The First Rule of Strategy
Schmoozing clients over dinner and drinks is great fun, potentially bad for your liver, and no longer key to winning major contracts. If you’re serious about building your business – in a more transparent world – you’ll need to submit excellent proposals and develop a strategy to do so.
Most companies don’t prepare for procurement competitions. They leave it to chance and are taken by surprise when an RFP drops. The pull out all the stops to produce a mediocre response which comes nowhere near to winning. Those who win find the process a lot easier because they’ve put their foundations, and a good strategy, in place well in advance.
The first rule of strategy, according to game theorists Dixit and Nalebuff, is to:
“Look forward and reason backward.”
As an owner or CEO you will have a vision and ambition for your business. It could be anything from becoming a market leader within five years to building the business in order to attract a suitor.
Why do you need a strategy?
Simple. It’s to get you from where you are now to where you want to be in three, four- or five-years’ time.
You may say, well “why would we need a strategy if all we need to do is tweak a few things here or there and we should hit the numbers.” That’s leaving a lot to chance. In the Financial Times’s Essential Guide to Developing a Business Strategy, Vaughan Evans says the following on that approach:
“Fine, you have a strategy. It’s called ‘seat-of-the-pants’. Your firm is at the mercy of the market. If demand takes a dip, or if customers switch to a substitute offering, your revenues will tumble. Likewise if a competitor comes up with a superior product or radically improves standards of services. And what if you launch a new product which is super but fails to excite your customers?” The market may remain favourable. You may make the right investment calls. You may achieve your hoped-for profits in Year 3. But that’s called luck. Strategy is about reducing dependence on luck.”
It’s the difference between bidding for everything under the sun – winning next to none – and targeting your efforts and winning big contracts that are going to make a big difference to your bottom line.
There are heaps of definitions on what constitutes strategy and the Oxford English Dictionary’s version is as good as any of them:
“Strategy is a plan of action designed to achieve a long-term or overall aim.”
Leading strategy thinker Richard Rumelt believes that good strategy is rooted in diagnosis – a thorough analysis of the business challenges ahead, warts and all, the designing of a guiding policy (‘an approach to dealing with the obstacles called out in the diagnosis’), which will create and sustain a competitive advantage and the translation of that policy into specific and coherent actions. These three aspects represent the kernel of good strategy.
With this in mind, what do you need to do?
Client: First, think about the type of clients that you would like to work with. Will they provide you with the right kind of work and pay the right kind of money? Will they be good to work with? You don’t want to work with someone who turns into Hannibal Lecter half way through the contract.
Value Proposition and Business Model: Have you developed products and services that will make a dent in the market, and have you assembled a business model that will support their delivery?
Your Team: Do you have the right mix of people on your team? You will need sales people who are skilled at listening for concerns and educating prospects on what you can deliver. You’ll also need to be able to draw on creative talents who are skilled at designing products and services as well as those who can manage the activities involved during a procurement competition. In Rework, Jason Fried and David Heinemeier-Hansson tell us to “Hire great writers….because being a good writer is about more than writing. Clear writing is a sign of clear thinking. Great writers know how to communicate. They make things easy to understand. They can put themselves in someone else’s shoes. They know what to omit. And those are qualities you want in any candidate.” Where are the great writers in your organisation? They may be right under your nose.
Process: Do you have good disciplines, routines and accountability structures that support the running of your response to a procurement competition? If you are short here, have a word with the best project manager in your organisation and ask him or her to design and mobilise a governance structure that will support the work.
What’s the outcome?
The successful outcome of your strategy is achieving the goals and objectives that you’ve set out through building a good sustainable mix of business over the medium term.