How to Develop Your Business Strategy
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The essence of strategy is choosing what not to do – Michael Porter
I love the Michael Porter here because it’s so true, and more so the more you dig down into the front lines of real business, such as small business and startups.
Strategy is what you’re not doing. My favorite metaphor is the sculptor with a block of marble—the art is what he chips off the block, not what he leaves in. Michelangelo started with a big chunk of marble and chipped pieces off of it until it was his David.
Strategy is focus
At the real-world level—my favorite—strategy is like driving and sex: we all think we’re pretty good at it. But simplifying, doing today what will seem obvious tomorrow, is genius. I say the best strategies seem obvious as soon as you understand them. Furthermore, it seems to me that if they don’t seem obvious after the fact, they didn’t work.
Strategy has to be easy to define. I like my simple “IMO method,” which I explain here. But aside from IMO I’ve also worked in depth, during my consulting years, with several competing strategy frameworks, and every one of them works well if it’s applied correctly and executed. And furthermore, I say you can also define strategy with a story, or a small collection of stories, which I’ll also explain here.
The IMO simple strategy method
The acronym IMO stands for Identity, Market, and Offering (product or service).
Think of it as the heart of the business, like the heart of the artichoke. It’s a group of three core concepts that can’t be separated: identity, market, and business offering. Don’t pull them apart. It’s the interrelationship between them that drives your business. Each affects the other two.
Business identity
Every business has its core identity. How are you different from others? What are your strengths and weaknesses? What is your core competence? What are your goals? What makes you different?
As an example, imagine the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like cycling as a family activity.
The first one will probably stock and sell expensive, sophisticated bicycles for the racing enthusiast and extreme long-distance or mountain biking hobbyist. The second will probably emphasize bicycles for children, bike trailers, carriers, and accessories for families.
I hope the example illustrates how the owners’ identity affects strategy in strengths and weaknesses, knowledge and focus, and choice of product and target market.
Part of your identity is what you want from your business. Some businesses are about your lifestyle, or pursuing your passion. Some people want their businesses to grow as big and as fast as they can and are happy to work with investors as owners. Others want to own their own business, even if it has to grow more slowly for lack of working capital. What’s your case? If you’re committed to a second income in a home office, incorporate that into your identity. Don’t look for generalized formulae; let your business be unique.
The market
Your identity influences your choice of target market. The bike racer focuses on attracting enthusiasts, offering expensive high-end bicycles and equipment. The couple focuses on attracting parents with kids, concentrating on medium-level bikes, trailers, and family-friendly accessories.
Keep your business focused on specific target markets. That bike racer shop owner has to know his products are too expensive for the families, and the families bother the high-end enthusiasts. The family bike shop can’t scare away its target market with very expensive racing bikes.
Offering
Your business offering is your product or service. You can already see with the bike shop example how one shop needs one kind of inventory and the other needs a different kind. That’s strategy at work. Your identity influences your choice of market, which influences your choice of product. Your choice of product influences your choice of market. They have to work together.
Understand that you can’t do everything. The bike shop that caters to families and racers is likely to fail. You can’t credibly offer high-end bicycles at bargain prices in a family-friendly atmosphere. If you say you do, nobody believes you anyhow. So you have to focus. Make this focus intertwine and mesh with your choice of key target customer and your own business identity. All three concepts have to work together.
Seth Godin’s book “The Dip” is about being the best at one thing. That’s the point of your focus. Since you can’t do everything and even if you could, your customers wouldn’t believe you, then you need to focus on something that you do well, that people want. Be the cheap and practical bars of soap that sell in volume in the big chain stores, or be a finely-packaged, expensive and sweet-smelling soap that sells in boutiques. Don’t try to be both.
Roll them up together
These three things are your business strategy. Don’t pull them apart. Don’t take them one at a time. Don’t ever stop thinking about them. Remember, in planning as well as in all of business, things change. Keep watching for change.
Your story as strategy
All human beings have an innate need to hear and tell stories and to have a story to live by. – Harvey Cox
Stories are the oldest and probably the best way to communicate ideas, truth, and beliefs. Stories are powerful.
Think of the key stories that are foundational in the great religions. Or think about the stories behind the phrases “sour grapes,” “the fox in the henhouse,” and “the emperor’s new clothes.” They all have power because they communicate. They resonate. We recognize their truths.
Business stories
Stories are a great way to define and communicate business strategy. A strategy that can’t be told as a story is doomed. And a strategy could be laid out as a story that includes the IMO factors, for example. And it could be as simple as a story defining the problem your customers have, the solution your business offers, and the factors that make your business especially suited to offer the solution. In this method the problem is also called need, or want, or, if you like jargon, the so-called “why to buy.” That’s slightly different from IMO, but that difference is not important. Strategy should be flexible. And a lot of successful presentations start with the problem and its solution.
Your essential business story
Strategy starts with an essential business story. Imagine a moment of purchase. Somebody is buying what you sell. It happens with every business. For example:
- A group walks into your restaurant.
- A web browser subscribes to your membership site.
- A customer in your store picks up one or more products, puts them into a basket, and walks to the checkout counter.
- A potential client decides to take on your management consulting or social media marketing.
In every case, there is a story. Think it through. Who is this person? How did he or she find you, your store, your restaurant, or your website? Was it by answering an email, looking at an ad, talking to a friend, or maybe searching in a Yelp app on a mobile device?
Every transaction is a solution to somebody’s problem. Understand what problem—need, want, or why-to-buy—you’re solving. Consider this famous quote:
“People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.”– Theodore Levitt
So you don’t invite somebody to a sushi restaurant just because you’re both hungry. You want an interesting meal; you want to sit down together for a while and talk. It’s an event, an activity, with hunger satisfaction far from the top of the list.
You also need to understand what business you’re in. The restaurant business is often about occasions, not meals. The drive-through fast food business is about convenience. Starbucks is about affordable luxury, not just coffee; and in some cases, a place to meet, or a place to work.
So the solution has to match the problem, but it should demonstrate what’s different about one company when compared to all its competitors.
For example, to make a restaurant story based on fine food credible, you need to add in how this restaurant’s owners and team can credibly deliver fine food. And in the software company example, there must be a sense of this company being qualified to deliver useful content in this topic area. That takes us back to the identity component of the IMO framework; but it could also be called simply the secret sauce, or why we’re different, and presumably better.
A business pitch as strategy summary
One way to build out your strategy is as simple and straightforward as developing a pitch for your business.
There’s no need for long-winded strategy explanations, and the pitch defines the problem worth solving and your offering that solves the problem, plus the market, competitive positioning, and key points for product and marketing, plus your identity. I’ve used the pitch format for clients. That’s a pitch in the illustration here, and you can click on it for more detail.
You can download a free business pitch template from Bplans, too.
Conclusion: The best strategies seem obvious
So please, keep it simple. The best strategies seem obvious after they’ve been executed successfully. Look at businesses you like and deal with often and I’ll bet you’ll see not subtle or sophisticated strategy, but a good combination of matching identity, target, and offering. Or a simple, obvious story about somebody needing or wanting something. If it works, you know it.
This article was originally featured on Bplans.
(Copyright notice: This article is adapted from an as-yet unpublished book by Tim Berry on Lean Business Planning and is copyright Timothy Berry, all rights reserved. The first image is courtesy of Timothy Berry.)
