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  • Writer's picturePaolo Pironi

3 Proven Steps To Set Company Strategy Without Second-Guessing Yourself

Deciding Company Direction and pursuing it relentlessly and decisively is one of the hardest things that a Startup Leader has to do. It’s hard to be steadfast and confident in the ambiguous and ever-changing world that startups operate in. But your company needs a predictable leader and clear direction. Else it will die a slow death...

But you want explosive, hockey-stick growth, don’t you? If so, you want to confidently set Company Direction, to state it clearly, and to have your employees pursue it relentlessly and passionately.

But how do you do that in practice? And what’s a reliable method to ensure you do it right every time?

Here’s your goal: To express your entire company direction in 3-5 semi-permanent Strategic Imperatives.

Simple, right? Good. Let’s now break that definition down into its 3 constituent parts and the 3 corresponding steps to achieve this mission.

Step #1: Write good Strategic Imperatives

In last week’s article, I defined what Strategic Imperatives are. Strategic Imperatives express WHAT your company will pursue. To define the WHAT, you will need a good grasp of the WHY: WHY these goals are worth pursuing and WHY other goals aren’t.

Getting to the true WHY isn’t easy for anybody: it certainly wasn’t for me when I had to do it for my companies. I remember endless leadership team meetings when it was already night time outside, multi-day offsite retreats that felt more tribal than strategic, coloured post-its arranged and rearranged on whiteboards to give a false sense of accomplishment, angsty second-guessing and re-negotiating on the priorities for weeks and months after the fact… It was stressful and kinda horrible.

That’s why I decided to research a reliable method. And after years of reading and trialling different approaches, I found the right framework. In the Wall Street Journal bestseller “Playing To Win: How Strategy Really Works”, legendary P&G CEO Adam G. Lafley outlines the strategic approach he used to double P&G’s sales, quadruple its profits, and increase its market value by more than $100 billion. That’s some really good stuff. But of course, running P&G is different from running a startup, so I had to adapt the method, trial it, iterate it. Finally, I was able to reformulate the book’s 5 landmark questions into 4 startup-friendly ones:

a) What’s your winning aspiration, the purpose of your startup, the thing you exist to accomplish?

You’ve probably already stated this a million times, so I won’t labour this point. Just write it down again, it’s a great way to start this exercise.

Example: create a distributed Internet that uses a peer-to-peer network built on top of people's smartphones (anybody got that reference? :)

b) Where will you play?

To paraphrase the book Zero to One by billionaire entrepreneur and investor Peter Thiel, it’s infinitely better to completely dominate a smaller niche than to be one of many players in a bigger niche. I know it’s not easy to pick only one niche: you might feel tempted to service everyone, or fear to miss out on other niches. But in practice it’s way better to choose a specific niche where you can win big (if you’d like to learn exactly why, read the book, it’s a must read for all startup leaders imo!).

Your niche definition should specify an audience (socio/demographic for B2C or industry sector/subsector for B2B), a geography (San Francisco? France? Asia?), a vertical stage (Software development? Distribution? Service layer?), and a distribution channel (Direct Sales? Agencies? Resellers? Software Integrations? Self sign up on Website?).

Example (B2B Tech): Software development for telecommunication companies in the US to be distributed via our direct sales force and through software integrations.

c) How will you win?

As written in Playing To Win, “To determine how to win, an organization must decide what will enable it to create unique value and sustainably deliver that value to customers in a way that is distinct from the firm’s competitors. Michael Porter called it competitive advantage— the specific way a firm utilizes its advantages to create superior value for a consumer or a customer and in turn, superior returns for the firm.”

Now is the moment to stress test your assumptions. According to our example, you want to develop a distributed internet and deliver it to Telcos in the US: so write a list of all the capabilities, staff, and systems you need to put in place.

We’re still in a brainstorming stage, so go for quantity over quality, but don’t forget that "your choices must be doable and decisive for you", as Lafley emphasises in the book. So you should identify areas and methods where you have an advantage or you know you can realistically build one, either internally or through partnerships (I’ll detail the pros and cons of partnerships for early stage companies in a future article).

Lafley cites the example of Bob Young, co-founder of software company Red Hat Inc, who wanted to sell to corporate customers. He realised that his target customers were more likely to buy from a dominant market leader, and his market at the time was fragmented, with no clear leader. So he started giving the software away via a free download: he saw the opportunity to gain market share, foregoing software licencing revenues and “only” earning technical services revenues in the process. As the market share of his free software grew, so did his company’s sales and revenues. When his market share made his company credible to corporate IT departments, Young could proceed to build a thriving Enterprise business. Young built a multi-billion dollar company as a result. This is a perfect example of how to choose where to play and how to win. Bravo Young!

d) What Strategic Imperatives will you derive from this analysis?

Now is the time to use your previous answers to compile your provisional list of Strategic Imperatives, which will include:

  • Your winning aspiration from question a)

  • Your specific niche from question b)

  • The list of all things you need to put in place to win, from question c)

The list from the company in our example would look like this:

  1. Create a distributed Internet that uses a peer-to-peer network built on top of people's smartphones

  2. Develop software that specifically responds to the needs of US telecommunications companies

  3. Scale user numbers to reach critical mass*

  4. Build a Sales team with strong US Telco connections

  5. Ensure the utmost privacy and security for our users

  6. Keep the technical education of the team at the cutting edge

  7. etc.

