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Business Strategy 101 With John Hale - The Strategy Guy

Business Strategy 101 With The Strategy Guy John Hale

We all know we need a business strategy, but a lot of time we don't have the time to sit down and actually make one.

John Hale, a renowned business strategist is going to be talking to us about how to make sure you've got the right strategy not only in business but also in personal life so we can achieve balance.

Key Points:

What is strategy?

• How would you know if you're being strategic in business?

How does leadership affect strategy, or do strategy affect leadership?

How do you make sure that your strategy is aligned with what you want to achieve in business?

How can you develop a strategic mindset?

What Is Strategy?

John Hale: Strategic thinking is the sort of thinking that we need to do when we're getting focused. We have lots of different thoughts. When we start to sort through the different ways we think about the world, we focus on an important aspect, or we come up with a priority for our thinking process, that starts to become strategic.

Basically, strategy is making sure you've got a list with the priorities of what's most important, least important, and how to fit that into your day and overall long-term goals.

I'm big on lists, and recently, I've decided that instead of just deleting something from the list, I'll put a line through it so that I can see that I've done them. At the end of the day, I know that I've actually achieved something for the day. 

John Hale: Lists are great. They help us knock off and achieve lots of things in life. If you put things down on a list, then there's more chance that they can get done.

Strategy is kind of looking at the list and getting rid of everything on the list except that one thing. Michael Porter, who is the father of Modern Strategy, said that the essence of strategy is working out what not to do. We can't really get the most important things done until we get rid of everything off our plate. Strategy begs the question: what are we going to do from the range of options available to us? The art of strategy is being able to formulate the options and then pick the right option.

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Strategy in Business

Anticipate and understand your customersIf you're a pie-maker and you've just decided to start your own business or maybe you've already got your own business, how would you know that you're going to be thinking with the right business growth strategies in mind and find that right option among all other options?

John Hale: A pie-maker, like most business owners, needs to think about the customer experience. What do the people who buy pies look for? People expect certain things. The sorts of pies that I ate when I was growing up wouldn't cut the rug in terms of some of the places you'd buy pies in Brisbane at the moment. The taste in pies has changed.

One of the most important strategic principles is to understand and anticipate your customers’ needs so that your product or service is meeting a need. In terms of a pie-making business, there are a number of ways a pie-maker could think to approach the marketplace. 

You could provide a low-cost pie and try to appeal to a broad market. The strategy involved investing in a capability that allows you to ramp up production so you can produce thousands and thousands of pies and have a distribution network so it could scale.

Or you could choose the differentiation approach and specialise in a particular type of pie for a particular niche segment of the market, like a vegan buyer. 

The other strategies have to do with how you position yourself in the market. With a choice to set up your pie shop next to another pie shop or somewhere away from the existing pie shops, traditionally, some businesses would not set up next to their competitors because the competitors will pinch their business.

Strategically, it actually makes a lot of sense to set up right next to the other pie shops. If you get three or four pie shops on the same block in a city or town, that becomes the pie district and everybody knows that if you want pies, you go to that part of town. It grows the size of the pie (no pun intended).

Did you know that you can utilise technology to better understand your customers? Let's talk. 

McDonald’s Strategy 

When McDonald's was introduced, that was definitely quantity over quality and then they've made this huge restaurant. Do you think that to grow and become able to sell everything in a more structured way was part of their strategy or do you think that just sort of changed as they grew?

John Hale: Mcdonald's is a fascinating company to look at because it's had to survive and reinvent itself in many respects. It's delved in chicken and nuggets, but it didn't quite go to the full KFC model.

To take our pie analogy a little bit further, what's interesting is that when you look around the world, particularly in Australia, you'll typically find a Hungry Jack's, a KFC and a McDonald's close to each other, and they're often not far from a petrol station. 

In Australia, we tend to clump fast food and take away with each other. When Hungry Jack's came into the marketplace and started offering healthier burgers or better value burgers, that affected how they played the game. 

In the United States 15 years ago, there was a company that came up with the fresh-and-go type of foods. At that stage, it was hard to find a decent bit of salad in most of McDonald's offerings so there's been pressure on them to be healthy.

Over the years, I've noticed that the size or portions of their burgers got smaller, which means that they're looking at the nutritional content and they're also looking at the calorie count. If you buy a burger that's half the size of one that was around 1983, you're not going to produce as many calories because you're only selling half the product. The price went up, quantity went down, but the packaging is probably nicer and the marketing is more impressive.

