Prior to the 1960’s, economists like Peter Drucker thought strategy was largely about competition on price.
Since then, a whole new set of ideas have been presented and studied, including Porter’s Five Forces, among others.
These new concepts introduced extremely insightful ideas like the importance of buyer and supplier power. But the real question is whether the various functions, resources, and operations within your company are aligned or consistent with your “strategy.”
Many people tend to define strategy as tactics, goals, objectives, or descriptions.
As I’ve asked various clients what their strategy is, I often hear things like “be the low cost provider,” “unrivaled customer service,” and “always be the first mover.”
These, however, are not strategies. They are elements of a strategy, but not the objective.
They serve as a primary element of distinction of their strategy. However, their next task is to describe a primary, simple goal, and then define how each aspect of their business is either consistent or inconsistent with their approach.
The Art of War
Strategy comes from the Greek work “strategos” which means the art of the general.
A lot of theory for strategy comes from Suntzu’s The Art of War. In The Art of War, winning is good and losing is bad, and strategy is simply how you win.
It can be very helpful to think about the current business environment as war, where casualties are lost time and investor pocketbooks instead of actual lives. The challenge of the CEO is similar to that of the ancient general: develop a set of tactics that lead to victory.
8 Important Questions to Determine Your Strategic Consistency
- At the end of the day, what is our company trying to accomplish?
- Where do we compete?
- What unique value do we bring?
- What are we really really good at doing?
- Is our marketing message and brand perception emphasizing what we want it to emphasize?
- What resources and capabilities do we utilize to deliver that value?
- Are our operations and supply chain in line with our stated approach?
- Finally, are the above choices in line with accomplishing Question #1?
Final Thoughts: IKEA & Consistency
Think of IKEA, for example. Their strategy was to be the first furniture retailer to place furniture stores in every major country. This allowed IKEA to gain economies of scale and the choice of markets has helped IKEA offer unique value in a diverse array of markets.
The company employs mass production techniques and ships in small boxes, creating a network that is extremely difficult to imitate. However, its core competencies are not high-end furniture or excellent customer service.
A clear strategy outlines what a company does in addition to what it does not do. But the choices that they make are all consistent with their strategy. Consistency within the company’s operational objectives and its strategy is one of the most important—and often the most difficult—task.
IKEA chooses to provide small boxes of mid-quality product to its customer pre-assembled. All part of its strategy of mass-market appeal, low-cost appeal.
Would you like to discuss your strategic consistency with a financial expert, or gain expert insight on how your strategy compares to other companies in your industry? Our CFOs are experts in strategy, industry analytics, and profitability. To speak with an expert CFO, contact us today.
About the Author
Michael Flint
CFO
Michael Flint is an experienced CFO with over 20 years in financial management. His expertise includes budgeting and forecasting, business process and systems improvement/automation, and technical accounting compliance. Michael is a VentureCapital.org Mentor and holds a Master’s in Accounting from Brigham Young Utah.
You may also be interested in…
6 Tips for Sustainably Growing Your Business
Growth is the goal of virtually every organization. However, it takes more than a good market and a good product to sustain and support growth. When we partner with an organization, it’s typically to help them achieve, prepare for, or support growth in some way. This...
What is an Outsourced CFO?
What is an Outsourced CFO? An Outsourced CFO is a financial expert who provides financial strategy services on a part-time or project basis. An Outsourced CFO provides high-level financial strategy, systems analysis and design, and operational optimizations. An...
6 Reasons You Should Outsource Accounting for your Organization
Outsourcing as a whole has become a common means of rounding out an organization’s important business functions without compromising the core focus of the in-house team. Among the most frequently outsourced functions is accounting. Organizations typically...
