“The essence of strategy is choosing what not to do.”— Michael Porter
Strategy involves choices, and choices involve trade-offs. Trade-offs enable you to deliberately choose ways to differentiate your organization from others in your field.
At a high level, deciding what to do — and what not to do — is only the starting point. Many other trade-off decisions will flow from that. Often, this means that to be most effective, a business or organization should be more focused in its activities. Trying to be a “jack-of-all-trades” (how’s that for an old and dated term!) or to offer “something for everyone” is not usually a path to success.
The need for a tight focus is especially important in cases where the organization has limited resources (read: early-stage companies and many nonprofit organizations). But it doesn’t apply in only those cases… even the largest organizations have limits. For example, a few years back, Ford Motor Company decided to eliminate sedans from its lineup. Ford made this difficult trade-off in order to solidify its leadership position in pickup trucks and SUVs.
There are several reasons why making these tough choices is essential to strategy development and long-term competitive advantage.
# 1. Increased effectiveness.
If you spread your resources too thin, you are unable to have the same impact in any one element of your business.
One of the very first clients of my independent practice was an early leader in a new food preparation technology. They had identified seven or eight different market segments for which the technology could provide some real advantages.
But… most of these segments would benefit in different ways, were reached through different channels, and had different procurement processes. Needless to say, my client’s small salesforce was stretched very thin — they were not getting traction in any of their target markets as a result.
Our strategy work shifted their focus of resources and attention to only two, closely related target segments. Soon afterwards, their growth accelerated.
# 2.Brand recognition.
If you are doing too many different activities, people may fail to understand what you are about.
This was a factor for my food technology client as well. The marketing messages directed at any one of the segments had no impact on the others; the relevant value proposition in each market was different. In some cases, it had to do with the ultra-high quality of their meals. In others, the labor savings and limited need for kitchen equipment was the key.
For nonprofits, this same challenge applies. I was recently involved in the winding down of a small nonprofit whose limited budget was being used to offer a broad range of services to three very different target audiences. They hadn’t achieved significant impact at reasonable scale with any of their programs and were unable to reach consensus about which audience or program was the most important. In the end, some of its resources were distributed to other area nonprofits and the organization was shut down.
#3. Sharper focus.
A past client of mine was the National Brain Tumor Society. Initially founded to fund research aimed at eliminating brain tumors, the original organization merged with another to achieve greater scale. The resulting new organization had programs on research, advocacy, and services to support those diagnosed with a tumor.
After demonstrating that there were several other organizations offering services, we worked with leadership to tighten the focus back to just research and advocacy. This narrower scope allowed them to develop an innovative approach to supporting research that has led to significant advances in understanding the disease. It also helped them to raise more funds and increase the reach and effectiveness of their advocacy.
How Do We Apply This Thinking?
- Consider the vision/mission of your organization. Reflect on the problem or opportunity that was behind its creation. Have conversations with representatives of your key stakeholders to make sure you understand what is most important to them — and whether their priorities have shifted.
- Consider recent external trends or developments. Technology, the market environment, regulations, available alternatives, etc. Have any of these led to changes in what is most important?
- Assess existing programs or products. How have they been performing? How well are they aligned with the needs and wishes of key stakeholders?
- Evaluate internal resources. Financial, personnel, time. Do your most important programs have what they need to be as effective as possible? If you could acquire — or reallocate — additional resources, could you significantly increase your impact? Are you prioritizing your activities and investments towards the most important stakeholders or issues?
- Analyze the impact of trade-offs. What would be the implications of reallocating resources from lower priority activities? What would be lost and what would be gained by those changes?
Trade-offs often necessitate difficult decisions. In some cases, staying competitive and relevant may require discontinuing programs that people within your organization are fond of, in order to allocate necessary resources towards higher priority activities. (Nonprofits are especially hesitant to close programs, since even a weak or limited program helps somebody.)
Thoughtful approaches to reallocating resources — through training or other means — may reduce the potential downsides associated with difficult trade-off decisions.
Wherever you come out, by applying logic and rigorous analysis and making changes as necessary, you can create a stronger, more impactful organization overall.