business strategy business planning

The essence of strategy is choosing what not to do

– Michael Porter

I love the Michael Porter quote here because it’s so true, and more so the more you dig down into the front lines of real business, such as small business and startups.

Strategy is what you’re not doing. My favorite metaphor is the sculptor with a block of marble—the art is what he chips off the block, not what he leaves in. Michelangelo started with a big chunk of marble and chipped pieces off of it until it was his David.

The Lean Business Plan Template

Business strategy is focus

At the real-world level (my favorite), strategy is like driving and sex: we all think we’re pretty good at it. But simplifying, doing today what will seem obvious tomorrow, is genius.

I say the best strategies seem obvious as soon as you understand them. Furthermore, it seems to me that if they don’t seem obvious after the fact, they didn’t work.

Strategy has to be easy to define. I like the simple LivePlan method, which I explain here. But aside from that one, I’ve also worked in depth, during my consulting years, with several competing strategy frameworks, and every one of them works well if it’s applied correctly and executed. And furthermore, I say you can also define strategy with a simple summary, story, or a small collection of stories, which I’ll also explain here.

1. The LivePlan simple strategy method

Think of it as the heart of the business, like the heart of the artichoke. It’s a group of core concepts that can’t be separated: problem, solution, market, and identity. Don’t pull them apart. It’s the interrelationship between them that drives your business. Each affects the other three.

The problem you solve

We forget too often, so start with this: Your business is not about you, what you like to do, or what you want from it. It’s about your customers. And, most important, the problem you solve for your customers.

Theodore Levitt changed marketing with his pivotal piece “Marketing Myopia,” which includes this important reminder:

People don’t want to buy a quarter-inch drill, they want a quarter-inch hole.

And this also famous quote, about railroads:

They [the railroads] let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.

Real businesses solve problems and to develop an effective business strategy, they have to know what problem they solve. For a social media company that posts updates for its clients, the problem it solves is not social media—it’s getting the word out, and getting people to know about their clients’ businesses.

Consider a bicycle retail store. Maybe it solves the simple problem of where to buy children’s and family bicycles, service, and accessories, which is one problem. But maybe it solves the problems of the mountain bikers and racers who want a lot of expertise, specialized bicycles, equipment, and know-how, which is a different problem.

You also need to understand what business you’re in. The bicycle store might be helping families with kids bicycles as they grow, or it might be offering real expertise to the serious bikers. Those are different businesses.  

2. The solution: Your product or service

Your solution to that problem is your product or service. Focus on the true desired end result for your customers—the holes too, not just the drill.

Take the bicycle store for example. One solution is a bike store catering to families with children and casual bikers. Another very different solution is a bike store catering to bicycle enthusiasts, such as serious mountain bikers and racers. It’s not just a bike shop; it’s a general bike shop, or one for families and hobbyists, or one that caters to serious cyclists.

That’s strategy at work.

3. The market: Who buys your solution

Your identity influences your choice of target market.

The bike racing shop focuses on attracting enthusiasts, offering expensive high-end bicycles and equipment. The family-focused shop focuses on attracting parents with kids, concentrating on medium-level bikes, trailers, and family-friendly accessories.

Keep your business focused on specific target markets. That bike racer shop owner has to know his products are too expensive for the families, and the families bother the high-end enthusiasts in the shop. Likewise, the family bike shop shouldn’t scare away its target market with very expensive racing bikes.

4. Your business identity (why us)

Every business has its core identity. How are you different from others? What are your strengths and weaknesses? What is your core competence?  What are your goals? What makes you different?

We have the examples above of the varieties of problems, solutions, and markets related to a bicycle store. To understand identity as a part of strategy, think about the difference between a bicycle retail store owned and operated by a former professional bike racer, and another one owned and operated by a couple with children who like cycling as a family activity.

The first one will gravitate toward stocking and selling expensive, sophisticated bicycles for the racing enthusiast and extreme long-distance or mountain biking hobbyist. The second will probably emphasize bicycles for children, bike trailers, carriers, and accessories for families.

I hope the example illustrates how the owners’ identity affects strategy in strengths and weaknesses, knowledge and focus, and choice of product and target market.

