How To Develop Strategies That Work?

Making smart strategic choices is critical for any business, particularly small businesses. But when searching online for guidance on how to develop strategies, I have been frustrated to find mostly theoretical or conceptual answers which are primarily geared towards larger corporations. Here is how I learned to develop strategies in practice.

Developing effective strategies is a 5-step process to make choices about how to achieve desired results:

1. Set objectives and goals as your destination
2. Develop strategic alternatives using SWOT analysis
3. Prioritize 3-5 strategies 
4. Check that chosen strategies are aligned, sufficient, and clear
5. Set measures and create action plan to drive implementation

Especially in small businesses, there is little time and resources for a structured strategic planning process. The focus of the business and its owner is on customers, delivering products or services, and getting paid. Cash flow is king. Yet, also small businesses benefit from a clear strategy.  So in order to avoid sounding too theoretical myself, let’s drill into the details of the five steps and add practical tips and examples. 

Strategy means making choices about where to focus resources to achieve results

First of all, strategies are not developed in isolation. There is always a context within which a business operates and there are people involved who handle the day-to-day aspects of the business. Both context and people should be considered and included in the process. 

What do I mean by context? My business operates in an industry, in a market, in a regulatory environment. There are forces external to my business which I have little influence over. They can be a source of opportunity or threat. I need to understand these influences and gauge the impact they might have on my business. 

In addition, there is an internal context. My business should have a purpose. It has certain capabilities and limited financial means. It is important to understand the internal strengths and weaknesses of the business. Together these form the context within which I operate and which sets the stage for developing strategies. 

People run the business, make decisions and allocate resources. As far as you can, involve your people in the strategic process. This will create greater clarity about the context, why choices are made, and how everyone can contribute to the success of the business. Clarity creates engagement and engagement creates results. So involve the team in formulating the strategy. If it’s just you, this will be easy. However, I’d still recommend going through the 5-step process. 

Step 1: Begin with the end in mind

In order to formulate strategies, begin with the end in mind. Set the objective and define measurable goals that you aim to achieve over a given time frame – typically 3-5 years. 

The objective should be a clear and concise, qualitative statement about the direction of the business. The goals are the quantitative translation of the objective into measurable facts and figures. Learn more about how to write a great objective and set clear goals via the respective links. 

Step 2: Develop strategic alternatives using SWOT

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It is a simple but very effective tool to get a handle on your internal strengths and weaknesses and external opportunities and threats. This is what a simple SWOT framework looks like: 

Strengths:  – … – … – …	Weaknesses: – … – … – …
Opportunities:  – … – … – …	Threats:  – … – … – …

Conduct a brief but thoughtful assessment of your strengths and weaknesses first. Identify the top 3 of each and write them down. 

Tip: Be brutally honest with yourself. You do not gain anything from this exercise if you beautify weaknesses or underestimate your own strengths. If you are not sure where to start, think about what you do well and why customers buy from you. Check into customer feedback if you have any or conduct a survey among your customers or your employees. If you have a team, conduct this exercise as a brainstorming workshop. 

Then turn to the outside environment of your business and identify the top 3 opportunities and threats and write them down. Be concise and specific. Refrain from capturing only “competition” as a threat. Yes, competition can be a threat, but which aspect of competition, which product, which competitor particularly etc.? Again, be brief but be precise. Work in a team if you can.

Bring the 4 SWOT categories together onto one page and do a ‘crossover’ analysis to identify strategic alternatives. Look at the following pairs to derive strategy statements. 

• Strength-Opportunity Strategies: Can you use any of your strengths to capture an opportunity?
• Strength-Threat Strategies: Can you use any of your strengths to eliminate or mitigate a threat?
• Weakness-Opportunity Strategies: Can you use any of your opportunities to improve or mitigate any of your weaknesses? Or could any of your weaknesses prevent you from taking advantage of an opportunity? 
• Weakness-Threat Strategies: Can you use any of your opportunities to minimize your threats? Or do you need to improve or manage around any of your weaknesses to prevent a threat? 

Write all strategic alternatives down in the “what-by-how” format. Statements using the “what-by-how” format have two parts that specify what you do and how you are going to do it. For example, “go to work by taking the bus”, or “grow my business by launching a new product.” The benefit of doing this is that you directly specify how you will achieve what you intend to do and have a starting point when formulating your action plan in step 5. 

Excellent, now you have an option space from which you will choose your strategies next. 

Step 3: Choose 3-5 strategies 

This is the hardest and the most fun part! This is where you make choices about how to spend your time and resources to achieve your objective. But exactly how do I do that? 

