When many of us think about business strategy, academics and expensive business consultants tend to spring to mind. The good news is that creating a really great business strategy doesn’t have to be complex.
Put simply, a strategy is what you need to get your business from where it is today to where you want it to be in say, 5 years time. Here are three simple steps to creating an effective strategy for your business:
1. Manage business risk
Business risk is a fact of life. Some risks can be mitigated and some can’t. Of those risks that cannot be mitigated, you need to ensure that the opportunity for your business outweighs the potential downside. Don’t try to sweep risk under the carpet. Instead, create a risk register and list all of the major risks to your business. Beside each line on your risk register, describe what you are doing to mitigate each risk. For example, next to “Cyber Security Risk” you might note that you have put a firewall and internet security software in place on your systems. Creating and maintaining a risk register will ensure that you don’t miss anything and that where possible, you do something to minimise business risk.
2. Understand your market
To develop a successful strategy you need to understand the market in which you operate. How big is the market sector that you are targeting? Is it growing and if so, how fast? Who are your competitors and how do you intend to compete with them for market share? If you understand the key drivers in your market, you can spot new opportunities, harness the forces that are driving change and create a product or service offering that is competitive.
A good understanding of your market will allow you to calibrate your offering in order to create the right balance between supply and demand, pricing and service levels.
3. Competitive advantage
Every business has strengths and weaknesses. Your business strategy should take this into account. Take time to analyse your main competitors and identify their weaknesses. Now consider how your product or service offering can exploit these weaknesses to give your business a competitive advantage. For example, if your competitors are expensive, perhaps you could gain a competitive advantage by offering a lower price alternative. Perhaps you can focus on a particular niche sector in order to create an offering that is differentiated. This could give you a competitive advantage with the potential to last a long time.