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5 Step Guide To Crafting A Well-Defined Strategy

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5 Step Guide To Crafting A Well-Defined Strategy

All organizations—from start-ups to established businesses—need a strategy. While it may seem obvious that a new business needs a strategy so that it can get off the ground, the need for a well-defined strategy is even greater for established businesses. They have to consider how they will fend off potential disruptors, how they will stay ahead of existing competitors, and how they will balance optimizing the core business with growing in adjacencies. Deeper than the typical high-level mission statement (“Our goal is to be the market leader. . . .”), your strategy tells you precisely how your organization is going to outperform the competition. Influenced by Procter & Gamble’s A. G. Lafley and the University of Toronto’s Roger Martin, our thinking on how to develop a winning strategy requires making five discrete choices. Ultimately, your strategy should be an explanation of how your choices meld together to form a concrete plan of action.

Too often, companies fail to get specific in how they answer these questions, or they agree on the easy answers without pushing themselves to go deeper. Successful strategies are ones that challenge conventional wisdom, allowing you to do things that your competitors haven’t yet thought to do.

A good strategy matters not just for the overall organization but for individual projects too. With a clearly defined strategic objective, teams using the Jobs Roadmap can ensure that their efforts support well-articulated aims. A major virtue of the Jobs approach is that it is expansive and yields a fully rounded view of latent demand; however, that virtue can turn into a danger of boiling the ocean if there isn’t also a way to cleanly prioritize interest areas and determine which insights are most worthy of turning into specific opportunities. Setting strategic objectives, therefore, isn’t just for strategy departments; it is for any team looking to use the Jobs approach to produce innovative ideas.

The first step in creating a strategy is defining what it means to win. Often this is expressed in the form of a quantitative target (e.g., growing revenue from new products by 20 percent over five years), but it can also be qualitative (e.g., developing a self-serve business model that will allow us to fend off new low-cost entrants). As you define what it means to win, you should also be asking yourself why you have come up with that objective. Why are you pursuing the path you chose? What would be different if you chose a different target or a different time frame? Businesses often announce wild aspirations simply because they sound good (20 percent growth by 2020!) without spending significant time thinking about whether they’ve chosen the right goals and how their goals can be achieved. As you answer the questions in our model, revisit your initial definition of a win to better understand whether your objectives are attainable and what resources you will need to devote to achieving your goals. And, by all means, never confuse a goal with a strategy—a goal is useful because it will impact strategic choices, but it tells the organization very little about what to do or how to make difficult trade-off decisions.

The second step in crafting a strategy is deciding how and with whom you will win. Generally this involves making choices along three dimensions. On one axis is your familiarity with the product or service you will be selling. Is this something you’ve made before, or are you launching into a completely new class of products? On the second axis is your familiarity with the customer you’ll be serving. Are you targeting a new customer type or geography, or is the customer similar to ones you’ve served in the past? On the third axis is business model familiarity. Are you rethinking the way you operate, such as by lowering your capital needs, getting closer to customers, or adding an ecosystem of complementary services? These business model imperatives can impact both product and customer selection. As you stray farther from the core along any of these three dimensions, you’re increasing both your growth potential and your risk. Keep in mind, however, that that risk compounds as you move farther from the core along multiple dimensions. There can be great opportunity in those newer fields, but do not presume omniscience as you might in your core business.

Over time, expanding what’s considered core is an essential part of growth. While companies can muddle along for a while by copying their competitors, that’s not a strategy that will result in any kind of long-term success. That’s what Atlas Comics was doing in the 1950s. It tried imitating the concepts that seemed promising from TV and movies at the time, such as Westerns and war dramas. The company failed to launch any breakout hits, but it managed to survive by getting comics out quickly and cheaply. When the organization rebranded as Marvel in the 1960s, it tried a different strategy. Its first step was to take a familiar product—superhero comics—and make them popular again, this time reaching new customers. It then innovated that product; Marvel’s Fantastic Four was one of the first to make real-world struggles and adult issues a part of comic book culture, allowing comics to appeal to new customers—adults as well as the traditional younger readers. Marvel continued to add characters with soaring popularity, such as Spider-Man, Hulk, and Wolverine.

