OK, You have given me a strategy development method… but what customer-centric strategies are actually possible?

The best strategy development method I have come across is one I learned from Willie Pietersen at his Columbia Executive Education course and is also described in his excellent book, Strategic Learning. I have blogged about the critical first step, “Situation Analysis’ here. While the method is reasonably easy to understand and implement, some people still want to find shortcuts. Their questions go something like this: “We are paranoid about missing out on a potential business strategy. Surely everything conceivable must already have been tried by someone. Can you suggest a list of all possible strategies, so we can choose the three to five that will make a difference for us?”

I used to think that this was like a company saying it wanted to design a new logo, and needed help with the choosing the color. “Could you please give us a full list of all possible colors?” I no longer believe this. For example, for consumer businesses, I now believe there is a finite number of possible customer-centric business strategies, and that the number is 30.

It is all about resource allocation

Business strategy is all about how you allocate your scarce resources in a way that allows you to win. As Pietersen put it in his class, you need to be able to count your strategic initiatives on your fingers, with one hand in your pocket. There should be no more than three to five. Once you have selected them, you take resources away from other areas so you can afford to execute your chosen initiatives and crush your competitors.

Bain Partner Eric Almquist has done extensive research on this subject over the years. He spoke about it on last week’s Net Promoter System podcast, and I found it quite compelling. He has just completed his work on B2B, but it is easier to find his B2C work on the web. There is a Harvard Business Review article, but I find the interactive presentation on the Bain site more interesting. After a few introductory slides, you are taken to the interactive graphic shown in the screen capture at the top of this article. Almquist found that leaders in various industries were outstanding in just a few areas. You can click on the industries listed in the bottom-left corner of the graphic to see which ‘elements of value’ brought the best returns for each of the ten.

So, what does this mean for customer-centric business strategy development? Choosing any five of the 30 as your strategic initiatives gives over 140,000 different possibilities. I suggest you use Almquist’s guidance for your industry as a starting point, if it is covered. No matter what you choose, the key to success will be finding the necessary resources by cutting spend in other areas that you have just decided are less strategic. Move to these new areas and win!