Although these three concepts are inseparable, we have to start somewhere, so let's look first at your business identity. This is what makes your business different from all others. What you want, what you do well, how you do things, what makes you unique.
What you want to do with your core strategy is establish that identity for yourself, your team, and out there in the market, for your customers.
You have to understand what you do and who you are if you are going to be able to set your business apart from its competition. The exercise is something like looking at a mirror. Gather your team together, if you have a team ready, because this makes for a good discussion. Ask some of these questions:
What do we like to do? How are we different? What is there about us that sets us apart? What excites us? What are we good at?
What do we do that other people (or companies) want to have done? What do we like to do that people want to pay for? What do we like to do that we do better or differently from others who do it?
What value can we add? What’s missing? How can we do something better than what’s now available? What can we see about the future that others can’t see?
Where can we give value that isn’t there right now?
Presumably, in whatever business you have or whatever business you're starting, you do something you want to do and believe in. Your team members have to want to do it and believe in it too. That restaurant that is somebody's lifetime dream, or skiing equipment, or a newsletter … success isn’t based on the idea, it is based on how hard you've worked at it, how much value you deliver.
In the Art of the Start, Guy Kawasaki offers a list of ways to generate new business ideas. Kawasaki talks about getting going, about ideas being generated by impulses like “I want one” and “I can do this better” or “My employer wouldn’t (or couldn’t) do this.” There too, it doesn’t come out of the blue, it starts with you.
In Growing a Business, Paul Hawken shows how a business grows naturally out of the owners and founders doing something they want to do, filling a need they believe should be filled. I recommend reading that book also.
To be fair, there are exceptions. Franchise businesses, for example, when they work, are a business formula you pay for and implement, while being guided and taken by the hand every step of the way. Being a McDonald’s franchisee means you’re a millionaire; it doesn’t mean you like eating or preparing what McDonald’s restaurants serve. You buy a business to run. The franchisor tells you how to run it. If it isn’t a set formula and if the franchisor doesn’t give you all you need to know, then it’s a bad deal.
To determine your core competencies, take another look at the mirror. Take a step away from the business, and get a new fresh look at it. What things do you do best? Let's consider a few companies most people know: We might reasonably think a core competency of Apple Computer is design, a core competency of Nordstrom is customer service, and a core competency of Volvo is vehicle safety. The picture here illustrates this idea: you have to recognize what you're good at. It can't be everything. You aren't credible if you try to do everything right.
You do have to understand your core competence as you develop your core strategy. Don't pretend you can be the best at service and have the lowest prices and the highest quality products; that isn't credible and it will just get in the way. Be honest with yourself or with your team.
Don't think that core competency depend on the industry, or that they are the same for all players in any given industry. Look at the difference between economy cars, reliability cars, safety cars, and performance cars, for example. Or consider the different possibilities for a management consultant, whose core competencies might be any of these:
Facilitation of discussions and brainstorming for the management team
Cost cutting and firing
Finding new growth opportunities in contiguous markets
Finding people with money who can finance new ventures from the consultant's clients
Developing documents that are easy to read and cover the bases well
And then consider the variations on food services and restaurants. To name just a few:
Quick, fast, drive-through
Ambiance; good place for a date
Healthy fast foods
So this is not a difficult concept to understand. It usually leads to good discussion and a better sense of core strategy.
The fundamental shortcoming of most mission statements is that everyone expects them to be highfalutin and all-encompassing. The result is a long, boring, commonplace, and pointless joke.
In The Mission Statement Book, Jeffrey Abrams provides 301 examples of mission statements that demonstrate that companies are all writing the same mediocre stuff. To wit, this is a partial list of the frequency with which mission statements in Abrams's sample contained the same words:
best - 94
communities - 97
customers - 211
excellence - 77
leader - 106
quality - 169
Fortune (or Forbes, in my case) favors the bold, so I'll give you some advice that will make life easy for you: Postpone writing your mission statement. You can come up with it later when you're successful and have lots of time and money to waste. (If you're not successful, it won't matter that you didn't develop one.)
We focus too much attention on mission statements. Too often they distract us from the real business of bearing down on why and how we're different, particularly when taken from the customers' point of view. The mission tends to be meaningless fluffy words.
Here's a good test: take your mission statement and ask yourself, honestly, if your competitions' mission statements couldn't be exactly the same? Could one of your own team members guess which company is yours if they read five mission statements including yours plus those of four competitors. Most companies' missions are full of promises about excellence and customer experience and leading-edge technology and such. They don't mean very much. Words like "excellence," for example, mean nothing. Define excellence. How would you even know?
However, you should also create a mantra for your organization. A mantra is three or four words long. Tops. Its purpose is to help employees truly understand why the organization exists.
If I were the CEO of Wendy's, I would establish a corporate mantra of "healthy fast food." End of story. Here are more examples of corporate mantras to inspire you:
Federal Express: "Peace of mind"
Nike: "Authentic athletic performance"
Target: "Democratize design"
Mary Kay "Enriching women's lives"
The ultimate test for a mantra (or mission statement) is if your telephone operators (Trixie and Biff) can tell you what it is. If they can, then you're onto something meaningful and memorable. If they can't, then, well, it sucks.
So why bother? Good question. Maybe the mantra is enough, as Guy suggests. But some companies use their mission statements well, they do become part of the background of day-to-day work and long-term strategy development. For those cases, if you're really going to use a mission statement, then I say you should also remember at three points a good mission statement should cover.