When they first started out in the United States, the real strategic value in McDonald's franchises was the real estate locations because they would position the stores in places that may not have been particularly valuable on the map from a real estate point of view. But by being there, McDonald’s attracted other players, which raised the value of the property portfolio, and that was the real value. Mcdonald's is the underlying value of the property assets, and that was an interesting strategy. It was sort of a Trojan horse strategy. 

Strategy and Leadership

Team and StrategyDo you think that leadership and strategy go hand in hand, do they overlap, or do they complement each other?

John Hale: A strategy without a team to implement it is worthless, so the strategy in itself is not going to add value. In most instances, it needs to be implemented by people, and people work well when they have powerful leadership around them. 

You need to have a good leader who listens, asks good questions, and can assemble a quality team that is diverse and competent. 

There's a whole lot of emotional intelligence and ethical considerations that a senior executive team needs to think about in terms of its mix. Once you've got the right mix of people on the team, coming up with a strategy and then implementing it is going to be far more effective.

Leadership and strategy are both important, and they can't exist without each other. 

Strategy and Business Growth

How do you make sure that your strategy is going to work with what you want to achieve and with the tools that you have at play? How detailed should you be going into something before you do it? 

John Hale: Let’s say you've developed something that you think the market will want. Does it add value? Can you charge for it? Can you attract customers with your new product or service? How close are you to your customers' needs? If you're developing products or services that consumers don't want, then you don't have a business, you have an idea.

John Hale: If your idea resonates with the marketplace, then you have a value proposition. However, that's not necessarily a strategy. That's just a business model and a value proposition. Strategy is typically something that needs to be addressed after the business is up and running for a little while.

1. Existence: The Early Stage of a Business

John Hale: When the business exists, the priority is to source a product and find customers. Those are the two things you've got to do well. And those are the two priorities for any business starting out.

2. Survival: The Next Stage of Business Growth 

John Hale: Once you have some customers and the ability to provide a product, you move to the next stage of business growth, which I call survival. Even though you've got a few customers and you're producing or sourcing a product, you haven't made any decent profit yet. Essentially, you're still starting out and you're still in survival.

John Hale: The survival stage is about finding more customers, new markets. It's about finding more efficient and better ways to source that product. You were still working with your initial value proposition. As a business owner, you're working in the business and on the business yet you've got your sleeves rolled up and you are in there on the tools, doing all that stuff yourself. You haven't got enough cash flow yet to step away and employ someone to do those tasks. 

3. Success in Business 

John Hale: Once you get to the third stage of business growth, which is success, the business is making a genuine profit. The business is making more money than that business owner would have made if they had been employed.

Now, you got to be careful because sometimes when you get to that stage of business, you're working 85 hours a week and you're making the same money you would have made working 35 hours a week. 

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4. Takeoff: The Stage After Success 

John Hale: When you've got a business that is profitable enough that you want to continue with it is called take off. That's where the business scales in some special way. It may scale in terms of production, market, range, funding, etc. It suddenly becomes five, ten, or a hundred times as big. 

Strategy for Business That Reached SuccessIn the takeoff stage, it's really important to have a strategy because once that business gets to that critical mass where it's making a profit, you've got cash flow. There are decisions that need to be made about which product we like to continue with. 

John Hale: Will we just keep our Wagyu pies and our vegetarian pies, or will we add other things like the lentil pie or the vindaloo curry flavoured pie? You have to decide which of the six pies you've developed you will scale up because you can't scale up all of them. We might have started out with a vindaloo pie that was very popular in Brisbane, but now that the business has grown, vindaloo pies only represent 5% of the market share. If we want to grow the business, we may have to sell that recipe to someone else or just discontinue that line. That's when we start being strategic.

John Hale: We might decide that there's an untapped market in Kangaroo pies. That's what we're going to invest in because we know that with the shortage of meat and the cost of cattle and the supply chain, there's an abundance of Kangaroos out there and we've discovered that it's really good for the microbiome and it's really healthy for us and tourism. 

5. Maturity of a Business 

John Hale: We might become the premium kangaroo pie company of Australia, and we might export Kangaroo pies around the world. We go from takeoff to the next stage of business growth called maturity. We now have 100 employees who bake five days a week, a dispatch bureau, and a group that negotiates with farmers and landowners around Australia to make sure we get our supply of Kangaroo. 

Like success and takeoff, maturity is a messy space. You have to get technology right, you have to get people right, you have to get strategy right. It's not possible to go through the take off stage on your own. As a business owner, you have to be able to delegate those things so you get a chance to work on the business instead of in it.

Strategy is really important in those third, fourth and fifth stages of business growth, not at the early stages. The early stages are about working out the value proposition, rather than the strategy.

If you're at the spot where you're starting to see some serious money turnover, it's probably the time that you get some serious strategies in place.

