For most professional services firms today the Number 1 strategic challenge is determining what the the right strategy for the firm actually is.
It would easily be THE single thing that firms I talk to are wrestling with, and it is understandable to a large degree. Changing remuneration and business models, changing regulations with new restrictions and new potential opportunities, changing consumer expectations….it all adds up to very confusing times indeed for anyone trying to determine the right way forward. It is not helped by the confusion over what strategy is, as opposed to what business planning is, or what tactics are.
Let’s be clear firstly about what strategy actually is: it is “the big cunning idea” that guides the planning process. It is the concept which links the detailed planning and tactics to the achievement of the long term vision or goal. The strategy is the big idea on how we will compete, or differentiate.
My favourite analogy for explaining strategy is the story of Sir Peter Blake and the Team New Zealand America’s Cup campaign. They managed to excite a nation – even those not interested in yachting – which is why I use the story, as everyone (in NZ) remembers it. Blake’s strategy for winning this yachting regatta was a simple one:
Have the fastest boat.
As far as strategies go it is remarkably effective in that is simple and easily articulated, and easily remembered by everyone involved in achieving the vision. He was lauded for the brilliance of his strategy too….which I always found amusing. Here’s the thing: in something like 150 years of America’s Cup yacht racing pretty much every entrant had the same strategy: “have the fastest boat”.
The strategy was not new by any stretch of the imagination, and nor was it particularly cunning for that matter. It was no different to the strategy of every other competitor in the history of the competition in reality.
So what did make it brilliant? He applied a testing question to every decision made by every person involved in the campaign: “will it make the boat go faster?
Whether it was a different sail design, changing a crew member, trimming the boat or adding new resources and technology, the question applied to every decision point by every person in the organisation was “will it make the boat go faster?”
This testing question is the brilliance of Peter Blake as a leader. In a simple way he managed to ensure the link between the vision (winning the regatta) and the strategy to achieve it (have the fastest boat) were able to be applied to the tactical and business planning (“should we do this or that?”). With the addition of a well constructed testing question an organisation was transformed from a hierarchal organisation to a team where everyone was pursuing the same vision, understood the strategy and was able to make sound decisions at whatever their level in the organisation.
There are a couple of points that todays professionals should take out of this story:
- A compelling and competitive strategy does not have to be unique, or even new.
- The success of the chosen strategy often comes down to how well it is articulated and executed.
- The REAL key to the success of a strategy for the firm is in anyone in the firm being able to apply a testing question to any decision which is required to be made by any persona at any level inside the firm.
This last point is the missing ingredient for many: to make a strategy actually work for the firm you need to be able to test all decision points against the chosen strategy. Without that testing question there is the very real risk (and frequent actual occurrence) of making business decisions without any regard to the competitive strategy that the firm decided to adopt in the first place.
A simple example from a real firm will help illustrate the points:
A large practice with diverse business lines has ageing Principals. They are looking to exit the business within the next 3 years, and wish to extract maximum value from their shareholding. The vision is simple: sell the practice as a going concern business at a premium price.
Their strategy is a simple one also, and not entirely unique: Great people + loyal clients + world class systems.
Every decision moving forward, whether that is re-designing employee remuneration systems, leasing new company vehicles, changing the telephone system or building a mobile app for clients is tested with the simple question:
“Would another firm pay a premium price for that?”
This question guides and shapes all decisions moving forward. Common business decisions, such as leasing company cars, become very simple to answer: “there is no special value in leasing newer/more expensive cars, and increasing the contingent liability on the balance sheet doesn’t create capital value”
On the other hand, a different facet of the business with a similar budget size was put forward: “We can create a customised CRM with workflow embedding all of our best practice processes and unique approaches to customer service and engagement, and have that become the cornerstone of the firm’s IP”.
Testing question: “Would another firm pay a premium price for that?”
Answer: “Highly likely”.
It becomes very easy to work out where the money should be invested doesn’t it?
The missing ingredient in bringing the strategy to life inside the business for many service firms is the lack of the testing question. Once the firm’s chosen strategy has been crafted, put as much effort again into getting the testing question refined. It will be the one big thing you do which brings the strategy to life, and actually makes it work for you.
5 Steps for Improving Content Personalization
Giving The Ultimate Gift
Why You Need to Let Your Team Go
Integrate Your Emotions and Logic for Better Money Decisions
Discover the New FinTech Bank
70% of the Sales Decision Is Made Before a Face-To-Face Meeting
What Financial Planning Can Learn From Peloton’s Success
The Newmont-Goldcorp Deal Is Positive News for Gold Mining
How to Recognize Whether Your Planner Is Being Present With You
What’s in an Ad?
Equities10 hours ago
Stocks Breaking Above Resistance As Earnings Begin
Development10 hours ago
Can Your Kids Get You Clients?
Financial Podcasts10 hours ago
Revolutionizing Asset Management with Scott MacKillop
Research23 hours ago
The S&P 500 In 2019 Looks A Lot Like S&P 500 In 2001
Strategies1 day ago
A Bullish-and Rare-Signal for Stocks in 2019
Learn1 day ago
Getting Defensive With Dividends
Advisor3 days ago
Are You Suffering from Market Anxiety?
Advisor4 days ago
Given the Recent Market Volatility, It’s Imperative to Go Back to Basics