The Real Definition Of A Business Strategy
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The Real Definition Of A Business Strategy
“Thank you Dr. Richard Rumelt.”
I always knew I was good at devising strategies for the business opportunities that came my way, but I never gave much thought to what a business strategy really was.
By: Art Consoli
“Thank you Dr. Richard Rumelt.”
I always knew I was good at devising strategies for the business opportunities that came my way, but I never gave much thought to what a business strategy really was.
By: Art Consoli
In Dr. Rumelt’s interview with Dan P. Lovallo and Lenny T. Mendonca as presented in The McKinsey Quarterly, he nailed it!
Unlike a business plan which is usually done on a repetitive time frequency, a business strategy plan is done when an opportunity or a crisis occurs. Some businesses may go for quite some time without ever having the need to do a strategy plan. Others may do them frequently.
At the heart of a strategy plan is the recognition of the opportunity (or the crisis) when it occurs and the understanding of whether the resources available (capital, talent and time) can be deployed to take advantage of the opportunity. Once satisfied that the right resources are available and that the opportunity passes the test of being worthwhile, the business leader has to devise the strategy to create a successful outcome.
Dr. Rumelt uses Steve Jobs success with the iPod as the result a strategic plan can produce. In fact Jobs was so good at understanding the real meaning of business strategy; what it was, that it occurred without respect to dates on a calendar and that it depended on recognizing that something was happening, that when he was asked, “What are you doing? What’s the long term strategy (for Apple)?”
Jobs replied, “I am going to wait for the next big thing.”
And when he understood what was happening with the need being expressed in the marketplace and how the technology Apple was already employing he leaped at the opportunity he saw.
The strategic plan is what should be used whenever anyone recognizes the situation Dr. Rumelt labels, “value denial.” Simply described this situation is when there is an unfulfilled need that buyers will pay for which no one is offering to fill. His example is the high rate of lost baggage occurrences now happening in the airline industry.
Would the consumer pay for a baggage delivery guarantee? Yes. Is such a service being offered? No. Why not? Certainly the airlines could figure out how much they would have to charge for this service which, in a totally ridiculous solution, could be provided by having employees hand place the insured pieces of luggage in a special compartment on the plane and hand retrieve same upon arrival. But this service is not available, the consumer is denied this service.
This is a revenue generator the airlines are missing.
That’s what true strategic planning is all about; how to maximize the opportunity and minimize the crisis. Such a plan is not done annually; it is done when the opportunity or the need arises.
In a well run business (defined here as one with few if any crisis) where the leader has encouraged actively seeking out opportunities, strategic planning should be going on all the time. Besides creating new profit centers this practice will create a much stronger management team and an abundance of mentoring situations which will bring out the best of all involved.
Unlike a business plan which is usually done on a repetitive time frequency, a business strategy plan is done when an opportunity or a crisis occurs. Some businesses may go for quite some time without ever having the need to do a strategy plan. Others may do them frequently.
At the heart of a strategy plan is the recognition of the opportunity (or the crisis) when it occurs and the understanding of whether the resources available (capital, talent and time) can be deployed to take advantage of the opportunity. Once satisfied that the right resources are available and that the opportunity passes the test of being worthwhile, the business leader has to devise the strategy to create a successful outcome.
Dr. Rumelt uses Steve Jobs success with the iPod as the result a strategic plan can produce. In fact Jobs was so good at understanding the real meaning of business strategy; what it was, that it occurred without respect to dates on a calendar and that it depended on recognizing that something was happening, that when he was asked, “What are you doing? What’s the long term strategy (for Apple)?”
Jobs replied, “I am going to wait for the next big thing.”
And when he understood what was happening with the need being expressed in the marketplace and how the technology Apple was already employing he leaped at the opportunity he saw.
The strategic plan is what should be used whenever anyone recognizes the situation Dr. Rumelt labels, “value denial.” Simply described this situation is when there is an unfulfilled need that buyers will pay for which no one is offering to fill. His example is the high rate of lost baggage occurrences now happening in the airline industry.
Would the consumer pay for a baggage delivery guarantee? Yes. Is such a service being offered? No. Why not? Certainly the airlines could figure out how much they would have to charge for this service which, in a totally ridiculous solution, could be provided by having employees hand place the insured pieces of luggage in a special compartment on the plane and hand retrieve same upon arrival. But this service is not available, the consumer is denied this service.
This is a revenue generator the airlines are missing.
That’s what true strategic planning is all about; how to maximize the opportunity and minimize the crisis. Such a plan is not done annually; it is done when the opportunity or the need arises.
In a well run business (defined here as one with few if any crisis) where the leader has encouraged actively seeking out opportunities, strategic planning should be going on all the time. Besides creating new profit centers this practice will create a much stronger management team and an abundance of mentoring situations which will bring out the best of all involved.
Art Consoli's unique background and skills allow him to speak and write about how someone with limited experience can do a self-evaluation which will let him decide which business opportunity is best, how to evaluate opportunities and gain control over the one which offers the greatest potential and then manage that business to success. Readers of his book call and write to tell him how much his book has helped their lives and improved their business. The author can be reached at www.businessstrategyartconsoli.com.
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