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Develop a Strategic Mindset

We’ve got these big companies like Blockbuster, Video Ezy and a bunch of large businesses that should have had people on to tell them the right direction to go or that they’re flogging a dead horse while they’re still doing it. 

John Hale: That's a classic example of not being able to listen to the whispers and not being able to see the future. Blockbuster didn't sense or see very well what was coming over the hill. 

How to Be Strategic

The Strategy Book by John HaleJohn Hale's book called The Strategy Book teaches how to cultivate a strategic mindset through a six-step process: 

1. Sense your environment

2. See what's coming over the hill

3. Connect with customers and stakeholders

4. Plan future value

5. Focus 

6. Move

Get The Strategy Book

If you want to make the strategic thinking process a little simpler, think of the following four questions:

1. What's really going on here? 

2. What are the options? 

3. What will we do? 

4. What do we do if that doesn't work?

John Hale: The first question is the most important, and this is where Blockbuster didn't really understand what was really going on. They thought the future would look like the past—why would people stream a movie when they can come down to the store and pick one for themselves? 

Encyclopaedia Britannica had the same problem. Why would you want to look up information on the computer when you can look at it in a book? You can have all the information you want in your living room in one of these beautiful books for only $3,000.

Encyclopaedia Britannica couldn't imagine Wikipedia. Blockbuster couldn't imagine all of the streaming options like Stan and Netflix. They weren't able to tell them stories about the future that could come true.

Megatrends and Radical Uncertainties 

John Hale: Megatrends are big forces that are here and are going to be here for quite some time. You’re going to have to get used to them and deal with them on an ongoing basis. 

Global warming is a megatrend. The world is continuing to get warmer and warmer. If you're operating without a strategy or you're operating a business that doesn't take that into account moving forward, you're not going to survive. If you're not doing the right thing by the planet, people won't buy your product or service.

It's important to understand what the megatrends are and shape strategy around them so that you can leverage the opportunity that comes from those megatrends. 

Radical uncertainties are things that we can't predict are going to happen. We don't want to put too much money or too much strategic effort into them because we don't know what they're going to do. We do need to hedge against them because we don't know when they're going to happen but they can happen. Examples of radical uncertainties are global finance and the fate of monopolies. Corporate lifespans keep getting shorter, and the market collapses. 

Blockbuster didn't understand that the internet was a megatrend. They didn't understand that in 10 years, everybody would have a device connected to the Internet. They didn't understand that computers and mobile phones would have the ability to play videos. 

Do you want to have more time to work on your business, instead of in it? 

Review Your Business Strategy Regularly 

Are there exercises that you can do to become better at strategic thinking? And is it something that you should be reviewing every day, monthly, or yearly? How do you know when the right time is to review your strategy before you conclude that it's not working.

John Hale: A good example of this is Nokia. Nokia would look at the future of mobile phone technology annually. On their drawing board, they had a lot of the functionality that we eventually saw on iPhones, but they didn't believe the market wanted it. They didn't believe the market was ready for it, but they already had the plans in the pipeline for the sorts of things that Apple came out with.

Nokia reviewed their strategy on an annual basis and they set their budgets on an annual basis. Apple understood that the release date for the iPhone was a month or so after they set their budgets for the coming year. They had set their strategy, they allocated their funds, they trained their teams, they worked out what projects were going to get funded and they started to roll out the next version of their phone. 

If Nokia has done their strategy on a more frequent basis, quarterly, for example, they could have responded quicker.

It's not practical to review our strategy on a weekly or monthly basis. If it's a highly volatile market and there's a lot of activity going on, lots of players, then you can review your strategy on a weekly basis. 

Strategy is something a lot of businesses don't do and they don't do well. Whether you do it every month, every quarter, or every year, the important thing is that you do it.

Ask the Strategy Guy

How do you know that you're going in the right direction? If you are looking to cultivate a strategic mindset, talk to John Hale. 

Ask the Strategy Guy

On Business Freedom

What is business freedom to you?

John Hale: Freedom means different things to different people. For me, business freedom is that I've reached a point in my life where, as an author, I get to communicate valuable things that I believe in and as a global keynote speaker, I get to travel the world and I get to meet fascinating people and every person I meet has something to teach me. Business freedom is the point where I can't differentiate between what's work and what's play, and when I'm working or playing, I'm actually doing both. 

I think if business owners don’t feel that they have fun when they're doing what they do, then they're probably not as free as they could be. I think it's being able to understand what is it in the world of business that I really enjoy that gets me into a flow state or a meditative state where whether I'm working or playing, it doesn't really matter. If you can find that sweet spot between work and play where you don't know which is which, then I think that's business freedom.

 

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