FIrst, review all strategic alternatives from step 2 and cluster them by category. (Bear with me for this step. This will become very useful later on.) In my experience it is very helpful to think about strategies in clusters of value-add or how they help drive competitiveness. You will see how in a moment and when checking for sufficiency in step 4. Typical categories of value-add are  

• Growth: these are strategies regarding focus markets, particular market trends, customers or growth drivers. 
• Productivity: these are strategies regarding process efficiency, cost improvements, supply chain, lead times, yield, quality and so on. 
• Product / Service offering: these are strategies regarding product development, innovation, adding new services or content for your customers
• Positioning / Value Proposition: these are strategies regarding value-add for customers, differentiation from competitors and clarifying how you want to be perceived by your customers
• People / Organizational Capabilities: these are strategies regarding knowledge, skills or capabilities you need to add or culture and employees.

If a strategy could fit into multiple categories, just pick one that seems most logical. It is not so critical which category you allocate. It’s more important that the purpose and the value-add of the strategy becomes clear. 

Next, go back to your objective and your goals and prioritize your list of categorized strategic alternatives. Prioritize the strategic alternatives according to which alternatives fit best with the purpose of your objective and will give you the biggest chance to succeed at the smallest cost. 

For example, if your objective is to grow the business, review the alternatives in your growth category and check for strategies that help you build the internal processes and skills you need to succeed. If your objective is to drive greater productivity, review the alternatives in your productivity category. If your objective is to build greater customer satisfaction, review the strategies in positioning and so on. 

If you have developed many alternatives, consider using the following simple tool to prioritize strategies according to cost/benefit. Evaluate each strategy on its cost/complexity/time to implement and its benefit/impact/return on investment. Prioritize strategies in boxes numbered 1, then 2, then 3 etc. Check strategies with low cost and low benefit for potential quick wins, which may help you build momentum. 

Your goal in this step is to choose the 3-5 strategies that will create the greatest impact/benefit with the lowest cost/complexity towards achieving your objective and all your goals. 

Pro Tip: Be conscious of potential cognitive biases in step 3. Make as much as possible rational, logical and data-driven choices. Avoid getting caught up in biases towards most recent projects (recency bias), personal beliefs (confirmation bias), or the first information you find (availability bias). Look outside your comfort zone. Conduct your research and seek multiple sources of data if necessary. The best strategy may just be the one that you had not thought of before.

Step 4: Check alignment, sufficiency & clarity

You are almost there. Now review your top 3-5 strategies once more to make sure they are the right ones. Do three checks:

• Check for alignment
• Check for sufficiency
• Check for clarity

Checking for alignment means ensuring that the chosen strategies are congruent with each other. All chosen strategies need to move the business in the same direction, namely towards your objective. If you have chosen two strategies that are in conflict with each other or pull in opposing directions, review if there is not a better alternative. 

For example, it could be problematic if two strategies required the full attention of the same resource. Imagine you only had access to one web designer and the capacity of the web designer was fully occupied by one of the strategies. That would put the second strategy at risk. 

Checking for sufficiency means ensuring that the chosen strategies satisfy the objective and all the goals. If an aspect of your objective or any of the goals are not sufficiently addressed by the strategies, go back to your strategic alternatives and either select an additional one or swap for one with greater impact. 

Checking for clarity means ensuring that the chosen strategies are 100% understandable and unambiguous. Review the strategies with your team. Ask the team to rephrase the strategies in their own words to check for understanding. I cannot stress this point enough. Different people read the same word but have two completely different understandings of what it means. Adjust the wording until everything is clear. Invest in clarity, over-communicate. Everyone must be clear what is expected of them to be successful.

Important: only move on from this step once the chosen 3-5 strategies are rock solid. Anything less than that will get you in trouble when driving execution. 

Step 5: Set measures and create action plan

Finally, create the implementation plan. A former mentor and friend once said, “a strategy is only as good as its execution.” So this is when you plan that execution. 

First, define 2-3 measures for each strategy that guide your implementation. Measures translate the strategy into quantifiable facts and figures that allow you to track the progress and success of your strategy. These can of course be financial figures, such as sales, cost budgets, or units sold etc. Or these could be operational metrics such as yield rate, customer satisfaction, or cycle time. 

Next, clarify who does what by when. For each strategy, create an action plan that specifies 2-3 initiatives with caretakers and timeline. Make sure that the chosen initiatives are aligned, sufficient, and clear to execute the strategy and achieve each of the metrics.

Once this is completed, check once more that resources are sufficient to achieve everything you have developed and that there is absolute clarity about what you aim to achieve and how you are going to do it. 

Finally, write down and summarize your strategic plan in a clean and clear document. A great way to do so is to use the OGSM format.  

