Business strategy
Chose your market
Research extensively
Develop a core value proposition
Be flexible
Develop an integrated solution
Exploit changes
1) Choose your market.
Your market should be your area of expertise and play to your strengths. This will enable you to form a strong position where you are at a natural advantage. Often an area where expertise from different markets overlap can be a natural source of strength. Losing focus and playing outside of your comfort zone is likely to result in problems. For example Time Warner bought AOL for £190bn and sold it for £3bn 10 years later. A good way to check whether you have defined your customer and market clearly enough is whether you can be clear about who you don't serve.
2) Research extensively.
You must know the market, competition, situation, and yourself. You cannot know your own strategies without knowing that of others. Then you must know theirs better than they do themselves. You must be able to pick the right move which can only come from deep knowledge of your competitive landscape. For example, when Gillette moved in to India: Rather than releasing the same product they researched extensively. They found that Indians shave using a small cup of water. So hairs are easily trapped in the blade. Therefore, a single blade razor was most appropriate. Working around our own myopia is perhaps our biggest obstacle.
3) Develop a core value proposition.
This usually describes a problem and your hypothesis for fixing it. To avoid becoming commoditised it's important to differentiate. This is usually guided by one of two principles. Low cost, or higher value. For example, Mars uses one very long very high speed production line which makes them cheaper than Hershey's. Mars decided not to undercut Hersheys with the profits. Instead, to buy the best shelf space which enabled them to grow extremely fast. You can test if your value proposition is truly disruptive if it invalidates traditional advantages and incumbents can't embrace it without negative consequences.
4) Be flexible.
Different strategies are appropriate at different times. For example Febreze, was originally an air freshener but it didn’t want to compete in that space. So it became a laundry product before finding its niche in carpets and upholstery. Where to play and how to win can change but they always need to reinforce each other. Sometimes, like Steve Jobs, it's smart just to be happy and wait for the next big thing. The aim is not to win at other people's games but to win by being unique and providing value as efficiently as possible. This will often require maneuvering into different positions.
5) Create an integrated solution.
The more integrated the solution the more effective and the harder to copy it is. Ikea enables stylish furniture for the low-cost customer. It can do this because the assemble yourself system trades off service for a low cost. This understanding of the customer can then extend to associated services. For example in-store child care and extended hours. These services are well aligned with their young, price-sensitive customers with no nannies and a full-time job. The synergies in offering create a system of reinforcing advantages. They do not mean a strategy is better but hopefully different and increasingly effective.
6) Exploit changes.
A business is never entirely bound by its chosen focus. A landscape can shift to create new opportunities which no-one has taken advantage of. It's possible to create a new market position. For example illegal downloading was causing a headache for the music labels. However, no label wanted to back another. So Apple stepped in to the middle. They started by creating desktop computers before moving in to music players and then phones. Often a company needs new market space to move in to as increasing their customer base will result in a less clear value proposition. The best place to look for growth is your existing customers.
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