Who it's for
An owner with several directions that look equally reasonable, whose decision has been postponed for several quarters already.
Key idea
Strategy is the allocation of a limited resource. If it didn't force you to give something up, it allocated nothing and will change nothing.
Contents
- Why refusal is so hard
- Four tests before a decision
- Three levels of strategic choice
- The format that works
- When it's too early for strategy
- What to do this week
Take the self-assessment
Test your strategy with one question: what did it rule out? If there's no answer, the document isn't a strategy, regardless of its length, how well it's designed and how many people helped create it.
This isn't wordplay. Strategy exists only where resources are limited. If there's enough for everything, no choice is needed. But there's never enough, and every "yes" to one direction automatically means "no" to another. The difference between companies is whether that "no" is said out loud.
Principle
An unspoken refusal happens anyway, just haphazardly and in favor of the most urgent thing rather than the most important one.
Why refusal is so hard
There are three reasons, and none of them has to do with a lack of analysis.
- 01
Refusal creates losers inside the company
Behind every direction is a person who has been running it. Saying "no" to the direction means saying "no" to its leader. Companies avoid this by keeping everything and underfunding each one, so formally nobody lost.
- 02
Refusal pins down responsibility
While everything is being done, failure can be explained by a lack of resources. Once a choice is made, the result becomes a test of the decision's quality. That creates personal risk for whoever made the choice.
- 03
Refusal feels like a lost opportunity
Psychologically, a loss is felt more strongly than an equivalent gain. So giving up a direction with potential feels more painful than diluting it.
Four tests before a decision
Before adding a direction to the priority list, run it through four questions. A priority that doesn't pass all four remains an intention.
- 01 What will we stop doing in order to do this? If the answer is "nothing, we'll find the resources," no decision has been made.
- 02 Who is responsible for the result? For the result itself, beyond the execution. You need a person's name.
- 03 By what observable sign will we know within a quarter that we were wrong? Without a failure criterion, the direction will live forever.
- 04 What makes this direction specifically ours? If there's no answer, you're entering a competition in which you have no advantage.
Trap
The most dangerous answer to the first question is "we'll do it in parallel without distracting the core team." In small and midsize businesses, parallel teams don't exist: what becomes parallel is the owner's attention, and that's the company's scarcest resource.
Three levels of strategic choice
It helps to know at which level you're stuck. Mistakes at the top level can't be made up for by the quality of decisions at the lower ones.
Level Question Sign it's unresolved
Where to play Which segments, markets, products Customers are described as "any business that needs…"
How to win Why they'll choose us over the alternative The advantage is phrased in words a competitor could say
What must be true Which capabilities and resources are essential The plan requires skills the company doesn't have and has no plan to acquire
Most companies spend their time on the third level without having resolved the first. Hence the feeling that the strategy session was interesting, yet the next day nothing changed.
Related service: Business Model Review
When it's unclear exactly what the business makes money on and what its real advantage is.
The format that works
A strategy that fits on one page gets carried out. A forty-page strategy gets read once. The minimum working set:
- Three to five priorities for the year, each with an owner and a success criterion.
- A list of refusals: what the company deliberately won't do during this period, and why.
- Conditions for review: which events will make you return to this document ahead of schedule.
- One constraint that's considered the main one. One, not a list of constraints.
A strategy that doesn't change the order of actions next Monday won't change anything in the coming year either.
When it's too early for strategy
There are three states in which strategic work won't produce results, and it's more honest to name them before starting.
- An acute crisis: while the horizon is measured in weeks, strategic decisions are made blind. Stabilization comes first.
- Unconfirmed unit economics: choosing a direction for growth is pointless if it's unclear whether the business makes money on its current customer.
- No capacity to execute: a strategy without people capable of carrying it out becomes a source of disappointment and distrust of the whole exercise.
Related service: Strategic Planning
When priorities need to be linked to resources, owners and oversight of execution.
Related service: Express Business Audit
If you first need to understand where the main constraint lies.
What to do this week
Questions to ask yourself
Take the company's current list of priorities
- 01 How many are there? If more than five, they aren't priorities but a to-do list.
- 02 What did the company give up this year? Name a specific direction or project.
- 03 Does each priority have an owner named by name and a success criterion stated as a number?
- 04 Which priority would you remove if resources were cut in half? Why is it still on the list?
- 05 At which of the three levels (where to play, how to win, what must be true) don't you have an answer?
Materials that continue the topic
- The owner's glossary
- When the model stops working
