Why a plan is not a strategy
Posted on 18th January 2023 at 08:43
In simple terms, what is the difference between a plan and a strategy?
A plan is straightforward; it requires a step-by-step process, which is outlined logically with expected outcomes. For example, implementing a new companywide CRM is a plan, as it requires research and then action, however, it’s not an overall strategy. Implementing a CRM could be a component of a more encompassing strategy to create a competitive advantage by being more in tune with our customer’s needs than our competition.
Strategy requires critical thinking and analysis in order to develop what we believe to be our best route to long-term success. Unlike a plan, the outcomes of a strategy cannot be guaranteed as, almost by definition, strategy contains uncertainties. Therefore, when executing a strategy, it’s important to be able to adapt when things don’t quite work out as hoped!
What do you mean by competitive advantage and how do we go about creating it?
Essentially, strategy is about creating superior returns over time and comes down to two fundamental decisions: ‘where are we going to compete’ and ‘how do we play to win’.
In business school speak, the first is our Participation Strategy, and the second our Positioning Strategy. So what markets are we going to focus on where we think we stand the most chance of doing well, and then within those markets, how are we going to position ourselves to outperform the competition – in other words, how do we create a sustainable competitive advantage?
We can do that in one of two ways: either find ways to make our product or service ‘better’ than the competition (this is an ‘Offer’ advantage and should enable us to either charge the customer a premium and/or enable us to grow faster than the competition) and/or find ways to be more efficient than our competition (this is a ‘Cost’ advantage and should enable us to make more profit than our competition at the same price to the customer).
So, in order to succeed in the long term, we need to be clear about our Participation and our Positioning Strategies – and then develop a supporting plan to implement those strategies.
What are the benefits of implementing a strategic approach in business?
Robust strategic thinking can be hugely beneficial, it can set a business aside from its competition and significantly increase the chances of long-term success.
Building on the idea of creating a competitive advantage, a recent example of combining a premium service with creating a ‘Cost’ advantage can be illustrated with a cleaning company️ that we worked with. This company is an exterior cleaning company and they were frustrated that one particular type of job took a long time to set up and pack away after, meaning that they could only fit in a certain number of jobs each day – limiting the profit they could make on it.
However, by recognising and thinking this through, they identified and invested in new technologies, and they were able to reduce set-up time from one hour to only ten minutes. This resulted in the company being able to take on far more jobs and gave them a competitive advantage – most other companies were not able to invest in similar equipment.
They could either charge the same as their competitors while doing more jobs than them, or to maximise job opportunities, they had the option to charge slightly less than their competitors while maintaining a really good margin. This is just one example of how strategic planning can allow a company to change its position within their industry.
Would you say strategic planning leads to Blue Ocean Thinking?
Strategic planning can often lead to Blue Ocean thinking, which refers to a process of thinking that allows businesses to explore new markets with no or limited competition so that they can introduce new products to the market and dominate a large market share. A true Blue Ocean strategy would effectively create a new market where you are the only option, rather than competing against others.
Tech giants such as Facebook and Google can be seen as some of the biggest companies that have grown as a result of blue ocean thinking. They decided to do something completely different from their competitors and develop new markets. This allowed them to establish themselves within their sector and take up a large proportion of the market even later down the line. This all started with strategic thinking, analysing company strengths, and considering the risks and the different outcomes.
We hear a lot about disruptors and essentially good strategic planning involves looking for ways to do things differently and find ways to disrupt the ‘norm’. Sometimes this can be a major disruption linking in with Blue Ocean thinking, more often it is around smaller (but significant) ways to create a competitive advantage.
How can businesses start thinking strategically?
Figures suggest that only 4% of UK businesses successfully scale beyond a £1 million turnover mark and exceed past 10 employees, meaning many will struggle to break out of the micro-business category. This is because many businesses only implement a plan that will marginally increase their sales and profits.
Strategy is more fundamental and significant. Strategy is about working out how to create superior returns over the long term compared with the competition – and this requires critical thinking and risk-taking. Strategy is working out where we want to play and how we ‘play to win’ whereas planning is more about ‘playing the game’.
To start, businesses need to analyse themselves internally to think about their core values and their core competencies – what they are great at. Business leaders need to think about their participation strategy which decides the markets they are going to compete in – are they going for a competitive, oversaturated market, or will they try and tap into something new, where they could build a strong differentiation and be more profitable in the long run?
Businesses need to understand their competencies and how they can outperform any potential competitors. This will help when considering their positioning strategy, what will the company offer that is different from the competition? Are they going to present themselves as a premium service or product that can charge more than the competition, or are they going to focus on internal efficiencies to improve their ‘cost’ position?
Thinking in this way will improve the decision-making in the business and open up new opportunities to make step changes in the business and increase the overall chance of long-term success.text to edit it.
Are you wondering if your Strategy is ready for your business to grow and scale successfully? Take our FREE Strategic Thinking and Leadership Scorecard today. You’ll get a personalised report and a free copy of the highly-rated book: The Entrepreneurial ScaleUp System (only pay P&P). Here’s the link:
Tagged as: Strategy
Share this post: