DAVID COLLIS

on lean strat­egy for en­trepreneurs.

The Smart Manager - - Front Page - DAVID COLLIS IS THE THOMAS HENRY CAR­ROLL FORD FOUN­DA­TION AD­JUNCT PRO­FES­SOR OF BUSI­NESS AD­MIN­IS­TRA­TION AT HAR­VARD BUSI­NESS SCHOOL

En­trepreneur­ship is about spot­ting an op­por­tu­nity in a rapidly chang­ing mar­ket en­vi­ron­ment, while strat­egy is seen as pur­suit of a clearly de­fined path, through a cho­sen set of ac­tiv­i­ties. While the two are viewed as po­lar op­po­sites, they crit­i­cally need each other. Many en­trepreneurs fail to grasp that ef­fec­tive strat­egy in­spires en­tre­pre­neur­ial be­hav­ior.

More­over, ex­ec­u­tives who want their firms to be more en­tre­pre­neur­ial of­ten fail to fully ap­pre­ci­ate how cor­po­rate tools for man­ag­ing strate­gic growth ini­tia­tives can un­der­mine in­no­va­tion. While in­te­grat­ing the bot­tom-up ap­proach of lean star­tups with the top-down ori­en­ta­tion of strate­gic man­age­ment re­mains dev­il­ishly hard, there is a way to get the best of both worlds.

The so­lu­tion is some­thing I call a ‘lean strat­egy’ process, which has emerged from more than two decades of study­ing and work­ing with large com­pa­nies and en­tre­pre­neur­ial ven­tures. This process guards against the ex­tremes of both rigid plan­ning and un­re­strained ex­per­i­men­ta­tion.

In this frame­work, the strat­egy pro­vides over­all di­rec­tion and align­ment, serv­ing as both a screen that novel ideas must pass and a yard­stick for eval­u­at­ing the suc­cess of ex­per­i­ments. It in­spires front­line em­ploy­ees to be cre­ative and helps in be­ing on the same page with the rest of the or­ga­ni­za­tion. And in the process en­cour­ages re­ten­tion which works as a win-win for both the em­ployee and the or­ga­ni­za­tion.

the en­tre­pre­neur’s chal­lenge

Most en­trepreneurs face cer­tain fun­da­men­tal chal­lenges— fund­ing, talent, in­tel­lec­tual prop­erty, ac­cess to dis­tri­bu­tion, and so on. Though ac­quir­ing ad­di­tional ex­ter­nal re­sources is partly the an­swer, it is wise to face the in­ter­nal chal­lenge which is to drive, con­serve, and de­ploy the avail­able re­sources.

That is ex­actly what strat­egy is all about. Also, en­trepreneurs need to rec­og­nize that in a re­source-con­strained ven­ture, choices are mu­tu­ally ex­clu­sive. And ev­ery choice cre­ates a unique path with a dif­fer­ent out­come and un­fore­seen im­pli­ca­tions. More­over, de­ci­sions are in­ter­de­pen­dent. Hence, any ven­ture must en­sure that peo­ple’s time is spent on the tasks that are crit­i­cal to the or­ga­ni­za­tion as a whole and not just to one de­part­ment. Hence, or­ga­ni­za­tions need to rec­og­nize these fun­da­men­tal prin­ci­ples: The op­por­tu­nity cost of do­ing A is that you can­not also do B

Ev­ery choice cre­ates a unique path with a dif­fer­ent out­come and un­fore­seen im­pli­ca­tions De­ci­sions are in­ter­de­pen­dent

Sim­ple mar­ket tests are not al­ways use­ful

The lean startup camp cel­e­brates agility and adap­ta­tion through rapid test­ing. That may be an ef­fec­tive way to

in­no­vate in­cre­men­tally and fine-tune an of­fer­ing’s fit with the mar­ket, but some ideas sim­ply can­not be eval­u­ated in a se­ries of quick, cheap ex­per­i­ments.

