Strategy First Think through these four components of your biz strategy and you'll be more ready for the rough spots.
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Q: How important is it to have a business strategy beforestarting the business?
A: Don't expect a strategy to guarantee success. Manycompanies spend a lot of time developing the wrong strategy.GoldPocket Interactive Inc.'s initial strategy was aboutrunning large-scale, "Who Wants to be a Millionaire?"type events across the Internet. It didn't happen. The revenuemodel was weak, and they couldn't make enough money.
Other companies punt strategy altogether and do wonderfulthings. FTP Software was founded to give the entrepreneurs a placeto work for themselves. Their product strategy was simple:"Gee, one of us developed some public domain software as acollege research project. Let's just sell enhancements tothat." The company was wildly successful and headed for theirIPO with six years of steadily growing profits, despite a totallack of business thinking.
So does this mean strategy is a waste of time? Not at all.Strategies don't guarantee success, and they often change as acompany grows. But the big benefit to creating a strategy isunderstanding and exploring your assumptions about the business.With that preparation, you'll make better decisions when thestrategy derails two hours before your first product launch.
So spend some time to think through several different kinds ofstrategy, including your:
Who do you want involved? What skill sets do you want to be presentin the company? What values? What ambitions? Are there specificpeople you want on your team for their experience, contacts orknowledge? Are there industry thought-leaders who you want to winas advocates over time? Does the size of your workforce vary withsales or seasonally? How do you want to manage that? Will you relyon full-time work, contractors, temps and so on? These questionswill help you understand the impact of how you hire, fire and paypeople.
How you actually deliver your product or service may make a hugedifference. JetBlue Airways is a profitable airline during theworst slump the airline industry. They did it by standardizing on asingle kind of jet, optimizing turnaround time at the airport gateand choosing short hops between nonmajor airports as theirpreferred routes. The result: savings on training, airport fees,repair fees and more, giving JetBlue a huge operational advantageover its rivals.
Decide who you're serving, what need you're filling and howyou'll reach them. Then test your assumptions as the businessunfolds. Let's say you target small-business owners, sellingthem a phone system that's simple and easy to understand. The200th time you hear, "We'd really prefer something morecomplicated and harder to use," you can explicitly revise yourmarketing to cope with the customer feedback.
Know who else in the market addresses the needs you'vetargeted. Ask, "If the customer weren't buying my productor service, whose would they buy instead?" The answer maysurprise you. Scott Cook, co-founder of Intuit, keenly determinedthat the biggest competitor to the Quicken checkbook programwasn't another software package--it was pencil and pen, and theway Quicken competed was not by having a lot of features, but bybeing easier to use than a paper checkbook!
FTP showed that strategy isn't always necessary. But theirZen approach to business wasn't sustainable. Microsoft enteredtheir arena, and within two years, FTP was gone. They hadn'ttaken the time to formulate a good competitive strategy, and thelack of forethought took its toll.
GoldPocket, meanwhile, had benefited from their strategicthinking. They knew what assumptions they were making about themarket. They understood what their technology delivered and how itcould fill marketplace needs. They reevaluated their options,closed down their game show, moved to Los Angeles and in 2003 werenominated for an Emmy for their interactive TV technology.
So give it a shot--pull together a strategy at the very start.The future may not cooperate with the course you lay out, butthinking it through will prepare you to deal with the chaos of themarketplace as the business unfolds.
Stever Robbins is the founder and President ofLeadershipDecisionworks Inc., a national training and consultingfirm that helps companies develop the leadership and organizationalstrategies to sustain growth and productivity over time. His website is http://LeadershipDecisionworks.com.