Find the time for some strategic thinking

How much time do you spend on strategy? If truth be told, it’s probably very little. Most business owners are so busy with the day-to-day work of running the business that strategy always ends up at the bottom of the pile of things to do. But an effective strategy can transform a business.

A great example of this is Innocent Drinks. The three founders, Richard Reed, Adam Balon and Jon Wright, had discussed setting up a business as university students. After graduating they continued to discuss the concept but had no idea what the product or service was going to be!

After brainstorming numerous ideas, the three of them – two were management consultants and one was in marketing – developed the concept and plan for Innocent Drinks and in 1998 tested the market by buying £500 of fruit, making smoothies and selling them at a festival in London.

By 2006, the company had sales of over £75m and posted profits of £6m. In 2007 it was set to burst through the £100m marker. So what can the business owner who is up to their neck in day-to-day fire fighting learn from Innocent?

1. Choose a destination. By planning where you want the business to be in, say, five years time in terms of profitability, worth and culture, you can start to build a picture of what it will look like. What are the likely products or services that you will be providing, where from and how? And what do you want the culture of the business to be?
2. Work out where you are now. Every journey starts with a single step, but unless you know where you are now, you will not know in which direction you are going. Develop a SWOT analysis, both for your business and yourself. Ask yourself if your product or service is the best it could be? Do you have what it takes to move the business forward in the way that you want?
3. Plan how you’re going to get there. What developments will you need to your products and services? Who are your likely customers, staff and suppliers and what additional management will you need to get there? What funding will you need to achieve your goals and how can you make your business attractive to such investment?
4. Identify key target and performance indicators. You need to know the trigger points that will enable you to know where you are on the path to your destination. For example, once you get to point B, you can then hire a new sales manager or open a new office.
5. Write it all down. As simple as this sounds, many businesses don’t commit their strategy to paper. Even though it has been thought through, the time pressures involved in the day-to-day running of the business mean the plan often exists only in the owner’s head.
6. Act on the plan. As a start, share it with your managers and staff and get their buy-in to it. They don’t have to know all the details but an overview will ensure that everyone is pulling in the same direction.

One way of developing a strategy is to compare your business to a car or a high street shop. We used the shop analogy at a recent workshop to help a client develop its own strategic plan.

The Board identified which shop it was at present – in this case, a local branch of M&S. This was done by comparing things like the brand, ethics, size and competition. Then we worked on where the Board wanted the business to be. The answer was a Hugo Boss shop – aspirational but affordable, known and recognised for quality products, efficient and friendly customer service and selling a range of products under a single label.

After comparing the two, we were able to develop a plan to transform the business from a small, steady, owner-managed business to a larger, fast-growing company whose customers and employees all wanted to work with them.

As the first stage of acting on the plan, the same study was carried out among the staff. Fascinatingly they had virtually the same views as the Board on where the business was and where they wanted it to be. Now the company is aiming to get into the Sunday Times FastTrack 100 this year as one of the key targets to achieving its plan.

A strategic plan can significantly increase the value of the business whilst also strengthening its resilience to threats. Without it, in a few years time you will probably end up still doing what you do now... only a little bit older!

February 2008