“In the light of today’s fast-changing markets, we can synthesize the last forty years of strategy-making into ten fundamental rules that must support the strategy of any of your businesses:
- The aim of any business is to find a market position that is both profitable and defendable in its market of choice.
- A market position that is both profitable and defendable can only be achieved through differentiated products or lower relative costs, that is, by either doing different things from competitors or doing the same things in different ways.
- Differentiation should translate into higher prices, higher demand or both. Lower costs, on the other hand, should translate into lower prices (which should lead to hand, should translate into lower prices (which should lead to higher demand), higher margins or both.
- To defend its market position, a business must deliver its value proposition at a lower cost than anyone else.
- What erodes a business’s ability to remain profitable is commoditisation, not competition. Commoditisation can happen to a product’s particular set of benefits and features, or to the ways in which those benefits and features are created.
- Because the process that leads to commoditisation is systematic in nature, a profitable market position is only defendable on a temporary basis, making strategy a process that must continually readjust itself.
- Although profits eventually lead to cash, the value of a business, and therefore the success of a strategy, must ultimately be measured through cash, not profit.
- An organisation should persistently look for ways to reduce costs even if its strategy is not based on low prices. Conversely, it should always look for ways to increase revenues, even if its strategy is not based on differentiation.
- The design of an organisation must fit its strategy, not the other way around. This necessarily means that a change in strategy must drive a “means that a change in strategy must drive a change in the design of the organization.
- A strategy can only deliver its benefits if it is well implemented. Therefore, an integral part of the strategy must be a “system” to ensure its systematic execution.
Take these as the ten immutable commandments of a business strategy. Violate any of them and see how your business loses profitability over time.”
Strategy is a well-debated topic and we are keen to hear your views on these points, as well as any stories from your own experiences in putting strategy into practice. Please post your thoughts and tag ‘Whitecap Consulting’ (LinkedIn) or @Whitecapconsult (Twitter), or send me a note at [email protected] to share your thoughts.
Hopefully you’ve found this article useful. If you feel that your strategy development and strategy implementation process would benefit from independent review and challenge, please get in touch.
Established in 2012, Whitecap Consulting is a regional strategy consultancy headquartered in Leeds, with offices in Manchester, Milton Keynes, Bristol and Newcastle. We typically work with boards, executives and investors of predominantly mid-sized organisations with a turnover of c£10m-£300m, helping clients analyse, develop and implement growth strategies. Also, we work with clients across a range of sectors including Financial Services, Technology, FinTech, Outsourcing, Consumer and Retail, Property, Healthcare, Higher Education and Professional Services, including Corporate Finance and PE.