I love strategy for the little things. Other business leaders will talk about getting everything else sorted in their business so that they can focus on big, important strategic things. That’s their job after all. But if you’re a leader, and it’s your job, are you sure you know what you’re doing?
The thing that I love about strategy is that it’s like a lot of things in life – what everybody thinks is the answer probably couldn’t be further from the truth. Want to get fit? Here’s a quick and easy ten minute routine. Lose weight? Just eat this superfood and watch the pounds drop off. Want the killer business that will earn millions? Of course that idea that your friend always talks about after a few too many glasses at your dinner party is the winning strategy.
The hospitality industry is a very good sector to use to illustrate my point because of how apparently simple it is. I’m currently involved as a minority co-owner in a restaurant launch. It’s my third, and the first two I worked on in my twenties in London very quickly popped any myths for me about what it took to be successful.
It’s not a killer idea; it’s a lot of things done exceptionally well. Create amazing food and deliver it via a brilliant service. Do this in an exceptional atmosphere and in a location that attracts a certain type of customer with unmet needs. This has to all be off the back of creating strong supplier relationships and getting the pricing just right. Only then can you achieve the tight net target margins available in food-led hospitality (think high single digits if everything works out very well).
About 50% of start-ups fail in the UK within five years (FT.com 6.10.15, ‘Staying in business proves greatest challenge’). UK restaurants fail at a rate three times faster than other start-ups. So if hospitality is so simple and we can break down the things that need to be done well so easily, why is it so tough to succeed? I’m sure you know at least one person who thinks they could run a successful restaurant, if only…
Cynthia Montgomery is director of research at Harvard Business School. She ran their Entrepreneur, Owner & Presidents programme for five years. This is for leaders of small to medium size organisations to get better at running their businesses.
With all her experience she defines strategy beautifully, “Strategy is about serving an unmet need. Doing something unique, or uniquely well, for a certain set of target consumers.”
Let’s break that down; we have to deeply understand the unmet needs of a certain set of target consumers. I see this as deciding the game you’re going to play. It gives you all the information you need to then concentrate on how well you play it. Unfortunately I find a lot of leaders don’t even know what game they’re really playing. They don’t focus on a niche or deeply understand needs and whether they are unmet or not.
When you know what game you’re playing, then you face the real challenge – “Doing something unique or uniquely well”. This is where leaders get lost because they tend to focus on the unique rather than the uniquely well. They believe their strategy has to be the equivalent of the superfood or exercise hack that gives them their target weight and fitness. They fail to recognise that it’s a comprehensive, sustained and combined programme of diet and regular exercise that delivers their target weight and fitness. Yes, some businesses are lucky enough to find and do something unique that serve the unmet needs of a certain set of target consumers. But most don’t.
So which are you? Recognising you have a strategy problem is the first step on the road to recovery, so I challenge my clients to answer the following:
- If your business disappeared tomorrow, would anyone miss you? This is the killer question. Be honest with yourself; if your customers could fairly easily replace you then your strategy is not strong enough.
- Why does your company exist? Following on from the above, you probably don’t matter to your clients because you don’t really know why your business exists. If you can’t articulate the specific needs your business fills and how it does it better than your competitors, you’re driving your business blindfold at night with the lights off.
- Do you understand your context? There are plenty of simple strategy tools like SWOT, PEST and Porter’s Five Forces. Use them to understand how tough your chosen industry at this point in time is to make money in. If you’re going to beat yourself up for being a poor strategist, at least recognise how good your industry needs you to be. Then you can decide if you pack up and go home or carry on playing.
- What needs, wants or problems do you solve? You’ve probably spotted this is the third time I’ve mentioned this. That’s how important it is. It’s your anchor to making a difference that matters. Continually orientate your whole business to understand and answer this better than your competitors, and you’ll sleep better at night.
Make sure your business would leave a hole in the world if it closed tomorrow. And don’t forget this is your job, and yours alone. You are the Chief Strategy Officer.