Those who follow business strategy research studies will likely be familiar with a famous article published in Harvard Business Review titled “What is Strategy?” by Michael E. Porter. In it, Porter debunks the commonly held assumption that simply borrowing a competitor’s playbook, relying on operational effectiveness, or focusing solely on productivity gains are actually a strategy. Rather, Porter contends, strategy is a concentrated effort to align the following 3 principles:
- Create a unique and valuable position involving a different set of activities
- Understand the trade-offs you need to make – in other words, what not to do, as much as what you do
- Align a fit among all of a company’s activities
Central to Porter’s thesis is that the core principal underlying the 3 points above is to keep your customer’s needs in mind. In other words, know who you’re trying to serve, and don’t waste resources on trying to be everything to everyone.
Enter market research: Strategy requires research at every turn
Let’s start from the top and go through how adding market research will help you through each of Porter’s three guidelines. First up:
Create a unique and valuable position involving a different set of activities
What does Porter mean by this exactly? To illustrate, here are some examples from well-known companies that have built their companies around this principle:
- A distinct need for many customers (Jiffy Lube – just oil changes)
- Creating broad needs for a select customer base (Sephora does this by providing a plethora of beauty products for women willing to spend more)
- Catering to the broad needs of many customers, but in a unique market (Dollar General has been specifically strategic about their chain locations, catering to a rural market)
What type of intel do you need to determine if your business strategy is hitting on any of the three above distinctions? Here, bringing in quantitative market research is key. Using combined methodologies including competitive landscape studies, pulling financials, and doing a concentrated deep dive into the consumer landscape will be your starting point. You need to tackle what your service aims to offer (is it broad or distinct?), who your customer market is (broad or distinct?), and finally, where your market is (blanketing various markets, or focusing on rural or urban?). To complete the necessary due diligence in this stage, commission a qualified market research agency that has access to proprietary databases and can conduct the necessary B2B and B2C surveys.
Next up on Porter’s list:
Understand the trade-offs you need to make – in other words, what not to do, as much as what you do
To accomplish this next step when building your strategy, you need to understand who your customer is. You can do this through building personas, and the best way to build personas, is to spend time interviewing your customers. There are a variety of qualitative methodologies that are highly effective here, but make sure you focus on qualitative methods, and not quantitative – surveys will only give you scant data at this phase.
To truly understand who your customers are, hire a neutral market research firm that can get up close and personal with your customers. A combination of focus groups, one-on-one interviews, and even ethnographies will provide a treasure trove of insights about your customer’s unique preferences, where they shop, how they use products, and what they’re most looking for in a product.
This process is meant to tell you as much about who your customers are as well as who they aren’t. Remember to pay attention to the aren’t part. If it helps, make a negative list, showing what types of product / selling / messaging approaches won’t resonate with them. Keep this around your C-Suite rooms, especially as your business moves further along and your team gets tempted to expand. If you alienate who you’re selling to by diluting what you are, your business will suffer. (Don’t believe me? Look at Maytag as an example.)
Porter’s third and final maxim:
Align a fit among all of a company’s activities
Once you’ve settled on the above two strategic alignments (position, customer knowledge), your third task is to design your business around these principles and ensure that there is a fit emanating from each. Periodically using a market research consultant is good practice. Through exercises such as activity system maps, you can visually place each department’s activities in the framework of your strategic positioning.
Good strategy requires strategy – and some outside eyes
The final takeaway from our wise friends at Harvard Business Review is that to be strategic, you need to be, well, strategic about your strategy. Simply focusing on improving efficiencies, out-smarting or mimicking your competitors, or widening your customer base is not strategy, and, in fact, can harm your business in the long run. Finally, using outside consultants who don’t wear your corporate lenses can do wonders for helping your leadership team see new possibilities and to get unstuck when business gets stuck.