Seth Godin’s book “The Dip” is about being the best at one thing. That’s the point of your focus. Since you can’t do everything and even if you could, your customers wouldn’t believe you, you need to focus on something that you do well, that people want.

Part of your identity is what you want from your business. Some businesses are about your lifestyle or pursuing your passion. Some people want their businesses to grow as big and as fast as they can and are happy to work with investors as owners. Others want to own their own business, even if it has to grow more slowly for lack of working capital.

What’s your case? If you’re committed to a second income in a home office, incorporate that into your identity. Don’t look for generalized formulae; let your business be unique.

Roll them up together

These four things, problem, solution, market, and identity, are your business strategy.

Don’t pull them apart. Don’t take them one at a time. Don’t ever stop thinking about them. Remember, in planning—as well as in all of business—things change. Keep watching for the change.

Your story as strategy

All human beings have an innate need to hear and tell stories and to have a story to live by.

– Harvey Cox

Stories are the oldest and probably the best way to communicate ideas, truth, and beliefs. Stories are powerful.

Think of the key stories that are foundational in the great religions. Or think about the stories behind the phrases “sour grapes,” “the fox in the henhouse,” and “the emperor’s new clothes.” They all have power because they communicate. They resonate. We recognize their truths.

Using business stories

Stories are a great way to define and communicate business strategy.

A strategy that can’t be told as a story is doomed. It could be as simple as a story defining the problem your customers have, the solution your business offers, and the factors that make your business especially suited to offer the solution.

Strategy should be flexible. And a lot of successful pitch presentations start with the problem and its solution.

Telling your essential business story

Strategy starts with an essential business story. Imagine a moment of purchase. Somebody is buying what you sell. It happens with every business.

For example:

  • A group walks into your restaurant.
  • A parent looking for a bike for their six-year-old.
  • Someone browsing the internet subscribes to your membership site.
  • A customer in your store picks up one or more products, puts them into a basket, and walks to the checkout counter.
  • A potential client decides to take on your management consulting or social media marketing.

In every case, there is a story. Think it through. Who is this person? How did he or she find you, your store, your restaurant, or your website? Was it by answering an email, looking at an ad, talking to a friend, or maybe searching in the Yelp app on a mobile device? What was the problem they had, and how did your business solve it?

So the solution has to match the problem, but it should demonstrate what’s different about one company when compared to all its competitors.

For example, to make a bike shop story based on selling bikes to families, you need to add in how your shop will be different from the local box store, and evidence that you understand that target market. And in the software company example, there must be a sense of this company being qualified to deliver useful content in this topic area. That takes us back to the business identity component, but it could also be called simply the secret sauce, or why we’re different and presumably better.

A business pitch as strategy summary

One way to build out your strategy is as simple and straightforward as developing a pitch for your business.

There’s no need for long-winded strategy explanations, and the pitch defines the problem worth solving and your offering that solves the problem, plus the market, competitive positioning, and key points for product and marketing, plus your identity.

I’ve used the pitch format for clients. That’s a pitch in the illustration here, and you can click on the link below it for more detail.

A pitch page created with LivePlan.

You can download a free business pitch template right here on Bplans, too.

Looking ahead: Strategic alignment

Remember, as you develop strategy, to keep execution in mind.

Be sure to think about how strategy is useless without execution. No matter how brilliant the strategy, it’s value will be measured in decisions, actions, results, and business health.

So it takes execution, which includes tactics and concrete specifics (milestones, as in dates, deadlines, tasks, budgets, and so on) to make that real.

Conclusion: The best strategies seem obvious

So please, keep it simple. The best strategies seem obvious after they’ve been executed successfully.

Look at businesses you like and deal with often and I’ll bet you’ll see not a subtle or sophisticated strategy, but a good combination of matching identity, target, and offering. Or a simple, obvious story about somebody needing or wanting something.

If it works, you know it.

Did you know this article is part of our Bplans Pitch Guide? Everything you need to know about creating your pitch, all in one place.

Tim BerryTim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Follow him on Twitter @Timberry.