*Note that at this stage we don’t define the KPI. In this case we don’t define critical mass: is it 100k users? 1 Million? 10 Million? KPIs are to be decided in later steps, which will be detailed in future articles.

Also remember that the S.I.'s aren't tactics or practices to "get things done", they should aim to build a unique, sustainable competitive advantage. So don't just copy your competitors. According to the book, that's just "a recipe for mediocrity". You'll never catch up with competitors and even if you do, they have the market advantage as they've been there longer - do you want to play for the crumbs or do you want to play to win?

Step #2: Choose 3-5 Strategic Imperatives (and not a single one more)

Less is more when it comes to Strategic Imperatives. This is the overarching message of NYT Bestselling book “Essentialism: The Disciplined Pursuit of Less”. If we try to do 100 things, we will make 1 tiny, insignificant step in 100 directions. If we focus on doing 1 thing well, we will make 100 momentous steps in that direction.

From your list of Strategic Imperatives, pick only 3-5 maximum. You’ll be surprised by how many startup leaders fail at doing this WITHOUT REALISING IT.

Many times I’ve seen lists of 5 Strategic Imperatives (good), but those were only the “official” ones. The startup leaders would also say things like “of course we will also maximise profits, and delighting our customers is a given, and obviously also…”

No and no and also no. Those count as Strategic Imperatives #6 and #7 and #8. If you want to include them, you need to remove 3 other Strategic Imperatives from your list. If you don’t believe that everything is a tradeoff and nothing is a given, consider this example:

Your company wants to both maximise profits and delight customers. All of your existing customers are asking you to add a feature to your software. This feature has high delivery costs (COGS) and will significantly reduce your margins on these customers. It will improve customer satisfaction, but isn’t expected to drive extra revenue. So new feature = delighted customers BUT lower profits. No new feature = unhappy customers BUT higher profits. Longer term impact on retention is anybody’s guess. In this instance, you can’t maximise profits and delight customers at the same time, you have to choose.

Do yourself a favour, stop confusing your people and yourself with too many Strategic Imperatives: only pick 3-5, no ifs or buts.

Now a quick exercise for you: from our list of 6 Strategic Imperatives above, which one would you remove and why?

Step #3: Ensure your Strategic Imperatives are semi-permanent (and stop second guessing yourself)

Startup Leaders live in a world that’s Volatile, Uncertain, Complex, and Ambiguous. (a future article will explain specific leadership techniques for tackling this VUCA world - subscribe here not to miss it!)

It’s thus extremely common for Startup Leaders to second guess themselves, re-negotiate past decisions, and change the company direction too frequently. This confuses their teams, slows everybody down and risks dire consequences such as employee churn and even bankruptcy.

It’s good to be flexible and open to questioning your decisions as a leader. However, this should happen BEFORE you finalise your Strategic Imperatives and communicate them to your company. So please DO agonise over your decisions, but once you’ve done that, you must “decide and move on”. This process will confer on you a decisiveness that is not reckless but rooted in positive realism. This is Great Leadership.

Here is how this process works in practice:

  • Write pros and cons for each of the Strategic Imperatives that you’ve written in Step #1. Force yourself to write the same exact number of pros and cons, and find at least 1 data point to support each pro and each con (PRO TIP: a great way to come up with cons is to ask yourself “if I pursue this, what am I giving up; if I say ‘yes’ to this, what am I saying ‘no’ to?”) In the words of Hiten Shah, one of the most respected SaaS founders in Silicon Valley, “What most founders get wrong - The most common mistake I see is to spend too much time learning the frameworks, and not enough time gathering a high quality and quantity of inputs. [...] It’s a lot easier to read business books than to go out and talk to customers.” Feel free to obtain data points from market research, but you should get as many data points as you can by talking with your customers and prospects - this is called “customer development” and it’s a central concept to foundational startup books such as “The Four Steps to Epiphany” by Steve Blank and “The Lean Startup” by Eric Ries (I really recommend that you read these books btw!) After completing this step, you’ll obtain a table similar to the one below.

  • Look at the list and think "this is it, this is what my company will do, these 3-5 things and nothing else!" - how does that make you feel? If you feel uneasy or uncertain or resistant, dig deeper as to why; you may want to change your S.I.’s, as well as your pros and cons perhaps.

You can build this table yourself or download my template for free by clicking here.

Once you have finalised your Strategic Imperatives, you should stick with them. Here’s how:

  • If you’re ever tempted to second guess yourself, refer back to your table of pros and cons and their respective data points to remind yourself of why you chose what you chose. And move on.

  • You may reconsider your Strategic Imperatives only when you receive new information. Not so fast though: you should question hard whether the new information materially impacts the pros and cons that you’ve already thoroughly considered.

  • If the new information has material impact, you may consider and change one or more of your Strategic Imperatives. No Strategic Imperative should be changed more frequently than quarterly - the exception to this rule is when the new material information requires a super urgent change of direction, but frankly that’s extremely rare (for example, the recent Covid-19 crisis has warranted a change of direction to allow companies to survive). This is what I mean when I say that Strategic Imperatives should be “Semi-Permanent”.

If you follow this method, you’ll hopefully feel that your company direction will allow you to build sustainable, competitive advantage (you know, as opposed to spelling your doom…). Next, you’ll need to communicate it to your entire company, and ensure they’re 100% clear and excited to pursue the company direction with you. And win together. That will be the topic of next week’s article.

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