Questions and Principles of Strategy
When you reflect about your business or life from a detached, higher-level perspective, what does it look like? What is the common source behind the direction(s) you have been following and intend to pursue?
This is strategy. It is the overarching framework behind your business or life decisions. A cohesive thread that unites your decision-making process. It is the container of all containers.
When there is no cohesive thread behind your decisions, you may feel lost and directionless, cognitively overwhelmed by the vast landscape of options in front of you. With the same token, when you decide to commit to overarching principles that guide your every decision, it may feel psychologically frightening because you have narrowed down the available options and you will never know how different choices/options would turn out. You experience FOMO (fear of missing out) either way. Therefore, strategy is also about choosing what not to do.
Similarly, when your business does not have a strategy, it feels as if there is no control and clear uniting principles behind what you are doing, which can create leakages and discontent throughout the team. This trickles down all the way to customers, and it can/will create issues.
What is strategy
According to Alan G. Lafley and Roger Martin, strategy is "An integrated set of choices that compels desired customer action" (2013) -- focusing on controlling internal decisions to influence customer behavior.
Strategy isn't only for top executives - people throughout an organization need to make strategic choices for success. The best organizations, according to Martin, are those that instill strategic thinking throughout the “chain of command”, effectively practicing distributed strategy and decision-making.
Strategy doesn’t have to remain fixed. In fact, it will almost certainly vary over time because culture and nature aren’t fixed. So, your overarching framework of decision-making need to remain in touch with present times in order to meet customers where they are and continue providing value to them. Failure to do so leads to the oblivion (i.e., no more relevance, shutting down).
Customers are at the core of strategy. Everything you do as a business is to continuously provide value to your customers. Your strategy provides the foundations to deliver value with consistency and high standards.
I would argue—and this is my opinion—that Strategy does not matter much if you haven’t even started your business yet. First, you want to find customers and a market that validates your offer. Once that is established and solid, you may engage in Strategizing and other similar intellectual pursuits.
In order to fully understand what Strategy is, you need to experience it yourself first by offering value. This will clear up your mind along the way and put you in the position to Strategize more effectively than simply engaging in an intellectual exercise without any practical foundations.
There are levels to the game of business/life, and level 0 is experiential learning through action.
Essential questions
In the book “Playing to Win”, Lafley and Martin provide five essential questions to determine strategy:
What's your winning aspiration? (What are you trying to accomplish?)
It is certainly hard for humans to know what we are trying to accomplish, truly. So is for businesses, which are merely a collection of humans working to deliver a specific value for which some people are willing to pay.
Our pre-frontal cortex puts all sorts of unimaginable barriers to answering this question, often in the form of limiting beliefs about the world and ourselves. The intensity of such barriers varies within individuals, but they are present within everyone nonetheless.
So, the first step in strategy is to define your winning aspiration—the thing(s) you are trying to accomplish. This is somewhat similar to goal setting. Picking one or two aspirations maximum is best. Writing them up and elaborating on them clearly is necessary.
Luck rewards specificity and punishes vagueness. When you are specific in your aim, you significantly increase the chances of placing yourself in positions that are relevant to that objective and that move you towards it, whether consciously or unconsciously.
The topic of desires and choices is a vast and fascinating one in itself. One key thing you may want to consider: at this stage, you may feel pulled into many directions and mimetic desires. You will look at other people who have done this before and fear that not doing the same thing they did will lead you to fail. But also you are not convinced about this because you know your intuition tells you something else.
It’s okay and you will be fine. We humans are inherently influenced by others and care about other people’s opinions. This has essential survival implications, but it can also stifle any progress and action when overindexing on this instinct.
Notice your emotional and body reactions to different aims/targets, and decide accordingly. Overanalysis leads to paralysis and no business. You are fundamentally part of a very large experiment that consists of many sub-experiments. You can merely play the game and iterate over time. Experiments are made for discovery and play through action.
Where to play?
The next step is to decide where to play. This means which market and location. I wouldn’t bother focusing on this if you haven’t started your business yet, or if you don’t have some track record of satisfying a group of customers’ needs (a few months to a year of consistent and profitable work).
At this stage too, specificity is better than vagueness. The same arguments above apply, but at this stage you may have started to overcome fear of missing out and all the other psychological barriers creating friction to choose.
