Entrepreneurs Don’t Need Strategy

'Entrepreneurs Don't Need Strategy' by Richard Shrapnel

There is a myth that still rolls around that entrepreneurs don’t need strategy, they just get up and go. Or if they do have a strategy then it’s the ‘light’ version, as they don’t have time to waste. Nothing can be further from the truth. But maybe some of that truth is clouded in the distinction between real entrepreneurs and those who are just opportunists.

 

Active Knowledge Questions:

Answer these four questions:

1.     Who is your customer?

2.     Why do they keep coming back to you?

3.     What do you do better than anyone else?

4.     What value do you deliver to them?

Guess what, if you answered these four questions, you have a strategy. If you couldn’t, then you are really not in business.

 

Opportunist Or Entrepreneur?

In my world, entrepreneurs are people who build businesses that endure. They identify a need, often a need not being well met or not met at all and they go about creating a way to meet that need better than anyone else. They bring people together who can make all this happen and they remain central to the creation and growth of the business.

Their focus is on the opportunity to meet that unmet need and yes, sometimes, but not always, they are excited about the dollars they might make. And there are times, more often than not, where they have no real idea how the dollars may work but the opportunity still excites them.

The dollars and business model emerge as the opportunity takes shape and their solution begins to become real. The point being, opportunity and need come first, and then dollars sometime later. It’s not about searching for an idea that will only make big dollars.

As their business gains scale, they then draw in additional expertise to support the efficient and effective operation and growth of the business. And they may at some time leave that business in the hands of professional management and apply their talents to the creation of a new business, but their businesses continue to grow and prosper in line with their vision.

Opportunists are those who search for the big dollars. ‘Where are the opportunities which I can jump into, leverage up, make a good dollar for myself and then exit at a great price? I don’t really care about the business per se, it’s a way to make money.’ Opportunists may well be wealthy and be seen as serial ‘creators’ of businesses but they really leverage off others’ talents and rarely build businesses that endure.

Our communities need more entrepreneurs and not opportunists. Strategy is the realm of entrepreneurs whereas capitalisation rates and short-termism is the focus of opportunists.

But Surely, It’s About Profits?

To clarify, entrepreneurs are concerned about profits, and cash flows and market value, but they realise that profits are an outcome. An outcome of out-competing everyone else in the marketplace and delivering exceptional, and ever-improving, value to their customers.

Profits, cash flow, and the resulting market value are an essential element of the lifeblood of their business. However, they understand that if you become too focused on profits then self-interest, politics and short-termism are the material side effects. And competitiveness becomes subject to profit and short-term gains typically result in a business’s declining competitiveness.

Academic and author David Collis in his article, ‘Lean Strategy’ for Harvard Business Review notes, ‘strategy without entrepreneurship is central planning; entrepreneurship without strategy leads to chaos’.

Strategy is the way that entrepreneurs keep the focus on competitiveness ensuring enduring profits are an outcome.

What Does Strategy Look Like Anyway?

If you can answer these four questions then you have the foundation of your strategy:

  1. Who is your customer?
  2. Why do you they keep coming back to you?
  3. What do you do better than anyone else?
  4. What value do you deliver to them?

These questions represent the core of any business strategy but it is not uncommon for the questions, and the answers, to have never been articulated and communicated. The problem then becomes one of conflicting directions and lack of focus.

Let’s look at these questions:

Who is your customer?

If you can identify and describe who your customer is then you know who you are seeking to serve. You have created a focus for your business and started to build an appreciation of their needs.

Why do they keep coming back to you?

An appreciation of why customers keep coming back evidences an understanding of the value you provide to them and, therefore, an opportunity to improve that value.

What do you do better than anyone else?

Knowing what you do better than anyone else allows you to build upon that strength and hopefully link that strength to the value you deliver to your customer, thereby improving your ability to out-compete.

What value do you deliver to them?

The answer to this question crystalises your competitiveness. It reflects the integration of the previous three answers into your competitive posture. ‘This is our customer, this is why they keeping come back to us, this what we excel at’ and wrap all that together and it becomes ‘this is the value we deliver to our customers that allows us to out-compete everyone else’.

 

Of course, strategy is not static or stagnant. It’s not a matter of answering four questions and then sitting back. Strategy is continuous and emergent and requires a business that can think strategically.

And strategy is not reflected by the occurrence of a formal strategic planning process or the creation of a 20-page strategic plan, rather it is reflected in the thinking and actions of the leaders and the business as a whole.

