Strategy for Startups: your overarching business strategy (2/3)

In The Lean Startup, Eric Ries explains that in order to try and achieve their Vision, “startups employ a strategy, which includes a business model, a product road map, a point of view about partners and competitors, and ideas about who the customer will be”. He concludes that, “The product is the end result of this strategy”.

Validating your product and finding customer traction is of course the number one goal in the very early days of a business, but growing a successful and scalable business requires broader strategic focus. I’m a little nervous then about Eric Reis’ statement because the product is really the end result of a product strategy. But the end result of a successful business strategy is a sustainable and profitable business, not just a viable product.

It is why I always like to see an overarching business strategy in place: a strategic top-layer or framework (aligned with the Vision) that guides the business and which the leadership team can use to manage strands of activity on a weekly to monthly cycle. Product and customers are key strands but finance, marketing, human resources and operations, amongst many others, also require focus.

The beauty of an overarching strategy is that it enables the management team to coordinate all strands of business activity in a coherent way, pivots and all.

An overarching business strategy provides constructive boundaries to a startup. By being clear about where you will compete (market opportunities) and how you will compete (what resources and capabilities you will utilise) you set yourself on a clearer path to success, so long as the analysis that informs your strategic assumptions is robust. Michael Porter, one of strategy’s Godfathers, said that “Strategy 101 is about choices: You can’t be all things to all people”. Fearful of narrowing down their options, many start-up founders focus on targeting a broad market share but end up without any focus: the words ‘target’ and ‘broad’ of course being highly contradictory.

The next step is effective execution. Without a clear, action-based plan, that is aligned with your overarching strategic ambitions, how can you AND your team effectively execute? Talking to a Product Manager for a scaling startup a few weeks ago, they could not tell me what their employer’s Vision or business strategy was. I hope you’ll join me in being puzzled as to how a Product Manager can design and build effective products without this knowledge? In a study from 2006 called The Execution Premium, by Kaplan and Norton, they found that in the great majority of surveyed companies, fewer than 10% of employees reported that they understood their company’s strategy. As they summarised, “Clearly, employees who do not understand the strategy cannot link their daily activities to its successful execution”.

Quoting VC Fred Wilson, he sums it up perfectly in his post about what a CEO does. He says it comes down to three key functions:

• Sets the overall vision and strategy of the company and communicates it to all stakeholders.
• Recruits, hires, and retains the very best talent for the company.
• Makes sure there is always enough cash in the bank.

I couldn’t agree with Fred more, though I’d add one more sentence to that first bullet – that the CEO “Sets the overall vision and strategy of the company, communicates it to all stakeholders and takes overall responsibility for its execution“.

image credit: john vetterli photographer

Editor’s note: This is a three-part series. Read the series here

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Richard Hughes-Jones is a former Deloitte management consultant and UK Treasury civil servant. He is a trusted advisor to entrepreneurs and organisations that support entrepreneurship. You can find out more about his work at www.firewerks.co and follow him on Twitter @rhughesjones