Done! Give yourself and/or your team members a big hand. Now that you have developed your strategic plan, the real work can begin. 

What is the importance of making strategic choices? 

Earlier I said it was important to choose only 3-5 strategies. But why? Why not choose all relevant strategies and increase my chances of success? And if you had endless time and resources that may be a good idea. However, resources are finite and if you are like me, you want to earn the highest possible return on investment. So you need to prioritize and choose.

The reason we pick three to five strategies is to focus. Focus enables you to concentrate your resources on those strategies most likely to succeed. Focus allows you to follow through and not get distracted. Focus allows your team to keep track of those strategies most important to your business. In an age of constant news and information flow, it is easy to get sidetracked or to get excited about new opportunities and activities. If you are serious about executing your strategies, however, you need focus. 

In my experience, three to five strategies are just right. If you choose more than five, you spread your resources too thinly and have to keep track of too many activities. If you choose less than three, you are heavily dependent on success in all of them. If one of them fails, your entire objective is immediately in jeopardy. 3-5 strategies achieve the right balance between diversification and focus.  

How is strategy different in small business? 

If you are anything like me, then at the beginning of my business, I did not concern myself much with strategy. I had picked a target market, I had an idea for a product, and then it was GO GO GO. My total focus was on creating that product – as quick and as many as I could.

When I realized however that I was not quite meeting customer needs and that my product had to adapt, I had to make a strategic decision which path to pursue next to drive cash flow. As a small business owner that’s what it’s all about: cash. Of course it is also about customer satisfaction and growth and managing costs etc. But the primary goal for a small business is to be cash flow positive. So I pivoted and modified the product to drive sales and with that cash flow. 

In essence, in a small business, when it’s just you, you go through the strategic process above lightning fast in your mind. As soon as you have a partner or employee, it makes sense to discuss through the process with the other person. The more people you have or the more products you sell or the more markets and customers you serve, the more formal or more explicit you want to be in working through the strategic process. 

Do not lose sight of why you do it though. The purpose of reviewing your strategy is to get back to making products, creating content, and delivering services for your customers. So do not spend too much time on the strategic review. Be pragmatic. Review the strategy to make sure you focus on the right products, the right content, and the right customers. Write those priorities down so they are explicit to yourself and to your employees and stakeholders. 

Things that are written down create clarity and commitment. If it’s not just you, discuss through the process, write down your strategies, and make sure that everyone in your business is clear about where you are heading and how you are going to get there. 

How do I execute the strategy effectively to achieve results? 

The most effective way to turn strategy into results is

• Having clear objectives and tangible goals,
• Having a clearly written down strategies and measures,
• Having a clear action plan with timeline and caretakers (even if that is yourself)
• And then execution, execution, execution.

This is not rocket science. But it does take focus and discipline. The best strategic plan is not worth the paper it’s written on if you do not believe in it and do not execute it ruthlessly.  

A great way to turn strategy into results is to use the OGSM methodology. OGSM stands for Objectives, Goals, Strategies, and Measures. It is a one-page business plan which connects WHAT you want to achieve with HOW you are going to do it. The OGSM builds the execution plan directly into the strategy. 

What I really like about the OGSM is that it creates clarity about what needs to be done to achieve the goals. It also doesn’t take a lot of time to set up. And it neatly aligns strategies and measures with objectives and goals. This alignment means that in day-to-day operations I can focus entirely on executing my action plan knowing that it will lead me to delivering the desired results.

Commit yourself to regularly reviewing your OGSM and making sure that you do what you said you would do. A good cadence to review your action plan for your 3-5 year strategy is on a quarterly basis. An annual operating plan should be reviewed monthly. Take an hour every month to check whether you are keeping up with your commitments. Double down on what’s working. Pivot where it’s not – and you will stay well on track to executing your strategy and achieving results. 

Conclusion

Strategies are the key initiatives you undertake to realize your objective and achieve your goals. 

Whether for large businesses or small ones, developing effective strategies is a 5-step process to make choices about how to achieve desired results:

1. Set objectives and goals as your destination
2. Develop strategic alternatives using SWOT analysis
3. Prioritize 3-5 strategies 
4. Check that chosen strategies are aligned, sufficient, and clear
5. Set measures and create action plan to drive implementation

Especially in small businesses, there is little time and resources for a structured strategic planning process. The focus of the business is on customers, products or services, and getting paid. Cash flow is king. Yet, small businesses also benefit from a clear strategy and the OGSM methodology is a pragmatic way to achieve that.

If you’d like to learn more about the OGSM methodology, click here. 

If you enjoyed this article or have any questions or comments, please leave us a comment below. Would love to hear from you!