It must be nice to be a dentist.
They are an example of what we might call a “downside industry”, whereby people hire them not so much to achieve something good, as to avoid something bad. Downside industries don’t have to sell you an exciting or aspirational future; they simply have to scare you about the horrible things that will happen if you don’t buy their wares.
Like the mafia and the IT department, dentists are lucky in this regard, because selling the downside is much easier than selling the upside. “Pay to get this” is a limper message than “pay to avoid this”, since, as we know, the pain of loss is said to be twice as powerful as the pleasure of gain.
Bearing this in mind, I think it’s high time I took a break from preaching the benefits of strategy, and tried a more negative approach. Forget the dream, let’s talk about the nightmare:
What bad things happen to businesses who neglect strategy?
(Strategy defined as a clear and unique market role, which competitors can’t fulfil)
The following problems are a selection which will, without exception, arise for brands weak in this area. I’ve written about some of them before, so here I am merely compiling them into one place.
You will notice that bankruptcy is not among them. That is because, as I’ve said many times, strategy is not necessary for financial success. You can fall ass-backwards into growth – and many brands do. But even if that’s the case, these chronic problems will remain; causing perpetual headaches and holding your business back from the far greater potential that lies within.
So let’s get to it. What are the consequences of poor strategy?
Consequence 1 – You will become more and more similar to your competitors
The broadest result of not having a strategy will always simply be an inability to distinguish yourself from other brands in your category. In the absence of a strong alternative path, you will always be left following the one laid by others – thus drawing you into direct conflict as you battle over who gets to own the space you all desire. This battle will generally be fought in three ways, 1) by lowering prices, 2) by splurging on marketing, and 3) by mirroring features – a combination of tactics which adds up to commodification when stretched over time. By and by, you and your competitors become increasingly similar, until consumers cease to have a particular preference – which leads to…
Consequence 2 – You will be at the mercy of the big guy
Not every businesses wants to avoid clustering and commodification; in fact for some it’s their whole model. Large conglomerates thrive on this dynamic, as it plays directly to their strengths: scale and cash. By virtue of being able to cut prices the lowest, and spend the most on marketing, they will often be able to edge out smaller competitors – taking the consumer’s indifference to the category and weaponising it. Arguably such businesses would rather have commodified brands in their portfolio than unique ones. Why? Because the risk is lower. A commodified proposition is market-tested, whereas a strategic one is a gamble. Sadly most businesses don’t have this luxury.
Consequence 3 – You won’t know what to do next, and will waste time spinning your wheels
With a tight and focused strategy, you have a way to evaluate which projects will work for you and which won’t ahead of time. It’s like being able to tell the future. If an idea is on-strategy then it will fit with the overall picture, and lead to growth – and if it’s off-strategy then it won’t. Naturally this is pretty useful when it comes to idea generation, decision making, and efficient allocation of resources. If you’re like most businesses however, and you don’t have a strategy which acts as such a filter, then the suitability of various ideas and projects descends to rank guess-work. Does this fit with what we’re about? Will this work? Will this lead to growth? Who knows – better just give it a go and find out. Such reactive and experimental behaviour is to be encouraged in the early years of a business, when it’s still figuring out its position. But eventually you want to move beyond such “hustle”, because it’s exhausting and expensive – progressing by stops and starts, with no real destination in mind. It does work (sort of), but it isn’t pretty.
Consequence 4 – Your growth will hit a wall
Every product, when launched, has what I call a “natural market size”. This means there is a certain latent appetite for it, which it will grow to fulfil, but no more. It might be huge, it might be zero – there is no real way to know other than putting it out there, and seeing where it gets to. The problem this creates for a lot of businesses is that one day, suddenly, growth will stop – and probably earlier than you’d like. In the absence of a strategy, these businesses are left with no way to grow beyond the inherent potential of their product – whether that’s by tweaking the product itself, launching new products, or recontextualising the product for a wider market. A strong strategy allows you to stretch the market potential of a product, and the wider business that produces it – perhaps without limit.
Consequence 5 – You will be boring
Businesses without focused strategies must, by definition, hedge their bets. They cannot attack any one direction too purposefully, because such singular commitment would, of course, represent a strategy – and so instead they will carefully endeavour to cover their bases; to do a little bit of everything, so they don’t get caught out. Such fence-sitting brands are, of course, intensely boring. By mixing together the colours of different vibrant strategies, they become a generic brown sludge – distinguishable in no particular way at all. It is only the strategically committed that are capable of bold action; and so it is only the strategically committed that are capable of being interesting.
Consequence 6 – You will be subservient to agencies and advisers
I used to work in a marketing agency, and I can boil down pretty much every brief from clients into one question “what are we for?”. They were at a loss, unsure as to how to convince people to buy this random thing they manufactured. Although the client was the one with the money, the agency was the one with the power. This dynamic only arises if a business is unsure of its strategy. Businesses with fixed strategies don’t outsource questions like this because they know the answer already. Of course, they may still work with external partners for executional purposes – much as you may hire a plumber or electrician – but they won’t outsource their very identity; let alone allow it to be changed every couple of years when new people with their own ideas get involved. Great brands use agencies not as gurus, but as messenger boys: because the message is settled, and there’s nothing left to do but deliver it.
Consequence 7 – You will struggle to lead
A lack of strategy not only effects your ability to grow your sales; it also effects your ability to grow your headcount. Every business starts its life as an autocracy, with a founder who has absolute power, and makes every decision. For a time this works pretty well, because it means that decisions are generally quite consistent, all coming from the same source. However eventually the time will come when the founder can no longer micro-manage the whole show – either because the business has grown too large, or because the business has been bought and new management is in charge. In this scenario many brands run into serious problems, as there is no central guidance around which to base decisions. A strategy solves this, since it effectively replaces the founder as the boss. Leadership is no longer based on the whims of one individual, but rather a consistent blueprint which covers the whole enterprise. Businesses with such a blueprint can reach vast sizes while maintaining the operational efficiency of a startup. The hard choices have been made up front – all that’s left is to adhere to them.
So there you have it. Just as a healthy body can be defined as one with an absence of ailments, so too can a healthy business be described as one which lacks these issues. Strip them away and all that’s left is a pure vision of what a business should be:
A vehicle for giving value to the world, and collecting value in return.