and well outshone by the manifold opportunities waiting to be grasped by your business?

Do not, as so many business plans do, attempt to sweep risk under the carpet.  Your backer will find you out – and walk away.

Questions you need to ask yourself:

  • What are the key risks?
  • Are most able to be mitigated?
  • Do opportunities outshine the risks?

This is business strategy in three plain and simple steps, whether for a start-up or for a more established SME. Understand your market, gain a competitive advantage and manage the business risks. Develop your strategy, test it and subject it to rigorous cross-examination before approaching a backer. Then wow them with your coherent, credible and convincing business strategy.

Vaughan Evans is an independent consultant specialising in strategy and business planning. His latest book Strategy Plain and Simple: 3 Steps to Building a Successful Strategy for Your Start-up or Growing Business (FT Publishing) is out now. For more information go to www.vaughanevansandpartners.com

Image credit: Whyframe/Shutterstock

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