For many entrepreneurs and small business owners, the term “business strategy” brings to mind a bunch of corporate drones in expensive suits, gathered around a conference table, distractedly watching a PowerPoint presentation with complex diagrams.
It’s not something that seems to have much of a place in our world.
Entrepreneurs’ lives tend to be different, more immediate. No one is paying us fat salaries to attend meetings and produce reports. We don’t have time to futz around with grand theories and long-term planning. Many of us live month to month and depend on immediate cash flow.
We need practical, effective tactics that are going to get us traffic, build our lists, move our inventories, generate new commissions, and that will push us just a little farther towards our goals. And we need that right now.
But I think something important is often lost in this relentless drive to take action, action, action and to focus on producing immediate results.
What is, in fact, lost is the kind of patient analysis and thoughtful planning that leads to creating a real strategy for our businesses. But this type of work isn’t easy to do. Hell, it isn’t even easy to write about! That’s because it involves a lot of abstract concepts that can’t easily be forced into a set of bullet points. It’s comprised of equal parts art and science.
But it’s very much worth it.
If you want to be able create and sustain a real competitive advantage for your business, you’ll need strategy.
If you want to build assets in your business, the kind that pay you again and again, year after year, you’ll need strategy.
If you want to move beyond copying clever competitors and want to develop both the insight and the ability to be able innovate in your niche, you’ll need strategy.
Developing and implementing a strategy is like fitting together different and independently functioning parts into a machine (or in this case, a business process) so that they work together and produce a much more powerful positive effect than any individual piece would, if it was working on its own.
Are you with me so far?
This may help make it clarify things a bit, if you’ve never really thought about strategy very much.
Imagine yourself in the position of a small online business owner, who’s planning on entering a new market niche (this is a very general and greatly simplified example of effective strategy).
You initiate your new business strategy by researching the topics and questions your target market is most intensely interested in and most intensely frustrated by.
You then research the competition in the niche, keeping an eye out for opportunities in the market where consumer desires aren’t being addressed and/or where you feel the competition is offering an inferior product or service.
Having concluded your research for now, you develop a plan to produce complementary text, audio, and video content that will hook your audience’s attention by appealing to those areas of intense interest and frustration.
You then leverage this high-appeal content by using good SEO and Social Media tactics, as well as by networking with industry influencers. By doing this, you’re able to reach your target audience and to cultivate both web traffic and elements of social proof (backlinks, tweets, testimonials, etc.)
You then further leverage all of the above by crafting an offer and a sales message for your audience that taps into and resonates with all of the preceding factors, and– surprise, surprise– your sales and conversions soar through the roof!
Now, any experienced business person will immediately recognize that I just left out about a thousand pieces of the puzzle from this example. But I was simply trying to provide a barebones feel for how an effective strategy works.
I realize some of this may still seem a bit abstract, so let’s take a look at a couple of interesting examples of what seem to me to be clever business strategies.
Strategic Example #1
As I write this, Amazon has just announced the Kindle Fire, an inexpensive Android-based tablet designed to compete with the iPad. They’re selling the initial version for just $199, hundreds less than the iPad. With the Kindle Fire, Amazon will be filling an undisputed market need for a more affordable tablet computer, and considering their reach in the retail space, they should be able to get it into lots and lots of hands.
However, according to those in the know, $199 is somewhere around the actual production cost of the product. So, Amazon is unlikely to make any direct profit from sales of the Kindle Fire. In fact, they may even wind up losing money on each sale after indirect costs are taken into account. On the surface, this seems foolish. Why would Amazon do such a thing?
Here’s what I think is going on: Amazon (unlike Apple) is not a hardware company. But Amazon does make a great deal of money selling content, and an ever-increasing percentage of that content is digital content.
So, even though they will likely make no money on the sale of the hardware itself, they will have done something which may ultimately prove much more profitable. They will have delivered an Amazon-branded and Amazon-payments-enabled content purchasing machine right into the hands of millions of consumers!
This strategy has already proved successful with the Kindle e-reader line. Amazon now sells more digital books via the Kindle, than it sells either hardcover or paperback books. The Kindle Fire will expand this strategy to encompass not only digital books, but also digital music, movies, television shows, and apps.
Pretty slick, huh?
The short-sighted entrepreneur who doesn’t think studying strategy is worthwhile, may dismiss this as a neat story, but as something which offers no real lessons for his or her own business.
