Four common misconceptions about strategy in startups - and the ways to address them
Four false myths and five tips to make your strategy work
Francesco | 13.03.18
Strategy? Business plan? Gosh no, we are a startup and we know what to do: build our product and grow fast. We don’t have time to waste with this old-fashioned nonsense.
Good luck. Without a proper strategy, and a plan to actually implement it, it’s very unlikely that you will get very far.
Below I will discuss four popular false myths around strategy which are quite dangerous for startups. I will also share some tips that will help you put your strategies to work. Some of the lessons we have painfully learned the hard way.
#1 Startups should not care about strategy
A smart idea and a great team don't guarantee success, even if you are strongly motivated and have a ‘think big’ attitude. You need to take the right steps for growing your business. And, to be frank, a lot of luck. There’s little you can do for the latter, but you can do a lot for the former.
Startups need a strategy. The team is small and resources are scarce, so instead of struggling to do everything at once, you should focus on the very few things that actually move the needle.
“At its heart, strategy is about choice” Xavier Russo
Strategy, in the uncertainty-filled world of startups, means choosing a clear direction. This way, you focus and coordinate your team efforts towards a shared goal. Priorities are clear, so everyone on the team won’t just be busy, but busy doing the things that really matter.
So, here comes the big question: how to choose the right direction? As you may imagine, there is no secret recipe. The next best thing is the Lean Startup framework. A startup strategy is not the same as a big company strategy, and the Lean Startup is incredibly useful for providing guidance to a new entrepreneur, especially for the first critical steps, such as validating your idea and finding a proper market.
#2 Your vision is your strategy
It is true that a company’s vision can be useful for giving a general direction. However, it’s not the same as a strategy. Statements such as ‘To provide people with ultimate pizza experience ’ look nice on your website but they don’t tell your team what to focus on right now.
A very common problem in startups is that, since we want to realise our vision fast, we rush straight away to work at the tactical level. We spend a lot of energy and resources on things such as doing an A/B test of the landing page or fixing the SEO. Most of us can implement these tactics quite well after some learning, but they are going to be truly effective only if part of a bigger, coordinated strategic plan, which is often missing.
To recap, we can identify three different levels of detail when thinking of our startup, and we need to define all three for reaching success:
- Vision, which outlines the company’s final destination and values;
- Strategy, for setting the current direction;
- Tactics, the actions we take to implement our strategy.
#3 Strategy doesn't care about execution
Of course, you can just write down a list of big goals, without thinking about if and how you could reach them, and call this your strategy. This is actually what many CEOs and founders do. However, this would be a perfect example of what Richard Rumelt, in his highly influential book Good Strategy/Bad Strategy, calls a bad strategy.
Good strategy, instead, is intrinsically action oriented. According to Rumelt, a good strategy has three components (the kernel of strategy):
- A diagnosis that defines or explains the nature of the challenge;
- A guiding policy for dealing with the challenge;
- A set of coherent actions designed to carry out the guiding policy.
After you have identified the challenge (where should we go), you have to find a good way to actually overcome the obstacles (how can we go there).
“When strategies stay in the clouds, employees get lost in the woods” Christine Comaford
Strategies have no value if they don’t communicate your team what to do to execute them. Therefore, setting some big goals without a plan explaining how to reach them is a nice blue sky thinking exercise, but it won’t give your team clear guidance when they need to differentiate what is critical and what isn’t.
#4 Strategy is a once-a-year effort
Another common mistake is thinking that strategy and strategic planning are a static process. You make the big decisions for the new year and write them in a document, where they stay, well, until next year.
There are at least three problems with this approach.
First, the timeframe. Let’s leave the long-term planning to big companies. In a startup, it is much more useful to work in shorter-term steps, especially when you are at the very beginning and have to find your identity and your place in the market.
Second, your strategy is not carved in stone. Planning your strategy is a dynamic process that should be adjusted almost in real time. We can describe it as an iterative cycle: plan - execute - measure output - revise the plan. Rinse and repeat until you reach success.
No battle plan survives first contact with the enemy, said Prussian military commander Helmuth von Moltke the Elder. The same is true in business too. In a constantly changing environment, no plan can predict the future. So there are tremendous advantages in being agile and constantly collecting new insights for reviewing and updating our existing strategy.
Third, if the plan sits on a shelf collecting dust, then it’s absolutely useless. Your strategic plan must drive your and your team’s daily activities. This means that the plan should be appropriately communicated and shared with your team. And no, a shared document somewhere in an obscure folder in Google Drive is not sufficient. A good plan that really delivers is accessible, ideally always in front of you, clear, so it’s understood by everyone, and actionable, so your team will always know what to do.
Five ways to make your strategy work
- Think about your current situation and where you want to go. Think about the challenges, obstacles, and resources. If you use the Lean Startup framework, this will considerably simplify the process. If there are other decision makers, bring them in.
- Create a plan for the next few months (or even for the next few weeks) and write it down. Don’t worry if you feel that it’s not perfect, it will never be! Remember, strategic planning is an iterative process.
- Share the plan with your team. If possible make it visual, so it will stick much more than the usual long fluff-filled text document. If you all share the same space, draw it on a big whiteboard, otherwise use a suitable software.
- Start each week with a Monday meeting for reviewing and discussing your strategy. Track the outcomes and see how things are going. This way your strategic plan will always be up to date, and you will make sure that your team is on the same page, focusing on what’s really important for moving your business forward.
- Be open to change. If you collect enough insights suggesting that it’s time for a change, do it.
Do you know other false myths about strategy, or do you have other suggestions for creating a better strategy for a startup? Let us know at firstname.lastname@example.org or via our social media channels.
I am grateful to Xavier Russo for his feedback on a draft of this article.