Winning Leaders Produce Winning Strategies
Winning leaders instinctively get the importance of win-win-win.
Winning leaders know they must win with customers and stakeholders who matter most...in order for them and their company to win.
Winning leaders understand they get what they measure in their business.
And, the best measures of winning are of value creation.
What is the customer value equation? What are stakeholder measures of value? How is value created for employees and management, owners and investors, other key stakeholders?
What are the clearest and best measures of operating total value creation for the company? The right operating measures enable the leader to understand what’s working and not, how and why. Accounting and financial measures can be confusing and even misleading.
5 questions, 5 choices: the surest path to a winning strategy.
A winning business strategy is a set of choices that enables a company to deliver superior value to its customers on a reliable and sustainable basis. The hallmark of a winning business strategy is that the choices a company makes create sustainable competitive advantage that is manifested in better performance, quality and consistent value for customers and better value creation for the firm and its key stakeholders.
5 questions enable 5 coordinated choices that increase the probability of winning:
What is winning?
Where will we play?
How will we win?
What capabilities must we have?
What are critical company management systems are required?
Let’s look at each question and choice in turn:
A winning strategy consists of coordinated and integrated choices that respond to the 5 questions. A winning business strategy does not need to be long or complicated. Some of the best business strategies I’ve seen can be expressed in a few statements of choice, in no more than a few paragraphs, on one page or less. What distinguishes a winning strategy is the clarity and coherence of the choices, and of course its ultimate effectiveness. Winning strategies deliver winning results for customers, stakeholders, and the firm.
A Deeper Dive: What is Winning?
For small businesses, for- and not-for-profit, and for independent workers, winning has never been more important. For many, it is a question of survival. So, what is winning for your business?
Peter Drucker gave us a good place to start. He said:
the sole purpose of a business is to create customers and keep customers by serving them better than anyone else can.
A winning business strategy begins with a very basic question: who is my customer? or, more precisely, who should be my customer?
I have been struck over the course of 50+ years in a variety of businesses by how often the 80/20 rule applies. 80% of sales come from 20% or fewer customers. And 80% of profits and cash come from 20% or less of sales.
Who are your best customers? How do you define them? How do you measure their value? Do you have enough of these better customers? Do you do enough of your total business with your best customers? Do you generate a better return and more value creation from these customers?
Narrowing your focus to your best customers and best customer prospects, and getting crystal clear about what it takes to deliver superior customer value to those customers, could be the difference between thriving and surviving...or even failure.
A winning business strategy delivers superior value to customers and superior returns to the company. Winning strategic choices create sustainable advantage for both customers and for the firm...its ownership, management and employees.
Businesses that perform make choices that find the right balance, the right combination, the “sweet spot” that creates a win-win for the customer and for the company.
(Stay tuned for future articles on the “customer is boss” and how to determine your best customer prospects, on employees: your most valuable resource, and on the rising expectations of your customers regarding climate change, the environment and social responsibilities. Customers expect more from their brands, products and services, and from the companies and leaders who provide them.)
Finding the combination of choices that deliver the win-win “sweet spot” can be challenging. It requires experimentation to hit the target and continuous improvement to stay on target.
After choosing to win with consumers who matter most, in a way that creates sustainable advantage for your product and/or service, and your company, choose how you will measure winning.
In my experience, most companies make the wrong choice. For a lot of reasons, they choose financial accounting measures of business performance. I prefer operating performance measures. For example:
net realization or revenues after all discounts, promotions, and rebates
gross and operating margins based on a clear and comprehensive understanding of operating costs
free cash flow and cash productivity, the cash it really takes to operate the business, and the cash the operating business really returns
Too many businesses do not understand their real costs, their primary sources and uses of cash, and which revenue sources and customers generate real operating profit.
Who is my customer?
How do I create better value for my customer, and better value creation for my company, my employees and managers, owners and investors?
How do I create sustainable advantage through my choice of what is winning, where to play, how to win? How do I focus on core strengths and management systems to enable and empower excellent execution in every day operations?