Strategy can often be communicated most effectively throughout a business by the use of simple guiding principles.

 

'Benchmark Your Strategy - Self-Assessment' by Richard Shrapnel'
‘Benchmark Your Strategy – Self-Assessment’

The capability of a business to think and act strategically is the foundation of building its competitive strength. The journey starts with a business beginning to think and act strategically through always:

  • Making a conscious decision as to how it will compete.
  • Considering the implications of its actions on how it has chosen to compete.
  • Looking for opportunities to improve the customer value it delivers.
  • Watching for the signs of change and moving to take advantage of them.
  • Not chasing but leading competitors
  • Adopting the mantra of better every day.

And the journey continues with the business appreciating what real growth is and building a business capable of decisive competitiveness.

These are the traits that successful entrepreneurs bring to their businesses.

Why Do I Need A Strategy Anyway?

As an entrepreneur why would you need a strategy if you run on instinct? You believe it’s in your head and people simply follow your lead. And that, by the time you have thought out and communicated your strategy, the market has probably changed.

The answer to this is simply: direction, alignment and focus. In whatever form you may do it, taking time out to consider why your offering will be better than anyone else and committing this to writing allows you to achieve a concerted effort which would otherwise not be possible.

Once you have crafted your strategy you want it to tell a compelling story. A story which links the answers to those four questions above and ties that back to:

  • Why your business exists and its visions and goals.
  • Why it is a business worth working for.

This will be a story that will direct your entire business, aligning all its resources and drawing everyone’s focus into what is most important, that is, how you have chosen to compete.

One of an entrepreneur’s most important skills is the ability to muster the energy, talents and support of others.

Roadmap To Developing Your Strategy

There is an approach to developing a business strategy that I believe considers all the key areas in a right sequence which I call Strategy Play. It examines those areas that influence and determine the competitive posture most appropriate to your business and the markets you have chosen to compete in. As you progress through each area of Strategy Play, a clear view of the optimum competitive posture for your business will begin to emerge.

Richard Shrapnel's 'Creating Undefeatable Business Strategies' chart
Richard Shrapnel’s ‘Creating Undefeatable Business Strategies’ chart

Strategy Play incorporates seven key areas, each of which represents a step in:

  • Building your competitive posture.
  • Crafting the organisation to deliver on that strategy.
  • Ensuring the financial returns are adequate and risks are recognised and mitigated.
  • Developing a plan to ensure effective delivery.

 

The seven areas and the role they play in crafting your strategy are:

  1. History: A consideration of the history of the business and identification of any significant events that may impact its future ability to compete.
  2. Strategic Analysis:
    • Marketplace: The boundaries of the market in which the business competes, the characteristics of that market and factors that may impact it in the future.
    • Competitive Landscape: Identification of competitors within relevant markets, the customer segments they target and market share, and the basis upon which they compete.
    • Positioning: The strengths, weaknesses, opportunities and threats (SWOT) facing the business, an identification of the resources and capabilities, and what the business is best at, leading to a consideration of how to compete.
  3. The Organisation: Identification of the purpose and values that exist within the business and the role they play. A development of the organisational structure of the business that will enable it to compete effectively and efficiently.
  4. The Future: A succinct description of how the business will compete effectively in the future, tested against various scenarios and establishing simple guiding principles.
  5. Financial Validation: A consideration of the financial returns expected to be gained under the competitive strategy and the adequacy of these returns.
  6. Risk Mitigation: Identification of the risks associated with the strategy and steps that may be taken to mitigate these risks.
  7. Implementation: A consideration of the impact of the competitive strategy on the departments and processes within the business, and the establishment of an action program to achieve the necessary changes.

The key to identifying the right competitive posture lies in asking the right questions, understanding the impact of the answers provided, and ensuring that the right people are engaged in a manner that draws their most creative and imaginative minds to the process.

The outcome sought is to remain true to the purpose for which your business exists, to position your business to deliver greater customer value than anyone else, and to create a truly competitive organisation.

Entrepreneurs And Strategy

Entrepreneurs need strategy and, honestly, strategy needs entrepreneurs.

Strategy setting, if used correctly, can be the process that unites and inspires an entire business behind a single vision and goal. The power of focus and alignment of all resources in a single direction can catapult a business into territories it never thought it could reach.

 


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All the best in the success of your business,

Richard Shrapnel