How Effective Is Your Business Strategy?

How Effective Is Your Business Strategy?

“The most serious mistakes are not made as a result of wrong answers. The truly dangerous thing is asking the wrong questions”.

–Peter Drucker

Freelance Consultant Friend, if you are not familiar with Peter Drucker (1909-2005), please allow me to introduce you to but a small serving of his genius. Peter Drucker was considered the father of modern management. In 1971, he launched one of the nation’s first executive MBA programs for working professionals, located at Claremont Graduate University in Claremont, CA. From the 1940s until about 2002, Drucker produced groundbreaking work on business practice and strategy. He was the Big Kahuna and he wrote several Holy Grails.

Drucker was also known to be a serious skeptic of macroeconomic theory, believing that economists of all stripes failed to explain significant aspects of modern economies (housing bubble, anyone?). In other words, if the folks at the Federal Reserve had followed Drucker’s wisdom and reined in the Wall Street masters of the universe, the world’s economy would be in much better shape today.

Recently, I found the above quotation plus a list of reality-checking questions that every Freelance consultant and business owner is advised to ponder and answer at least once a year. The questions are quite simple and would appear to be no- brainers, yet they are surprisingly effective at revealing the business strategies that your management team would be wise to develop and implement.

The first two questions require your team to set priorities and the last two require that you assess the organization’s ability to focus on those priorities by choosing meaningful performance measurements.

1. Who is your primary customer?

It always comes around to identifying the customer, does it not? Identifying the natural customers for your products and services is the ultimate make-or-break realization for all business entities, whether one makes a few hundred dollars during winter by shoveling snow from front stairs and driveways, or a few million dollars from running a multinational corporation. Only when the ideal customers have been identified is it possible to develop a marketing strategy that is a guide for resource allocation (e.g., equipment or PR campaigns), sales distribution channels, product positioning and branding strategies, pricing, creation of a sales pitch, the networking strategy and so on.

2. What business performance variables are you tracking?

Whatever yardsticks you select to measure business performance, make sure they provide an accurate assessment of what is happening. A sharp bookkeeper or accountant, one with a background in financial analysis, can tell you which numbers on your profit & loss statement and balance sheet make sense for you to watch and why that is so. Freelancers probably want to pay attention to net revenue generated, new business, repeat business and the number of projects contracted.

3. What strategic boundaries have you set?

Implementing a strategy involves risk. Any strategy could lead the business to a place where you’d rather not go. Know your core values, priorities and preferences. Think about what your customers expect and will accept from your organization. It may be that you decide to take a pass on a golden opportunity because you just don’t want to offer that service or work that hard. As the late, great fashion arbiter Diana Vreeland said, elegance is refusal.

4. What strategic uncertainties are keeping you awake at night?

The game is all about whether your strategies work and for how many quarters will they work.Unfortunately, there is no silver bullet that can zero in on the weaknesses of your business strategies. At some point, customer needs and preferences change, technology marches forward, or some other event compels you and your management team to reboot dearly held business assumptions and approaches. In order to adapt successfully, it is necessary to constantly monitor the yardsticks established in Question 2.

Thanks for reading,