Get ideas to craft a winning strategy
Compromise strategies can represent the worst of all worlds. When there are many forces urging compromise, will you be able to make a bold choice?
We have just had a recent example of a terrible compromise strategy. President Trump is sending 4,000 more troops into Afghanistan to add to the 8,400 US troops already there.
Companies often use their crown jewels to protect less efficient aspects of their business, instead of maximising their value as a stand-alone businesses.
All companies do some aspects of their value chain better than others. The strong “crown jewels” are the real source of profit, although conventional management accounts tend not show this. They subsidise the weaker aspects of the business.
One radical growth option for a company is to see if a strategy can be built by “unbundling” its value chain, and opening up the crown jewels to others to use.
The world is changing faster and faster. Companies that fail to accelerate learning will get left behind.
Every company learns the same way. They go through a learning cycle of action, evaluation, reflection and then back into action again. This feedback loop is the same whether they are trying to understand changing customer needs, launching new products, starting new businesses or exploring new channels. What determines which companies learn the fastest?
There is continual pressure to compromise your strategy with incremental decisions that individually are fine but cumulatively lead you down the wrong path. Mechanisms and policies can fight this “slow strategic fade” in the medium term, and sharing the fundamental insights can keep the company on track in the long term.
When couples separate, there is not one moment when they choose to part. Instead it comes as a series of small incremental decisions – like that night when you chose to stay proud instead of reconciling – that combine over time to form a direction. And each step down the path makes coming back harder.
Companys experience this same slow fade. At the start, the founders have a crystal clear image of their strategy. They know what they stand for, how they make money, where they are going and what they should do and what they shouldn’t do.
The techniques to manage financial risk have become familiar to anyone who does their own personal finance or read the FT. Invest in a portfolio of unrelated assets, maintain liquidity, make multiple bets, limit your exposure to any one position or variable. The concepts are well proven and applied in business too.
Approaches that work for finance are like poison for managing strategic risk however. Strategic risk can be defined as the chance of becoming undifferentiated, with no clear competitive advantage. Then business becomes a hard commoditised struggle.