In­deed, the sin­gle best piece of advice for any com­pany builder is this: know what not to do. Strat­egy helps you fig­ure that out.

how strat­egy can help

A well-ar­tic­u­lated strat­egy is in­dis­pens­able for a firm’s over­all growth and suc­cess. It helps en­trepreneurs do four things:

01 choose a vi­able op­por­tu­nity

02 stay fo­cused on the prize

03 align the en­tire or­ga­ni­za­tion

04 make the nec­es­sary com­mit­ments

These help in dis­tin­guish­ing mar­kets that prom­ise en­dur­ing suc­cess from those that of­fer only the il­lu­sion of sub­stan­tial suc­cess, and en­able the ven­ture from try­ing to do too much; and there­fore al­lows a leader to em­power all em­ploy­ees while avoid­ing du­plica­tive ef­forts and the pur­suit of con­flict­ing agen­das.

Once the clar­ity is set and the op­por­tu­ni­ties to pur­sue are de­cided, firms must make the in­vest­ments needed for suc­cess.

com­bin­ing de­lib­er­ate and emer­gent strat­egy

To ad­dress an en­tre­pre­neur’s chal­lenge, the strat­egy must em­brace en­tre­pre­neur­ial tech­niques. The lean strat­egy process be­gins with the or­ga­ni­za­tion’s vi­sion—the rea­son for its ex­is­tence. A vi­sion should be com­pelling and mo­ti­va­tional. It may also be as­pi­ra­tional and pos­si­bly even un­achiev­able.

de­lib­er­ate strat­egy

A de­lib­er­ate strat­egy should be agreed upon by se­nior ex­ec­u­tives to de­liver on the en­tre­pre­neur­ial vi­sion. This in­cludes the com­plete anal­y­sis of the firm’s in­ter­nal re­sources and ca­pa­bil­i­ties, and ex­ter­nal threats and op­por­tu­ni­ties. This de­lib­er­ate strat­egy helps in iden­ti­fy­ing the broad mar­ket po­si­tion to use the firm’s unique ca­pa­bil­i­ties. This then sup­ports in sat­is­fy­ing cus­tomer needs in a way that no com­peti­tor can.

In my view, there are three un­der­ly­ing el­e­ments of a strat­egy—the ob­jec­tive, which ar­tic­u­lates the near-term goal that de­fines suc­cess in the eye of the ven­ture’s leader; the scope, which iden­ti­fies ‘what busi­ness we are in’ and helps in draw­ing the bound­aries around what the ven­ture will and will not do; and the com­pet­i­tive ad­van­tage, a dis­tinc­tive value propo­si­tion that aligns the firm’s ac­tiv­i­ties and shapes fu­ture ex­per­i­ments.

For en­trepreneurs, strat­egy mat­ters more than it mat­ters to es­tab­lished busi­nesses. Yet, lean meth­ods for in­no­va­tion also have a lot of value.

emer­gent strat­egy

Myr­iad de­ci­sions are made ev­ery day by man­agers across lev­els in im­ple­ment­ing the strat­egy. These in­de­pen­dent choices grad­u­ally sum up and al­ter the com­pany’s po­si­tion and de­ter­mine the ex­act form the strat­egy takes over time. This is the emer­gent di­men­sion of strat­egy.

In re­sponse to en­vi­ron­men­tal changes and the find­ings of ex­per­i­ments, the ven­ture builds new in­ter­nal ca­pa­bil­i­ties and, if nec­es­sary, re­vises the orig­i­nal de­lib­er­ate strat­egy. Then the process be­gins all over again.

For en­trepreneurs, strat­egy mat­ters more than it mat­ters to es­tab­lished busi­nesses. Yet, lean meth­ods for in­no­va­tion also have a lot of value. Their rec­on­cil­i­a­tion in the lean strat­egy process en­ables en­trepreneurs in or­ga­ni­za­tions of all sizes to be­come ag­ile and ef­fec­tive in­no­va­tors and not be in con­flict.

Even be­fore test­ing fea­si­bil­ity, the lean strat­egy helps firms iden­tify long-term at­trac­tive­ness of pos­si­ble busi­ness mod­els and mar­ket spa­ces. By com­bin­ing strat­egy with ex­per­i­men­ta­tion, firms and or­ga­ni­za­tions can greatly in­crease the odds of achiev­ing last­ing suc­cess. ■

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