Strategy: Three Questions (Part 3)
How Will We Get There?
In Part 3 of our strategy series, we answer the question of “How will we get there”. Building on the starting points of “Where are we today” and “Where are we going”, we seek to map our route. Strategic initiatives are broad workstreams that take you from where you are to where you want to go. Your initiatives should further reinforce your where-to-play and how-to-win choices to create a virtuous cycle of winning (we find the best choices create a flywheel effect). Aldi offers a good example:
Exhibit: Aldi’s Strategic Choices Create a Virtuous Cycle
Even Aldi’s smallest initiatives support its strategy of leveraging low prices to increase purchasing volumes and reduce costs: advertising spend is negligible, employees are cross-trained so three can operate a single location, and products are displayed in their cardboard boxes (instead of shelving) so suppliers can ship directly to the aisle without goods entering inventory. This devotion to ruthless frugality benefits customers in the form of unmatched prices, which attracts additional customers, which drives higher volumes, which further reduces costs, and produces a flywheel of growth and operating leverage that strengthens Aldi’s cost advantage (its moat) derived from scale. In addition to developing initiatives that powerfully reinforce your where-to-play / how-to-win choices, here are a few best practices to keep in mind:
- Less is more. Invest in a small number of bets. Selecting as few as three initiatives and as many as five clarifies priorities while reducing complexity.
- Foundational vs. breakthrough. Separate your foundational initiatives from breakthrough ones to ensure focus (i.e., don’t attempt too many transformational things at once). “Foundational” means making incremental improvements to the core business and “breakthrough” means inventing offers to serve new markets and customer needs. For example, Cinnabon shrinking its portion sizes and prices to create a more approachable indulgence was a “foundational” initiative, while leveraging its brand to expand into licensing such as flavored coffee creamer was a “breakthrough” initiative.
- Focus on the core. We concentrate first on building the core through foundational initiatives and have found that the core business often has untapped potential.
At Kanbrick, after making our strategic initiative selections, we spend a few months crafting robust action plans that outline the what, who, when, and how for each initiative. Our action plans clearly define scope and objectives, assign sponsors and owners, establish deliverables and timing, and set objective measures for success (i.e., KPIs).