During the last decade, strategy has been the main focus of high-growth companies around the globe. This is because a well-executed strategy is the driving engine behind revenue growth. If you are a mid-market business and are having problems increasing your revenue, then it is time to take a closer look at your strategy.
In my last blog, we talked about how the capacity and the capability of your people can stall growth and the importance of having happy, skilled and productive employees. But, you also need to have a clear strategy that they can focus on and execute well. In this blog, I will explain how strategy drives revenue growth.
Loose Plans Stall Growth
Many businesses grow to a certain point simply by doing what they do well and without planning strategically for where they want to be. Except, when you grow quickly without direction, eventually you will find that your growth will suddenly come to a halt and flat-line. I commonly see this happen with companies with revenue of between $12 million and $40 million. When mid-market companies work to a loose, non-specific plan, they do not have the structure, direction or cohesion that is required to sustain revenue growth.
To explain in more detail, below are some of the reasons why not having a clear strategy stalls revenue growth.
- Structure – without a clear strategy you will not know what roles you will require in the company nor what their accountability will be. As a result of this, I have often seen employees wearing ‘too many hats’, being overworked and unproductive, carrying too much stress and frequently falling ill.
- Direction – without a clear strategy people will procrastinate when making decisions and/or finishing a project because they are not sure if they are doing the right thing or not. A lack of direction can also create overly complicated goal setting and priorities. Having competing priorities creates feelings of being overwhelmed, encourages procrastination and leads to poor execution of projects. Because there is no clear strategic direction or path forward, decisions become reactionary, more projects are added and eventually every decision feels like it requires elaborate discussion and deliberation. Growth stalls as a result.
- Assumptions – Poor data and biased opinions not based on fact can lead to short-cuts being undertaken, reduce the quality of decisions and increase the risk of bad strategic decisions being made overall.
- Differentiation – without a strong strategic process you cannot visualise a path to true differentiation and competitive advantage. This, in turn, generates poor results in revenue growth, gross profit, net profit and cash, creating another constriction on growth – because growth sucks cash.
- Fragmentation – without a clear high-level strategy you cannot align all operations in the business. Marketing, sales, operations, innovation, customer service, finance, human resources, development, and technology should each have a simple strategy that is compatible with the overall company strategy. When your business areas are misaligned you get fragmentation and the business will pull in different directions – hindering growth.
A Strategy is Not an Action Plan
Ask yourself, does our strategy drive the revenue growth my business seeks? Or is your strategy simply a lengthy action plan, or worse, just a set of goals? Something that I see regularly in businesses that are failing is when goals and tactics are confused with strategy.
So what is the difference between a goal, a tactic and a strategy?
- A goal is a desired result. Goals or priorities are what you need to achieve in one year or less. Your goals help you achieve your key strategic thrusts, your capability building objectives and/or your points of differentiation.
- Tactics detail the specifics of what you need to execute in order to achieve your goals or priorities.
- Your strategy by contrast clarifies the purpose of your business (your why), where you are going, and the things you should/shouldn’t be focusing on. Your strategy does not outline what you are doing, when you are doing it and who is responsible – these details are in your tactics. It’s important to remember that you cannot know what you are doing until you are clear on why you are doing it!
Effective Strategy Drives Business Growth
An effective strategy starts with defining what is at the core of a company, i.e. core values, core purpose and core competencies. Ask yourself – what are the driving passions, purpose, core values and core competences of your business. An effective strategy also drives business growth by clarifying where you need to focus your efforts; where to execute them; what to say no to, and where not to waste time.
An Effective Strategy is Adaptable to Change
Your strategy must be adaptable to changing trends and circumstances. The core values, core purpose and core competencies of your company do not change over time, but the other elements of a strategy can change. Strategy, once clear and set, is something you need to reevaluate on a regular basis. High growth companies address their strategy on a quarterly basis in order to stay abreast of change. Company leadership teams also need to have a meeting structure or rhythm in place, which regularly reviews strategic priorities. Strategy meetings should be part of your monthly meetings, with quarterly reviews in place and an annual strategic planning session undertaken.
An Effective Strategy is Kept Simple
A good strategy is not overly complicated (complexity cannot be scaled quickly). It needs to be specific and simple enough for people to understand and align with. Ask yourself – can I articulate our strategy in one sentence?
In conclusion, remember that it takes time to build a strong and clear strategy, but it is a key driver to revenue growth, so it needs to be done. A strong, clear strategy takes more than one or two days to build so take the time to focus on it. Once you have your strategy clear, remember to review it on a regular basis in order to stay on top in a busy and ever-changing business environment. This is essential to maintaining sustainable business growth.
In my next blog, I will talk about the ways you and your staff can improve the execution of your strategy – the third reason for stalled growth.