How specific to be? It’s a quite complicated question. You want to be as specific as possible in identifying a target market—not too specific that the market is too small and unprofitable; not too broad that the market has many players on it and not enough customers eager to resolve their issues.
How can you win? (Lower cost or highly differentiated)
Once you know what game you play and where, you can decide how you are playing the game. According to Martin, who draws from Michael Porter’s work, there are two options to win:
Offer your products at a lower price than other players in the game. This will give you a clear strategic advantage in the eyes of customers, assuming there is price sensitivity within the demographic and people care about saving money in their purchases.
Differentiate yourself significantly from competition through better quality or any other specific traits that would make your product unique and superior in the eyes of potential customers. Price doesn’t matter here and would likely be high—surely higher than a cost leadership strategy.
Either way, the most important thing is that you don’t get stuck in the middle, hesitating to take a stance for fear of missing out. According to consensus in strategic management research, that is not a good strategy and leads to death.
4. What capabilities must you have that competitors don't? (to win—i.e., reach lower costs or high differentiation)
Once you know how you are playing, you can break down the specific elements you need to win. These are the “features” and systems you need to manifest your strategy (cost leadership or differentiation). If you decide to be a cost leader, you need to ensure you can do this while remaining consistently profitable. Therefore, your capabilities must point toward that goal. You can leverage economies of scale to achieve lower production costs. You can automate as much as possible and reduce people count in order to reduce costs. All these tactics add up to reduce your input costs so that you can reduce the price of your products and be a cost leader.
Similarly, if you choose a differentiation strategy, you will identify some specific areas where you want to deliver excellent quality to keep your unique value proposition and delight customers, who are willing to pay a higher price for your capabilities.
Your capabilities are your moat—your unique mix of components that create value for your customers. The more capabilities you have, the better, because capabilities can be copied by other players, and if you don’t have strong foundations, customers are willing to switch. The good news is that capabilities compound over time with consistency and focus, and they become increasingly hard to replicate by others.
5. What management systems need to be in place?
With all that in mind, you can define the management systems (people and processes management) to deliver on those capabilities consistently and effectively implement your strategy and achieve your objectives.
For example, you may ensure your onboarding process for new team members is excellent and gets them up to speed and capable of executing quickly. You may have a regular performance review system to ensure turnover rate is low and people have a clear path to success and rewards. You may build automations in some key areas of your business to reduce staff costs and deliver on your cost leadership strategy or maintain a consistent standard of quality.
Similar to capabilities (section above), management systems compound over time and can create a solid moat around your business, elevating it to a hard-to-reach position.
Practical actions/next steps
The next thing you can do is to answer the questions above, in a journaling fashion at first—writing down everything that comes to consciousness as you answer the questions. Then you can review and refine your answers to define your strategy as clearly as possible.
Example
Here is an example for a marketing agency.
What's your winning aspiration?
To become the leading data-driven marketing agency for B2B SaaS companies, helping them achieve predictable revenue growth through innovative digital marketing strategies. We aim to transform how B2B companies approach marketing by combining creative excellence with measurable results.
Where to play?
Target Market: B2B SaaS companies with annual revenue between $5M-$50M, primarily in North America and Europe, who are looking to scale their marketing efforts and require sophisticated, data-driven approaches.
How to win?
Differentiation strategy through:
Advanced data analytics and AI-powered marketing solutions
Industry-specific expertise in B2B SaaS
Guaranteed ROI metrics for clients
Integrated approach combining performance marketing with brand building
Required capabilities
Proprietary marketing analytics platform
Team of data scientists and marketing strategists
Deep understanding of B2B SaaS customer journey
Strong partnerships with major advertising platforms
Content creation excellence focused on technical B2B topics
Management systems
Project management software customized for marketing campaigns
Weekly data-driven performance reviews
Quarterly strategy alignment sessions with clients
Continuous learning program for team members
Client success tracking and reporting automation
Featured products
Similar Articles
Affiliate Links
Do you work at a startup? Get 3 months of Notion Plus for free, plus unlimited AI. Visit https://www.notion.so/startups, select Simone Smerilli as an affiliate partner in the drop-down list, and enter the unique code SimoneSmerilliXNotion at the end of the form.
Build your web forms with Tally (integrates natively with many tools)
Get one free month on the pro plan in Make (automation software)