Now, this isn’t a direct parallel, and I’m no mobile marketing expert, but consider this:
How many small businesses are, even now, successfully opening their very own mobile marketing and purchasing channels by developing useful smart phone or tablet apps for their customers and fans?
Often, these companies are either distributing the apps for free or selling them at a pittance, but they’re getting them into the hands of many of the most engaged members of their markets. And so they’re providing more opportunities for those customers and fans to interact with, bond with, and do business with their companies.
It should be obvious that the thinking behind a move like this is not so different than the thinking behind developing and distributing the Kindle Fire.
Strategic Example #2
This second example fits less into the mold of a structured strategic implementation, like the Amazon example. It is more focused on a successful strategic analysis and the immensely profitable opportunities that such analyses can sometimes uncover.
It comes from the annals of “He of the Amazing Hair“—The Donald. Now, think whatever you want of Trump personally (I’m really not a big fan myself), but when you consider his business career, there’s no denying that he’s a brilliant strategic thinker.
In the book Trump Strategies for Real Estate, one of the investment case studies that’s outlined is Trump’s purchase of the historic 118-room Mar-a-Lago estate in Pam Beach, Florida.
Interestingly, the chapter in which this is covered focuses primarily on managing properties in the right way to maximize profits. However, it also covers the basic outline of how Trump purchased, renovated, and cleverly repositioned the property from a historic estate museum into a luxury country club. In truth, I wish the book had covered all of this in a bit more detail, but even as it stands, the whole chapter serves as an excellent case study in successful strategic thinking.
Here’s one nugget that jumped out at me and that’s literally only mentioned in passing, without any real commentary:
As part of the purchase agreement for the property, Trump also purchased all of the antique furnishings that had been part of the original estate.
And “when he decided to turn the estate into a country club, he sold some of the antique furnishings that were of museum quality for more than he paid for the entire property.” (Emphasis mine.)
Do we really think that the potential market value of the antique furniture as a separate asset didn’t enter into Trump’s overall strategic analysis of the purchase? I wonder how many others analyzing this deal or bidding on this property had the same insight as Trump? I doubt any of them did.
So, how could this example of clever strategic thinking help in your business?
I don’t know. Maybe it could help, but then again, maybe not. But it definitely serves as an object lesson in successfully finding a hugely profitable hidden opportunity and as a fantastic example of “lateral thinking.”
Okay, we could talk about cool examples all day, but here are a few tips to help you get started developing a more strategic mindset, which is the necessary first step in using strategy to grow your business.
- Start asking more questions — a LOT more questions, specifically more questions about your business, your competitors’ businesses, and even your vendors’ businesses. Preferably, these questions should begin with “Why.” Why are they using this service? Why are they targeting that niche? Why are they advertising through this network? Why are they promoting this product line?
- Never be satisfied with the first answer to a question. Root out and consider alternate explanations and multiple motives and causes.
- Question assumptions and industry norms, especially those assumptions that “everyone” agrees with and those norms everyone follows. This can sometimes uncover serious opportunities. This also goes back to always asking “why.”
- Study entrepreneurs who teach strategy. And don’t just listen to what they say; listen to the types of questions they ask and the types of topics they address. For anyone in marketing – Dan Kennedy and Jay Abraham would be my top picks here. If you’re of a pretty intellectual bent, you might try the business school standards Competitive Strategy and Competitive Advantage by Michael Porter.
- Pay very close attention to what’s going on in your industry or niche. Things are changing quickly everywhere these days. Who are the thought leaders in your niche? Who writes or speaks about trends, about where the industry is heading, about future challenges and opportunities, about how the industry is evolving? These are the strategic thinkers.
- Optional bonus tip: As you become more comfortable with this type of thinking, take it up a notch. Try spending a bit of time reading and listening to people who discuss changes and trends in technology and in politics and the economy. How are those trends and changes affecting society—how we live, how we behave? There are real insights to be had in asking these questions and in listening to the observations and analyses of thoughtful people in these areas. But the important thing is the process of asking the questions, considering the available information and coming to tentative conclusions. Needless to say, don’t get sucked into the inevitable ideological debates that cluster around these types of topics. Always ask how does this relate to me, to my industry, to my business? How can I use this?My final bit of advice on the whole topic of strategy is to look at it as an intellectual adventure and have some fun with it. Flex your mental muscles.
The more you practice thinking strategically, the more you start seeing patterns.
The more patterns you see, the more opportunities you’re likely to see. And I mean real opportunities, the ones you can get into and exploit before someone releases a WSO about it!