Does your strategy have bite ?

It’s the time of year when many founders immerse themselves in strategic planning. Some may even have been gaining inspiration from some of the great strategists of the past. Like Hannibal Barca. The most famous scion of Carthage, a great maritime power, he resolved to destroy Rome on land. He marched his elephants over the Alps and inflicted crushing defeats on every legion he faced. Or Napoleon, who became master of Europe through a series of bold, aggressive campaigns in which he outmanoeuvred and outfought a succession of coalitions. Or even Manstein, whose surprise Ardennes offensive in 1940 was a dagger thrust into French hearts, achieving in six weeks what had proved impossible in 5 years of the Great War.

The exploits of these men and other great generals fill the pages of business books. Quite why is a mystery as they were all strategic failures. Hannibal could defeat every army sent against him but he didn’t have the strength to march on Rome, and eventually he had to withdraw to Carthage (where he was defeated at Zama). France simply wasn’t powerful enough to support Napoleon’s ambition. Like a hydra, every coalition he defeated simply regenerated. Napoleon was worn down and he eventually over-extended himself, suffering crushing defeat in Russia which shattered his empire. Hitler didn’t allow Manstein to press home his advantage, allowing British troops to escape from Dunkirk, which made Germany’s path to victory perilous then, after declaring war on America, impossible.

What happened? For all their tactical and operational brilliance, these great generals failed to achieve their ultimate goals because their strategic planning was flawed. They didn’t plan far enough ahead. And, crucially, failed to match their goals and strategies with the resources and capabilities available to them. Which had the effect of making their strategies toothless.

Don’t make the same mistakes. To be successful, strategy has to be translated into realistic action plans. Exciting, visionary and brilliant thinking must be shepherded safely across an operational bridge. Unfortunately, in most organisations this bridge is either too narrow or non-existent. The result is that action plans are formulated independently of strategy, or vice versa, ensuring that both are doomed to failure. The two must march forward together in perfect synchronicity. Otherwise, the planning you do this year may result in your business being even further away from its ultimate goals in twelve months’ time.

Here are a few simple exercises you can do in your planning to make sure that your strategy has a chance to bite.

Strategy is about ensuring long-term success, so start by being clear what this long-term success looks like. Is your business plan up to date? What is the bold goal you are forecasting for five years’ time? Your customer forecasts may look something like this classic ‘hockey stick’:

Next, ask yourself if these are achievable. The way to do this is to look at the growth rates. Has anyone in your sector (or a similar sector) ever achieved these rates? If they have, game on. If they haven’t you may need to revise your numbers. A typical shape is below:

If your growth rate is increasing each year to crazy levels (e.g. 1,000% growth in Year 5), you are creating a very difficult plan to deliver.

Now you need to work backwards from your Year 5 target. To achieve that you must do something differently in Year 4. What is it ?

This is the most important strategic turning point in your business. There are others in Years 3 and 2. They are there even if they are less immediately visible. Each will set your business on to a new trajectory that takes you to your ultimate goal. The big mistake here is to think that this step change will happen automatically, or through an injection of funding. It won’t. Incremental action looks like this:

Unless there is something in your business model that creates a compounding effect, to achieve your end goals you are going to have to do something different to steer your business through each turning point. Maybe you will target a new market (e.g. B2B to complement the core B2C)? Or expand to new geographies? Or launch new products? Or do a huge deal with an ecosystem player? There are lots of options. Which do you think you need to take at each turning point?

Then you must link this strategic sequence to your operations. What do you have to achieve before each turning point? Achievements could relate to customer numbers, perceptions and behaviours, revenue or funding. Maybe it is product developments, especially monetisation strategies, or new marketing and brand initiatives. Equally important (and often neglected) are the internal capability developments. It is usually these that hold businesses back at each stage: they don’t have the skills, the organisation or the capacity to move up.

Each successful turning point or transition to a new trajectory is largely due to decisions taken in previous years. This means the decisions you take now will determine your ability to navigate not just the next turning point, but each subsequent one thereafter. That is why you can’t completely ignore difficult future challenges and keep kicking them down the road to deal with later. What do you need in place now (and soon) to have a chance of staying on your ideal track?   

Finally, you need to make sure that your business model is geared to deliver the economic power you will need. Projected revenues like this look great:

But they can mask serious issues. For instance, the numbers above hide a significant decline in revenue per customer, which should be growing:

It is usually not enough for your cost trajectory to mirror your revenues:

This business is growing, but it is not scaling. It is not adding more and more value to the resources it has. The costs need to tail off more sharply. Why design and build this kind of business? If you are on this trajectory, you need to take operational decisions that get you off it through product, pricing, positioning or automation developments.

Follow these steps and you will be crossing that bridge, marrying strategy and operations. Your turning points should provide a path to your ultimate goal. They will also drive the operational decision-making in preceding years. Usually, the outcomes of this kind of exercise is revelatory. There may be programmes to start sooner or big decisions about future markets, product and pricing. If the challenges seem too great, revise the core goals and modify your ambitions. This is the essence of entrepreneurialism: doing whatever it takes to hit a moving target.

Try it, because next year you should be doing the same thing again, and re-planning based on new realities. Maybe you will go down in history for it…

UP AND TO THE RIGHT.