How to create a strategy?
Management Consultants are extremely good in creating plethora of strategies, tactics, and frameworks. They all sound interesting but at the very end you don’t know how to use them and how do they interact with each other. Below a nice picture showing just a handful of them.
If you want to be a badass consultant you have to put some order into that sea of frameworks and create an algorithm that in a sense will tell you which route to take and what does it mean for you. Slowly but surely we are trying to get there 🙂 . As a first step we have created a nice 300-slide presentations that shows a simple approach to strategy. Before you move on to the presentation we have prepared a short overview of our approach.
There are basically 5 strategic routes that you can consider as a company:
- Do what you do but better. This a great option if you are satisfied with the size of the business or for some reason you cannot grow it. Here you concentrate on improving your business, increasing the profitability and generating as much cash as possible. Quite often it may be a stage before you set on to another of the 5 routes
- Expand. Most people like having more, so majority will try (and quite often fail) expanding the business. This route is all about scaling the known business in the right way.
- Go niche. Sometimes you have to redefine your business not to be crashed by competitors. One of the ways to defend your business is to go niche.
- Transform. If you want to be really big a pure expansion will not suffice. You will have to gradually transform your business into a new beast. Sometimes you do it to grow faster your current business models. On other occasions you do it because you have used up all the opportunities to grow and new need a new potential to develop further.
- Disrupt yourself. The toughest one is the last one. In this case you don’t transform slowly your business, but you have to do it radically, killing your revenue streams in the process before somebody does it to you.
Below the presentation with details on each and every strategic routes that you can take.
For those you want to have a taste of it without going through the 300 slides below a short summary of each and every route.
Do what you do but better
As we have said this is a great option if you are satisfied with the size of the business or for some reason you cannot grow it. Here you concentrate on improving your business, increasing the profitability and generating as much cash as possible. Quite often it may be a stage before you set on to another of the 5 routes. There are plenty of tools and techniques that will help you achieve that. My favorite ones that every badass consultant should master are:
- Essential lean manufacturing techniques and theory of constraints. If you want to improve processes those techniques will be priceless and will greatly help you not only to cut costs, inventory but also improve quality. Many businesses were totally transformed thanks to this methods
- Consulting techniques. Obviously, consulting techniques and frameworks are great for improving the profitability of the business. They will help you set priorities and estimate what has the biggest potential.
- Examples of improving the supply chain. Even if the business does not grow you can drastically improve the profitability by looking at supply chain issues. Have a look at some main challenges in supply chain and examples how to improve the supply chain
- Examples of improving sales & marketing. Another source of potential improvements are sales and marketing. You can try to lower cost of acquiring and retaining customers, increasing his values, cross-selling him new products or doing a little bit of up up-selling. Have a look at some main challenges in sales & marketing and examples how to improve the sales & marketing
- Framework for increasing sales in consumer goods
People like to conquer and to have more (even if they don’t know what to do with it 😉 ) Therefore, expanding the business is such an attractive option and hardly anybody stops at the route 1 (doing what you do but better). Expansion has many shades and options: you can enter new geographical markets, you can add products to existing categories, add new categories, target new customer groups, you can go up or down the value chain and you can at the end buy your competitors or even businesses not directly connected with you. As you can see there are plenty of interesting options and you will be never bored. This is the Golden Mine for consultants as this is where companies fail a lot and need assistance to be able to scale the business to new markets in the right manner. I recommend some additional reading that you may find interesting:
- Does it make sense to introduce new products – case study in Excel
- Finding the white spaces on your market
- How to create rankings for potential expansion opportunities
- Expanding via M&A – potential benefits
- Calculating potential benefits of M&M in Excel – case study
Quite often expansion is not the right choice as your positioning is making you vulnerable. With expansion you simple are scaling the problem. Before the expansion you should most likely reconsider your positioning and for example go niche. This is the unfortunate history of many mainstream players that were totally demolished by low cost players and application of blue ocean strategy. Here you have 3 main options: going down the price (low cost players / no-frill business model), going up with the prices (luxury products), addressing the neglected segments and non-users (blue ocean strategy). As always some additional recommended readings:
- Low cost business model
- Why it make sense to start in a niche
- Why Tesla has started in a niche?
- Blue Ocean Strategy in a nutshell
- How to start in a niche?
If you thought that expansion is difficult then you will be shocked how difficult transformation is. If the firm is to live for longer than 10-20 years it will have to transform its business model at some point and most likely multiple times. If somebody asked me to categorize how difficult it is I would say that 10x what we saw in the case of expansion. Moreover, in expansion you see the result fast. In the case of transformation you are sometimes doing things that will help you stay in business in 10-15 years and will cost millions to build. To give you a taste of what transformation is about below a short summary of this route
A great example of successful (for the time being) transformation of the business model is Netflix. Below a movie showing the changes done to their business model over the last 20 years:
I recommend as always a few other readings:
- What is Amazon?
- How Amazon was scaling his business and removing bottlenecks?
- How Netflix has transformed his business?
- Innovative revenue streams
- How Shopify has been transforming its business model
The toughest route, and to be honest requiring from you to be a bit of a psychopath, is the route of disruption. In this case, however, you disrupt yourself and in the process you are kind of killing your business. It is obviously for the greater good and high rewards. Nevertheless, it requires huge psychological resistance to the short-term costs and problems that hardly anybody can master. Below a short movie that shows you when and why it may make sense
That’s in short about my approach to strategy for more examples with calculations in Excel you can find in my online course Strategy for Management Consultants & Business Analysts