Growth Guide: It’s all about strategy

June 1, 2009
By Peter Christo
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Growth Guide: It’s all about strategy

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A business plan is nothing without a well thought out strategy. In other words, the business plan should look beyond simply how you plan to work. Rather, it should provide a detailed road map to success.

When writing a business plan, the strategy (aka; how we plan to win) should be as clear in your head as your own name. Only then can its chances of success be made equally obvious to the reader. To do that, I suggest seven steps.

  1. Determine the demand driver for your customer and, in the B2B case, your customer’s customer.
  2. Determine the value chain of the industry and identify where you fit in the process.
  3. Identify what all the value propositions are in each segment you represent.
  4. Rate each item in the value proposition as to whether you:
    a) Do it well
    b) Should do it well and thus need training
    c) Need to outsource
  5. Identify what market your competition is targeting
  6. Identify what your competition is communicating in terms of a value proposition (VP) to that market.
  7. Communicate this VP to the market in every way possible.

Demand Driver

Fundamentally, every industry and, therefore, every business is underpinned by a demand driver. For example, the fishing industry is underpinned by an obvious demand driver – hunger for fish. That is something that is undeniable. People want and will continue to want to eat fish, which drives a whole industry. The telecommunications industry is underpinned by the need for us to communicate with each other. The superannuation industry is underpinned by the need to protect, grow and get an income from our savings and investments.

If you are in a business to business (B2B) organisation, providing goods and services to other businesses, then your demand drivers are simple. In fact, every B2B enterprise should be geared to serve the same three demand drivers: The customers need to generate revenue (the more the better), the customers need to minimise costs (the less the better) and the customer’s need to manage any risks that could affect the above two. It flows that to effectively service a business in the B2B space you need to also know your customer’s customer and their demand drivers.

Value Chain Development

All industries run according to three main stages. Going back to our fishing industry example, there is the capture stage (where the fish are actually netted), the processing stage (where the fish are filleted, canned, etc.) and the distribution stage (where the fish ends up in its new form at the shops, supermarkets, restaurants, etc.). If you think that this framework doesn’t apply to your industry, think again.

The resource for the industry that catches motorists speeding is, of course, the speeding drivers (not all get caught). The net is the camera and the production is about undertaking the activities necessary to comply with the law and issue the infringement to the speeding motorists. Collecting the money is merely delivering the result. Demand is driven by you and me, as the people of the state who want safety on our roads. The Value Chain can, therefore, be summarised as follows: Resource > Capture > Process > Deliver > Consumer.

Value Proposition Identification and development
This part is hard work. A value proposition is best described as ‘the benefits to your customer’. For example, low cost is a value proposition, as is quality, and is the way one can pay, how fast they will get their product, etc. Having access to information easily via, say, a 1300 number, is also a value proposition.

Using our fish business again, the VP from the fisherman to the production guy is what? Fresh fish (maybe a specific fish, like snapper), delivered by 11am, at a great price, guaranteed. In most businesses, the VP between segments number in the dozens. Rating the VPs
Focus is the key here. The underpinning principle is that you don’t waste effort on non-core activities. Core must be delivered with exceptional quality and effectiveness. Go through the VP list and choose which items you offer as part of your own business VP. Rate each one as core or non-core, and determine your level of competency as a business in each one. For example:

  1. Fishing – core (10/10)
  2. Navigation – core (6/10)
  3. Knowledge of Snapper – core (7/10)
  4. Boat cleaning – non-core (2/10)

The obvious next step is to seek training on items two and three and outsource item four.

Competitors’ Markets

Look at the type of consumer your competition is targeting. Are they twenty somethings? Do they have young kids or are they empty nesters? To be super strategic, use Maslow’s Hierarchy of needs to identify what need the message is targeting. (Is it communicating at a sustenance level or at an esteem level?) If you are in the B2B space, what stage are your customers at in their own evolution? Are they big, little, growing, shrinking?

Competitors’ VPs

Look at your competitors and determine what VPs they are using. If they simply claim to be the cheapest, and they actually are, then don’t compete on price unless you know you can beat them. Identify up to three of your most obvious competitors and map where each has positioned itself. Ideally, position away from them and add dimensions to your VP that they can’t deliver on.

Communicating your VP to the market Now that you know how well thought out (or not) your competitors’ messages and VP are, you can structure your business service, message and collateral accordingly. In the fishing example, Pete’s Fishing fleet could be an ‘on-time, specialist at delivering snapper to the market at a great price’. Develop your message in an appropriate way as to avoid the competition and extend the VP.

Make yourself untouchable. Your VP could relate to the service or product or how your customers pay (the business model) or where the product can be found (easy to access). As for delivering the message, given you have done most of the work now, leave this to the pros. But if you have to do it yourself, keep it succinct and clear.

This process is not just for entrepreneurs but can be applied to established big and medium-sized businesses. It is relevant whether you are an entrepreneur or a CEO or even a manager dovetailing your department’s services into the broader business (eg: HR, IT, Marketing, etc.).

The Seven Steps

  1. Determine the demand driver for your customer and, in the B2B case, your customer’s customer.
  2. Determine the value chain of the industry and identify where you fit in the process.
  3. Identify what all the value propositions are in each segment you represent.
  4. Rate each item in the value proposition as to whether you:
    a) Do it well
    b) Should do it well and thus need training
    c) Need to outsource
  5. Identify what market your competition is targeting
  6. Identify what your competition is communicating in terms of a value proposition (VP) to that market.
  7. Communicate this VP to the market in every way possible.

Peter Christo is a serial entrepreneur who has started over six businesses in an array of industries, including technology, consulting and hospitality. He also holds a Bachelor degree in Economics and Marketing and a Masters of Entrepreneurship and Innovation. He lectures at RMIT University. www.christopartners.com.

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