A Strategy in 2 Sentences?
Updated: Jul 12, 2019
Is it possible and why would you want this?
Consider my favourite chess strategy, “Control the middle 4 squares and castle early”
It seems impossibly simple and yet it's crazy powerful.
With millions of moves available in chess, at least for the first chunk of the game, my simple strategy informs exactly how to develop each piece. Each move informed by and assessed against this simple and very importantly, memorable strategy which develops a highly defensive board capable of launching powerful attacks on most opponents.
Business is no different, with even more possible moves than in chess, is it possible and desirable to have every move reconciled to, and informed by a simple and powerful business strategy?
Consider this one I developed for a private pension fund administrator.
"Specialise in serving medium sized companies (<300 employees) with high average salaries, where we may act as the brokerage and administrator.
By the way, this turns out to be medium sized, IT companies…
Upon analysis, I discovered a number of forces driving profitability in this company.
Fees are calculated on salary value so high salaries is better.
Fees are calculated on a sliding scale of number of employees with diminishing returns so <300 is better.
Where we are the broker, we literally earn double fees, the administration fee plus the broker fee.
Administration is more costly where there is high staff turnover, the cost of adding or removing an employee from a fund is literally 15 times that of calculating the share of fund for someone just rolling over in a month.
So for a 300 person IT company where average salaries are high, staff turnover low and we are the broker, profits are literally 28 times higher than a 300 person retailed where salaries are low, staff turnover high and we are not the broker because 4 X earnings at a 10th of the cost.
Can you see how this very simple strategy informs every part of the business? From who we market to, where marketing is done, who we say no to and when we need to add staff? It also details the profitable part of the business, laser focusing our efforts and resources on only high value business.
It's remarkably simple AND it actually has a chance of being implemented, unlike the more traditional 15-page PowerPoint strategies which lie dormant in the CEO’s top drawer and have no hope of seeing the light of day.
But be careful, these super simple looking strategies are not arrived at without serious effort. It’s derived from thinking about the fundamentals and questioning and testing basic assumptions with rigour. Pinpointing the sources of value creation, the drivers of the cost to deliver it and the basis of competition, it is also not set in stone and evolves over time.
And a strategy is also not a plan and doesn't replace planning, rather it is a set of guiding principles which can be applied as the situation evolves – but its simplicity keeps it front of mind and therefore much easier to adhere to…
And this is totally possible, even highly desirable for every business… I recently (re) wrote all of my strategies created over the past 10 years to see if I could achieve the same level of simplicity and absolute raw power and even impressed myself with the sheer genius :).