Why is it that some businesses perform so much better than others? Very similar products, same customers. And yet, one business seems to consistently perform better than another business.
The answer: The core business strategy. Strategy is a secret ingredient that can be the biggest multiplier in your growth plan. Your business will be far more successful if you can make the major strategic decisions correctly, Way more successful.
Let’s quickly talk about definitions so you know what I mean when I talk about Strategy. Strategy is:
- Big choices that you make
- on how to deploy your limited resources
- to create sustainable competitive advantage
- that results in profitable revenue.
So let’s break that down. “Big Choices” means that these are things you’re going to spend money on and invest in. As a small business, you need to create a “moat” around your business – you offer something competitively differentiated, and you need to protect that. That’s what I mean by “sustainable competitive advantage”. And you want profitable revenue, not just any kind of revenue.
Some quick examples: First one is Apple computers. For years, Apple did not sell to businesses, focusing instead on end users exclusively. They let Dell, HP, Compaq and the rest battle it out selling to corporate customers. Number 2 is Trader Joe’s. A small format stores competing with the major chains across the country, Kroger, Safeway etc., and in that small footprint, they outsell more than 2:1 on a dollar per square foot basis with less than 10 percent of the SKU’s. And number 3 is Dollar Shave Club. The business started a few years ago selling razor blades to men through subscription service, rather than compete in the vast physical distribution channels that are dominated by Gillette and Schick.
Three very different businesses. What’s that one thing that they share? It’s the key strategic decisions that they made about how they went to market that allowed them to win in the marketplace and grow their businesses.
These companies all made important strategic decisions about how to create competitive advantage, how to promote that advantage in the marketplace, use it to differentiate themselves and attract the target audience they were looking for.
It’s critically important that you focus on creating strategies like these for your company if you’re a small business. Because your resources are limited. And the market is really big. So you can’t go after the entire market. You just don’t have the resources to do that. But if you choose a small segment of the market, addressing a very specific type of pain point, you can really move the needle. You’ve have to analyze your customers, the competition and the market, and right at the intersection of those three things is where your strategic options are.
If this concept of strategy is still fuzzy for you, I’d love to talk to you about it, just me know.
But here’s the thing that I want you to take away. This notion of making these big strategic choices is the most important thing you can do for your small business. Don’t skip this step!