Sunday, May 28, 2017

Startups and Small Businesses Desperately Need Strategy & Tracking Mechanisms

This week, I found two of the readings, “Your Strategy Needs a Strategy” and “The Balanced Scorecard – Measures that Drive Performance” to be particularly impactful. After a bit of reflection, I was struck by how many of these techniques and strategic mechanisms can be applied in almost every business scenario. In fact, I’ve been able to look back and identify situations where some of the concepts would have assisted with the projects that I’ve had the pleasure of working on during my short career. Even so, I’ve recently been inserted into the startup and small business world, where resources are limited and the direction of the company is fuzzy or undefined. Because of these two contributing factors, I can’t help but think that these two tools (defining a strategic strategy and the balanced scorecard) could be especially invaluable to new companies or resource constrained organizations.

One of the largest challenges of startups or small businesses is the two pronged issue of first defining a strategy, and the subsequent problem of measuring and evaluating the success of the strategic direction. This is why cataloging a strategy into four categories (shaping, adaptive, classical, or visionary) as suggested by the authors of “Your Strategy Needs a Strategy” helps narrow the scope of strategic planning. With limited capital and an extremely rapid cadence of decision making, tools such as the quad chart outlining the four strategies on page 6 would be a useful tool to focus discussion. Visual representations such as these immediately enable a company to engage in dialog to identify where they fit relative to other industries. With a better understanding of which strategic pathway makes sense for the company, a startup can use the information as a guidepost to narrow the entrepreneurial planning focus. In my experience, this can be challenging to do when history and precedence don’t exist!

Additionally, I was surprised to see that over 75% of companies used the classical and visionary styles of strategic leadership, even when their industries are undoubtedly unpredictable. I think that it is human nature to overestimate predictability and malleability, especially in a startup or small business where many times company leadership is working in a “bubble” with little 3rd party oversight. According to the authors, “companies that correctly match their strategy-making processes to their competitive circumstances perform better than those that don’t.” Finding the right strategic style can help a startup get off on the right foot – which is extremely important because according to experts, 9 out of 10 startups fail. [1]

Moreover, when setting up an organization or planning for a product line, there are so many bumps in the road that could be smoothed out via understanding the fundamental structure of the industry, and aligning the organizational strategy with metrics. Many start-ups wonder “what should I focus on and how do I measure if I’m successful?” Once a strategic direction is chosen and adequately defined, ECI’s “Balanced Scorecard” can be used to measure progress. To me, the key takeaway here is that defining a strategic plan is the first step, but the successful outcome is dependent on the effectiveness of the chosen path. Applying the scorecard helps with minimizing information overload, but also enables reflection.

Finally, because decisions are iterative and will need to be adapted to the organization or product at hand, a tool such as the balanced scorecard can help track strategic priorities. I really liked the idea of asking questions right from the start associated with customers, how the company creates value, how they view shareholders, and what they must excel at. Especially in a startup scenario, defining these metrics so that the success of the strategic direction can be monitored will help to move the company forward. Additionally, I like that the scorecard is flexible, allowing for additional operational metrics to be added as needed.

- Abigail Hardt (ahardt)


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