Create a Business Strategy in 4 Easy Steps - Here's How

Most business strategies suck.

Don’t believe me, check out the statistics on the numbers of businesses that cease trading every year. If you’re a new business – a start-up – well good luck, 20% fail in the first year, with a further 60% not making it past year two.

The business strategy – the plan that is going to provide the vision of success is lacking in many instances. But why?

Business school rams home the importance of a good business strategy. Survivorship bias gives us inflated examples of brilliant strategies. The failures, the ones who didn’t survive, what of their business strategy?

What did they not do?

The answers are never clear cut, instead, we get a pitch of excuses. Not enough capital, poor cash flow, too many competitors…you get the drift. I might levy another excuse – a poor business strategy.

Poor business strategies get wrapped up with visions, missions, goals, and other fancy plans when what’s needed is a strategy. The problem is that most people don’t know where to start, so they sidestep it. Hence, the spread of mission statements and the like.

Before we get to the ‘create a business strategy in 4 easy steps’, we need to understand what a business strategy is. All will become clear as to why that matters.

The first-principles view of a business strategy

Many companies confuse their vision, mission, and other fancy terms for what a business strategy is. In our need to appear smarter than we are, we forget the fundamental truths of business and strategy. Starting from the beginning - as in first-principles allows us to understand the basics of what we are trying to achieve.

‘Business’ definition

The term "business" also refers to the organized efforts and activities of individuals to produce and sell goods and services for profit.

Business Definition (investopedia.com)

‘Strategy’ definition

 A simple Google search reveals the answer, a plan of action designed to achieve a long-term or overall aim.

The definition of Business Strategy

A business strategy explains how a business will make money by selling goods or services to its customers. Thus, achieving a (normally financial) goal in the future. It sounds simple, but it is challenging.

The business strategy should specify what will prompt a consumer to become a customer. Nobody buys a product unless it helps them. Often this can be an uncomfortable realization because a strategy will fail without customers!

So, simply put, a business strategy explains how a business will make money by selling goods or services to achieve a financial goal in the future.

How do you do that in 4 easy steps?

Creating a business strategy

Many businesses struggle with creating a business strategy. The word strategy itself creates problems that lead to designing a plan which is too complex. The plan becomes the focus.

What matters isn't the plan itself, but the actions it explains. Think about something simple like preparing for a car journey. A beautifully detailed map looks lovely, but a set of directions would be more useful.

If you consider the definition of strategy, this is what happens – people focus on the plan and forget about the substance.  

Inversion

If we look at the definition of the word strategy again, we can see it is a combination of elements. I’ve added brackets around each one to highlight them.

A (plan of action) (designed) to (achieve) a (long-term or overall aim).

The problem with the definition is that it isn’t logical – not from a creation perspective. But, if I invert the definition, I get a more logical statement. What I also get is a creative process – one I can use to create a business strategy.

(Long-term or overall aim) (achieved) by (designing) a (plan of action)

Inverting the definition creates a more logical process – one where we can start with the end in mind.

If we apply the inverted definition to our car journey, we start with where we want to travel to (overall aim). We can then decide upon the method of transport we will use (achieve). Considering the various routes (design) allows us to choose a safe and quick route for us to follow (the plan of action).

4 Steps to creating a successful business strategy

For me, this is a logical and easy way to create and build a business strategy. It breaks the complex process of creating a strategy into 4 simple steps.

1. Decide upon a Long-term or overall aim within your business by creating a diagnosis.

A diagnosis is the first step in building your strategy. You might be asking what’s a diagnosis? A diagnosis is a summary of problems – for both your business and your customers. It’s a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). By defining problems – you define opportunities. That is how a business grows, by finding problems and creating solutions for them.

The customer's problem might not be known to them, but that’s okay. A diagnosis captures this and gives you the insight to set a long-term goal.

2. How will you achieve this long-term or overall aim?

Once you have your diagnosis you then come to the stage of writing a guiding policy. In practical terms, a guiding policy is a simple statement that defines the long-term goal with a summary of how the business will achieve this goal.

Remember, this isn’t the plan of action. This is just a statement that provides a guide on what your business will do.

3. Consider the Design of your action plan.

How can you most efficiently deliver the guiding policy for your business strategy using the tools you have?

The process of design is often understated as it should play a critical part in the creation of any strategic plan. The steps that form your action plan should be coherent, meaning they should link together. 

When individual steps don’t align with each other, you risk losing momentum – which can de-rail your strategy. Hence, why design is another important part of the process. It empowers you to identify and understand the steps that will allow you to maximise any points of leverage.

4. Create a plan of coherent actions – a plan of action.

Coherent actions detail the ‘how’ in the business strategy document. It’s about taking the lessons from the design stage and creating a meaningful plan. You've got your guiding policy and your thoughts from the design phase. You should now be able to write out the detailed actions that need to be taken.

The detail contained within the plan of action enables everyone to know what they’ve got to do. It is an essential part of what it takes to deliver a successful business strategy.

How to create a business strategy

I think it’s worth just pulling this together because what we have is a 4-step process to creating a business strategy.

1. Decide upon a Long-term or overall aim within your business by creating a diagnosis.
2. How will you achieve this long-term or overall aim? What’s your guiding policy?
3. Consider design. How can you most efficiently deliver the guiding policy using the tools you have?
4. Create a plan of coherent actions – a plan of action.

Remember, this has all come from the definition of strategy and inverting it. For me, it’s a great demonstration of the power of inversion. It’s a great tool to use when solving hard problems. This 4-step process is designed to give you a simple and logical path to follow when it comes to creating a business strategy. 

If your business is struggling to make progress with creating a strategy, then please use this process I have mapped out.