Tesla is a company that evokes emotion in some. If you are a short term investor, that emotion is often confusion and bewilderment. The company has made long-term investments while shrugging off short term profits. As a result, Tesla has posted huge losses. Still, its largest shareholder, Elon Musk, continues to invest millions of dollars into the company personally.
Tesla’s mission is to accelerate the world’s transition to sustainable energy. Typically a mission isn’t something that can be accomplished quickly. The company has made significant investments that will take years to pay off.
Many people and investors question the strategy. They throw around questions like “Will Tesla ever be able to monetize its investments?” However, no matter the noise, the company keeps moving along.
What keeps the company moving forward with a laser-like focus? Strategy.
Confusion Around Strategy
While most business owners agree that strategy is essential, few understand how to develop strategy. Most try a process that involves a brainstorming session (either individually or with their team) where ideas are generated and then implemented within their business.
I’ll give credit to those that do a process similar to this – at least there is a plan. Some businesses merely decide they are going to offer widgets and call that their strategy.
If your process is similar to either scenario, some key elements are missing from your business strategy. If you are looking at business strategy merely as what activities you are undertaking, then you are missing the point. Businesses taking this approach are executing a task list, not a strategy.
Some might say that their strategy defines the processes they are undertaking in their business. This is getting closer, but still missing some key points. For instance, is your strategy aligned with your long term mission, 3-year target, market niche and messaging, and core values of your organization? Most can’t answer, because none of that has been defined.
A Process for Strategy
A business strategy must involve a framework. If there is not a framework that has been developed, then a strategy is nothing more than throwing ideas against a wall and see what works. So what does this framework include:
- Overarching mission and values – A lot of business owners hear about mission and values and immediately think they don’t need those wishy-washy things. However, a mission and values should be considered the guiding principles for your company. One reason that Tesla is so devoted to long-term results is its mission: “accelerate the world’s transition to sustainable energy”. Tesla will not accomplish their mission overnight or even in a quarter. Tesla is laser-focused on achieving this, and if it takes time, that is OK.
- Understanding of Marketing – Many companies don’t understand who their customer is, what their niche is, or what makes them unique. As a result, critical mistakes are made, such as wasting money trying to go after markets, not within their niche, mixed messaging to customers, and service/product decisions that go against what makes them unique.
- Long Term Planning – In Jim Collins’ book, Good to Great, he explores some of the differences between successful companies and others. One of the key takeaways is goals and focus. Companies that succeed more often than not have set goals, and the organization is laser-focused on reaching them. Companies must have 10 and 3-year goals so that everyone knows their purpose and what they can be doing to help achieve them.
- Short Term Planning – How do companies know what their initiatives should be in the next three months if they don’t understand what their one year plan? Only 45% of companies budget. Without planning that aligns with everything else above, a strategy will fail.
Every company needs an operating system. Think of your operating system as the strategy. By definition, a system has different components that work together to accomplish tasks. At Krieger Analytics, before we ever design a report or analyze financial statements, I walk my clients through a detailed strategy process. The process isn’t over – we continue to refine every month.
Developing your business strategy is not something that can be accomplished in an afternoon. If you don’t know where to start and you don’t want to use someone to help you, let me recommend starting with the book Traction by Gino Wickman. The book outlines one idea of what a business operating system should look like.
If that isn’t your cup of tea, look at some of the work the Harvard Business Review has done around strategy. They are some of the pioneers on business strategy and will provide you with a deep dive into the subject.
Whether it be Krieger Analytics or another virtual CFO service, I truly believe that a CFO is the steward of strategy across a business. Much of strategy is about organization, system, and effect of certain items throughout the company (i.e., what is the financial impact). No position within the organization is a better fit to handle these three criteria than the CFO.
Strategy is about putting a system around your business, creating focus, and defining objectives. Ask yourself how you would rank your business in each category. Are you accomplishing all you want in your business? If not, it might be time to put a better definition around strategy.
About Krieger Analytics
My name is Matt Krieger, and I am the founder of Krieger Analytics. We are a virtual CFO and bookkeeping services partner for small businesses and franchisors. Our goal is to completely outsource your accounting department from bookkeeping to victual CFO services. I am also the owner and franchisor of a concept called Monkey Bizness, in Denver, Colorado. I know what running a business entails.
As a small business owner with a background in finance and strategy, I realized the benefits that a virtual CFO could bring to smaller organizations. Most franchisors and small business owners don’t have a need (or budget) for a full-time CFO or bookkeeper. To better fit my clients, Krieger Analytics is a part-time resource. While most think of CFO’s being involved in finance and accounting (we are), we are also involved in much more. We partner with clients by coaching, giving them clarity into their business, and creating growth strategies. Conversations are free, so don’t hesitate to reach out to me at email@example.com.