Deconstructing strategy

The days of preparing weighty business plans may be past (at least in most companies!), but the process of business planning remains as relevant as ever. A clear strategy will maximise your chances of success, and keep your organisation focused.

At workshops when I introduce strategy and a framework for applying it, the part that generates the most discussion and debate is usually when I ‘deconstruct’ the strategy of some well-known brands, explaining how their strategic choices impact the decisions they make and the actions they take. After all, If thinking never becomes doing, what’s the point?

This exercise  - as well as demonstrating the flexibility of the framework I recommend - allows company behaviour to be contrasted, and better understood in light of their purpose and aims.

In this article I deconstruct the strategic choices of two very different companies, but first let's look at the framework...

The strategy framework

I am a big fan of the ‘playing to win’ framework developed by Roger Martin of the Rothman School of Management and former P&G CEO A G Lafley. Why? Several reasons - firstly it is simple, as strategy tools should be. It asks straightforward questions that cut to the heart of what a company is trying to do. Secondly it is scalable - it can be used not only at the organisational level, but at at the divisional, team or even individual level. Thirdly it leads to action. Many people fail to translate strategic intent to doing, but this framework makes the link explicit, and encourages ongoing learning, experimentation and iteration in the same way as the lean startup approach.

The framework is an iterative cascade, based on five key questions:

  1. what are you trying to achieve i.e. what is winning?

  2. where will you play i.e. where are your customers?

  3. how will you win i.e. will you be lowest cost or differentiate? How can you do this better than your competition?

  4. what will your core competencies be i.e. what must you do excellently to be successful?

  5. what systems and processes do you need in place in order to know whether your strategy is working?

If you want to understand the model in detail I highly recommend you read the book. I will now focus on its application to our two subjects.

Please note that the strategies presented below are my personal view on these two companies, and have been prepared without their involvement.

Subject number 1 - the service industry giant

MITIE is one of the largest employers in the UK that most people have never heard of. EMploying around 80,000 people, MITIE provide a wide range of facilities and healthcare services to private and public sector clients across the UK. With revenues exceeding £2bn MITIE is a FTSE 250 listed entity and one of the largest players in the UK outsourcing market (disclosure - I worked for MITIE for six years between 2007 and 2013).

What is winning?

Becoming the UK’s largest provider of facilities management services

Where do they play?

Focused almost entirely on the UK market, MITIE serve a variety of large private and public sector organisations, with a long-tail of smaller customers

How do they win?

MITIE follow a lowest-cost strategy. Unusually in the sector they self-deliver most services (rather than use sub-contractors), which gives them complete control of their delivery model and avoids margin duplication. The lowest-cost model allows MITIE to bid aggressively on price for new contracts. Their scale and national coverage minimises the marginal cost of new work, as existing systems, structures and resources are leveraged

What are their core competencies?

Cost estimation, bidding/tendering, resource scheduling, activity planning, job tracking and management, compliance management

How do they know if they are winning?

Financial reporting, pipeline and bid management, customer job capture and tracking, compliance (QHSE etc reporting), performance measurement and customer report generation, employee engagement

Subject number 2 - the artisan challenger

Hiut Denim makes high quality jeans from its factory in Cardigan, West Wales. Founded in 2011 by David and Clare Hieatt of Howies fame, the company seeks to help regenerate Cardigan by utilising the skills of the local population to build a sustainable business making high quality jeans. Following the closure of a local jeans factory the area has a ready supply of workers with significant experience and expertise in jean production. As founders of the Do Lectures, the Hieatts are strong advocates of purposeful business, and are building a company culture and customer community based as much on passion and purpose as the profit required to sustain it.

What is winning?

Hiut wants “to get Cardigan making jeans again”, creating 400 local jobs in the process

Where do they play?

Predominantly through online sales channels, with some very carefully selected stores also stocking product. Targeted customer groups include creatives, entrepreneurs and ‘disruptors’ who are willing to pay more for quality and a product story they feel part of

How do they win?

Clear differentiation strategy through use of story, jean quality, lifetime repairs, history tag etc. all justifying the high price. Hiut are seen as one of the leaders of the ‘makers movement’, this aligning the company with the artisan community e.g. the Makers and Mavericks list.  The “do one thing well” message reinforces the positioning and the focus on their core product - great jeans

What are their core competencies?

Production quality and repairs, content generation, community building, material sourcing for limited edition product runs

How do they know if they are winning?

Budgeting and cashflow management is key (especially whilst company is young), effective CRM systems allowing long-term customer relationship, stock management, social engagement stats

Final thoughts

So there you have it, two very different companies, with very different goals and strategies for achieving them. Analysed through the lens of this framework you can see how these goals have driven core competencies and underlying systems to deliver.

This exercise is a great way to get underneath the skin of companies you are researching, or those you admire and whose strategy you may want to emulate. It’s a useful tool to help you understand why companies do some of the things they do.