“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where—,“ said Alice.
“Then it doesn’t matter which way you go,” said the Cat
“—so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if only you walk long enough”.
-- Alice in Wonderland
And that is what happens to organizations that don’t have a good strategy – a long walk to nowhere.
A good, sound strategy is vital to an organization’s health, existence, growth and sustainability. Yet, even many senior leaders in corporations are often confused and frustrated in attempting to develop a good business strategy. The constant struggle is distinguishing between strategy, mission, vision, tactics, goals and values.
The American Heritage Dictionary defines strategy as “a plan of action intended to accomplish a specific goal”. But one definition that sticks out in my mind as simple, applicable and practical, is the one described by Michael Watkins, published in the Harvard Business Review Blog Network in 2007 (just goes to show how some things have more longevity than others): “A business strategy”, he said, “is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. A strategy is therefore about how people throughout the organization should make decisions and allocate resources in order accomplish key objectives”.
So strategy is about the how, not the why, what, when or why. And in order to fully understand the how, it is important to get a good grasp of the goal of every business.
The goal of every business is to create and increase shareholder value by growing profit or operating company income. There are generally three common methods for growing operating company income: 1) through acquisitions; 2) developing and launching new products and 3) reducing costs. While short-term profit is possible through strategic acquisitions and cost reductions (developing technical solutions that reduce costs of core products or re-engineering), a long-term, sustainable profit growth is clearly driven by revenue opportunities with new products. If a company puts too much focus on driving costs down rather than risking new product launch, it will become stagnant. And if it does not define its path for product development, it will under-perform over the long haul.
So if one agrees that developing new products to create new revenue streams is an important long-term driver of earnings growth, it is imperative to have a robust product strategy, as a subset of the overall business strategy that provides a clear roadmap, helps prioritize initiatives and drives decision-making,.
It is true that currently there are no unifying new product strategy “types”, and there is much debate about the relative strengths and weaknesses of each type. Some emphasize differentiation and market focus, others value being first to market, product leadership, and customer connection and still others prefer discovering a niche space and defending that space with high quality, better service and lower prices. But one thing is certain: according to the PDMA Comparative Assessment Performance, the best companies (those who had 7-10 times better profit result compared to the rest of the companies) drive new product development from strategy.