The subject of strategy has enjoyed and still enjoys an amazing popularity in business publishing. There is no lacking of books on the subject and no lacking of experts to write more. But one wonders what there is to still write really. Sad as it is, it appears like the more we try to learn about strategy, the more we get confused about it.
This happens in the space of SMEs basically because of insufficient attention to strategy, which leads to its misconception and a complete abandonment of the subject.
Strategy results from the need to bridge the gap between a business and its customer and defines a business unique approach to competition and the competitive advantage upon which this approach will be based.
According to Peter Drucker, the two basic functions of any enterprise are innovation and marketing. The purpose of innovation is to meet human needs. In the attempt to create solutions to human needs the enterprise encounters challenges that attempt to limit what is possible. These limitations come from the business environment defined by political, economic, socio-cultural and technological factors.
But if the enterprise would remain in existence profitably, the executives will have to figure out ways to reach the business goals irrespective of the challenges posed by the environment. The business will have to find a way to overcome the limitations of the environmental structure. This is only possible if the company can design a different way of competing from others.
This presupposes that business goals are attainable irrespective of how difficult or turbulent an environment might be. As Nathan Rothschild, the famed English Banker stated, ‘great fortunes are made when the cannonballs fall in the harbour, not when the violins play in the ballroom’. He meant that the more turbulent an environment is, the more fortunes you can make. Here’s why: people are more desperate for solution in turbulent environments, their pains are greater and their desire stronger. That’s why Nigerians could afford to pay MTN over N40, 000 for just a SIM card in 2000.
But making great fortunes especially in today’s hyper turbulent business environment requires ruthless execution of top-notch strategies. Now you wonder what a top-notch strategy will look like. After all you’ve been doing strategy all along.
Strategy is easy when you understand that it is really about the customer and how to be most valuable to them (of course at a profit). The more you understand the customer – their pain, limitations and desires, the more your innovation will spike? Being the customer means thinking like him, feeling his pain, sharing in his hope and knowing his joy. This is one thing that separates market leaders from the rest.
Leading organisations know that being great at strategy depends on knowing how the customer thinks, how he feels and what’s important to him. They know great customer experience is about what the customer wants it to be (even if the customer isn’t clear of it) and not what the enterprise feels like. Based on that understanding they design an approach that can deliver the most value to not just the customer but also all stakeholders. This is so because you have to have an intimate knowledge of your customer before you can create solutions that are truly valuable to him.
By being the customer, you understand what impact political issues, economic policies, socio- cultural situations and technology has on him and how much they separate him from what’s possible. Then you look for opportunities within the structure that may not be immediately obvious and maximize them to deliver value to him.
Millions of people around the world wanted the possibility of having just the music track they want from a music album. They weren’t happy about purchasing a whole album just for one or two tracks. Anger they expressed in illegal downloading and sharing of .mp3 audio files. Many couldn’t understand the language of a group of people voicing their complaints. Though they got the judgment in their favor, the industry still lost 90% revenue.
One company understood the message. The iPod, and iTunes were born. The people rejoiced and viola, Apple recorded over 5 million downloads from the iTunes store within two months! iTunes generated $12.9 billion in 2012 for Apple. That’s the reward for understanding the language of the market and building a bridge to reach them.
The iPod was Apple’s strategy for market leadership. It was the iPod that solidified Apple’s mainstream appeal. “Before the iPod, Apple had a reputation for making nice but expensive computers…But as the iPod became cheaper and more popular, so more and more consumers were introduced to the Apple brand. Someone who got an iPod for Christmas would wander into the Apple Store and start checking out the other products. Next thing you know, they’ve replaced their old PC with a MacBook. Then they buy an iPhone, then an iPad. So the iPod has a tremendous ‘halo effect’ — the halo from the iPod shines a light on Apple’s other products. It took a while, but Apple these days is thoroughly mainstream.”¹
The world is replete with the voice of complains of the customers waiting to be served. By understanding the language of the market, you will have the strategy that is just right – a top-notch strategy.
Brian Reuben, Managing Partner, D•Seven Associates is an advisor in leadership and strategy. He heads BusinessDay Training.