What are you doing for your customers? Let's hope this is something that sets you apart, makes you different, and that your customers will recognize.
What are you doing for your employees? Fair compensation, good tools, professional development, encouragement, or whatever. If you're serious about it, put it in the mission statement. If it's in the mission statement, get serious about it.
What does the company do for its owners? Don't apologize for needing profits to stay in business, or for generating return on investment for those who invested. Say it as part of your mission statement.
If at this point you're still looking at developing a mission statement, then I recommend reftk.
Like the artist squinting to view the landscape better, or differently, as you build your sense of business identity, try to focus on keys to success. Keep it to just two or three key priorities that make the difference.
Some of this will depend on your industry, but there's a lot more to it than that. For food services, for example, you might think good food would be an obvious one, but what about a good location, easy drive-through, good parking, or even a proper match between price and reputation. Or marketing? Or the personality of the maitre d'?
In a retail business, for example, the classic joke is that the keys to success are location, location, and location. In truth, that might be, location, convenient parking, and low prices. It's different depending on your real identity, who you are as a business, and what your strategy is. A computer store's keys to success might be knowledgeable salespeople, major brands, and newspaper advertising.
This idea is related to core competence, but it isn't exactly the same thing. You hope you have core competencies that match your keys to success, but making that happen is a matter of working over time to build the business.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. I particularly like the SWOT analysis because it's easy to understand and very quickly gets a team involved in strategic thinking.
Notice that there's a big difference between the first two and last two components. Strengths and weaknesses are internal. They are part of your company identity. You can change them over time, but not easily; you have to work on it. Opportunities and threats are external. They are out there in the market, happening, whether you like it or not. You can't change them.
Especially when you're growing an existing business, you want the planning process to pull your team together, to develop commitment and accountability. Managers have to believe in a plan to implement it. They also have to believe that results will be tracked and that managers will be held accountable for disappointing results and will be given credit for positive results. Healthy planning process depends on everybody believing that results will make a difference. As an owner or operator of an existing business, recognize this team factor as a vital part of your planning process. Work on bringing the team into the planning at several levels.
At least once a year, go through a strategy review process that begins with a SWOT meeting and SWOT review. Get your key people together and develop bullet points. Keep notes. Keep the discussion open.
Digest the results of the SWOT. Consider the responsibility you have as owner or manager of a business, which involves some delicate balancing. On one hand, your plan should include your managers by reflecting their input. On the other, real business strategy can't be done by committee or by popular vote. Sometimes a leader has to make hard and even unpopular decisions. So you should digest those SWOT results in a way that combines ownership responsibility with participation and teamwork. Optimize the SWOT. Sometimes that means that as you summarize the points made, you allow your summary to reflect and direct the discussion towards the strategy that you want to develop. This can be a difficult paradox to manage.
Share the digested, optimized SWOT with your team of key managers. Develop the strategy. Keep in mind that strategy is focus, and remember the principles of long-term consistency, displacement, and priorities.
Give the team time to develop detailed strategy, tactics, and programs. You can use the strategy pyramid framework, for example, to develop tactics to implement each of your strategy priorities and programs to implement those tactics. Keep everybody involved focused on strategic objectives.
Merge the team's contributions into a plan. Remember again that strategy isn't done by committee or popular vote. Somebody has to have the last word, and that somebody ought to be the owner of the business.
Schedule regular implementation and plan review meetings—assign them dates and importance from the beginning—at the same time that you approve the plan. Make this schedule very specific, with real dates and times, so that every manager knows ahead of time; for example, meet on the third Thursday of every month. Review plan vs. actual results. Talk about why actual results are different from what was planned—and they always will be—and what should be done about it.
Make sure that those review meetings happen. They have to be important. If you're the owner, operator, or manager, make sure you attend and manage those meetings. If the review meetings fall apart, so will the plan.
During my 20+ years as a business plan consultant and 10+ more years running a company, I've seen many times how the SWOT is an icebreaker. It invites people to contribute. It gets people thinking strategically, talking, sharing, and it turns a group of people into a team.
The SWOT also offers a good forum for opening up discussion. I've seen a SWOT discussion bring up problems that needed upper-management attention but might otherwise have remained hidden. Middle managers don't always like telling upper managers what's wrong. Even in a healthy company culture, that can be awkward. SWOT makes that easier.
For example, I once saw a 30-year-old software development manager suggest during a SWOT meeting that one company weakness was that the 50-year-old president kept messing with the software code instead of leaving it to the full-time pros. I saw another SWOT meeting in which several managers said ownership was unwilling to hold managers accountable for underperforming.
It's not magic. It's just an easy-to-understand framework that invites anybody who cares about a business to contribute.
Of course you have to manage a SWOT meeting well. Like any other meeting subject, SWOT can degenerate into useless discussion. A SWOT meeting should focus on the SWOT agenda and avoid unrelated side discussions. It should invite contributions without reprisals for negative comments. It's a variation on brainstorming, so contributions—as in suggested bullet points, suggested items on the list—are all positive as long as they are well intentioned.
If you accept all comments, good and bad, you also get the benefit of bringing people into the discussion. Implementation is much more likely when managers contribute to the plan. They understand the background and they feel like the plan reflects their input. So use the SWOT both ways—use it to catalyze team commitment and to develop strategy.
SWOT Analysis is adapted from Hurdle: the Book on Business Planning