In the decades that followed, Marvel experienced pockets of phenomenal success, but it also faced deep competition from rival DC Comics. In an effort to shrug off its financial troubles and keep heroes relevant, Marvel took its core assets—its tried-and-true stories and characters—and brought them into totally new products. Marvel’s new movies gave the company’s characters mass appeal across customer types. Its 2012 blockbuster The Avengers sits as one of the five highest-grossing films of all time, bringing in over $1.5 billion worldwide; it also helped to expose Marvel to still more customers, such as Chinese audiences who hadn’t grown up with these characters. It also added more leading female characters over time, such as Jessica Jones, to bring comics beyond their traditional male reader domain. Most recently, Marvel has made a push to try new business models as well. Building on the success of its Agents of S.H.I.E.L.D. TV series on ABC, for example, Marvel partnered with Netflix to offer Daredevil as exclusive programming for Netflix subscribers. Marvel also experimented with an alternative model for selling comics with its Marvel Digital Unlimited app, which offers readers mobile access to comics on a monthly or yearly subscription basis. While Marvel has seen enormous success by expanding into adjacencies along all three dimensions of growth, it’s important to remember that its success was premised on its ability to leverage its core stories and characters—its most valuable assets.

The third step for honing your strategy is determining your competitive advantages. This involves identifying the strengths that allow you to expand beyond the core, as well as the assets and tactics that you can use to outperform any competitors who are already playing (or may choose to start playing) in your newly chosen arena. In the ideal scenario, the advantages you leverage will also act as signals to potential rivals to stay out of your new markets. Your advantages will help to determine where to focus, so there may be iteration between steps two and three of this process.

The fourth step for creating a strategy is about defeating specific and articulable challenges. It’s folly to assume that just because you set a goal you can achieve it. A good strategy maps out the challenges you are likely to face and the uncertainties you need to resolve, articulating a plan for how risks can be reduced and how obstacles can be overcome. We recently talked to Trang Nguyen, the cofounder of Tipsy Art, which is popularizing painting as an evening social event in Vietnam.

While she knew that she could satisfy some of the same jobs as a U.S.-based analogue of this business, called Paint Nite, she also recognized that Hanoi and Boston are completely different markets. For example, she discovered early on that alcohol was a much less significant part of the equation in Vietnam. Participants in many of the early sessions often just discarded their free drinks. The Tipsy Art team quickly restructured around coffee shops, which are much more of a focal point in Vietnamese culture. In addition to increasing demand, this also allowed the business to reduce its drink costs. Even now, the team continues to keep a clear vision of the challenges that will need to be addressed as the business grows, including how to build relationships that will be hard for competitors to copy, how to achieve scale in a business that relies so much on relationships and experiences, and how to ensure that the model is sustainable over the long term even if interest in introductory painting workshops begins to wane.

The fifth step in crafting a strategy involves developing growth options and the capabilities to move forward. This step focuses heavily on the “how” of strategy. What competencies do you need to develop in order to gather customer insights, build a culture of innovation, or manage a new business? Your strategy should articulate the institutional capabilities that you will build or strengthen in order to achieve your underlying objectives. At the same time, your strategy should allow for an ability to adapt as uncertainties about the future become clear. This means ensuring early on that the ability to pivot is built into your long-term plans. When a major change or event causes you to shift direction, you should be able to choose a different road, without having to backtrack or blaze an uncharted path through the woods. This is not to be confused with panic! An ability to adapt does not equate to abandoning your chosen course because a new venture proves challenging. Rather, a good strategy allows you to transition to alternative routes when certain predefined circumstances come to pass. You will have already articulated several options and will have a view as to how many of those options remain open to you.

More of this approach is featured in my new book JOBS TO BE DONE: A Roadmap for Customer-Centered Innovation.

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