When I first purchased my small business, Monkey Bizness, I took a meeting with a small business strategist. I have to admit, I left the meeting and I turned to my Director of Marketing and asked: “Did you understand what that guy does for businesses?” It wasn’t that the meeting was fascinating and insightful (it was!). It was that it was impossible to understand the true meaning of strategy in a 2-hour meeting.
The biggest take away I got from the meeting was a book recommendation. The book I went out and bought that day was The Strategist by Cynthia Montgomery. Ms. Montgomery is the Director of Research at the Harvard Business School. It was a relatively simple read coming in at right around 170 pages. Ms. Montgomery gave many examples of what strategy was and how companies went about implementing it. While the examples she cited were often much larger companies such as IKEA and Southwest Airlines, it was easy to relate to my small business. A lot of her work comes on the heels of Michael Porter’s work, another author who I would strongly recommend.
So what is strategy? What it is not is a one-line answer, it is much more complicated than that. A company’s strategy speaks to the root of its being. What is it’s purpose? How does that purpose translate into values? How do those values translate into operational tactics? Michael Porter put it best when he wrote, “A Company can outperform rivals only if it can establish a difference that it can preserve.” At its’ core, strategy is about doing something unique and meeting an unmet need.
That last line should stick with you…think of the companies that you admire or that you are loyal to. Most likely, those are companies that you believe are different than their rivals and as such, you have developed loyalty to them.
To start with a strategy, you must determine your business’s purpose. A good purpose in noble and virtuous. For instance, our purpose at Monkey Bizness is the following:
We strive to create a happy and healthy place for families in our community.
The above statement says what we will do, and what we won’t do. It is a statement that we can measure our future decisions. It says how we will create value for our customers and in turn, how value is created by our business. Ms. Montgomery has several pages in her book that I won’t recreate here, but she does ask one questions that she calls an acid test for purpose, “Will it give you a difference that matters within your industry?”.
Notice what your purpose is not…it is not a paragraph going into details about operational execution. It’s not overly wordy or hard to remember.
In taking this purpose, I can now apply it to the functional areas of my business to make sure we are executing it. For instance, how does it apply to our customer services, human resources, finance and accounting, marketing, products, and other areas of our business? Below is the strategy wheel for Brighton Collectables, whose purpose is to “Create exceptional customer loyalty and retail profitability for specialty retailers”. The wheel goes on to show how they do this across their business. Essentially, it translates the purpose into actionable tactics.
The Strategists Mistakes
First, coming up with a purpose is not a 10-minute exercise. Take a lesson from me, if you, the business owner, do not believe in the purpose, you will not execute on it.
Second, don’t be too vague or dull. What makes you distinctive? How are you different than the other similar business down the street? Be bold and inspiring. Would you want to work for your company?
Next, you can’t be everything to everyone. For instance, IKEA doesn’t worry about high-end furniture buyers. Southwest Airlines doesn’t have a first class. McDonald’s is not trying to be your romantic Friday night spot. It’s OK to say who your customer is (thereby also saying who it isn’t).
Lastly, don’t forget the customer. Yes, this is your story, but the customer is the star of your story. If you don’t have a product or service that is geared to the customer, then you won’t get too far.
What does this have to do with accounting/finance?
A large part of accounting and finance are about trade-offs and resource allocation. It is virtually impossible to allocate resources without having a strategy or purpose. Otherwise, you are just playing an expensive game of pin the tail on the donkey. As an advisor to businesses, I also discuss strategy with them so that I have an understanding of their mission, values, and goals. Only then can we start to implement strategy across their company.
If you are interested in having a deeper discussion on strategy and would like to see if Krieger Analytics is the right partner for you, reach out to us today. After all, phone calls are always free.