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Many SMEs mix up strategic positioning with operational effectiveness. They think once they are effective with operations, then they're strategically positioned. Not true. While one can make you become the SAME as your competitors, the other makes you DIFFERENT from them. Thread.
First, what is Strategy? I know many business books and MBA texts give very fancy and complex definitions to strategy, but as I always do, I'll keep it simple. SMEs don't need complex stuff. Strategy, in simple terms, is how you can drive your business from point A to point B.
What it means is that you have to first identify and articulate what you want to achieve with your business, i.e. your vision (point B). Point A is where you are today. Every intentional or calculated plan that takes you there is your Strategy. Bear in mind it shouldn't be RIGID.
What this means is that everything from how you sell to how you produce (operations) is part of your strategy. Both are essential for competitiveness. It ensures you produce & sell cheaper. But operational effectiveness alone does not guarantee strategic positioning. I'll explain
What is Operational effectiveness? It is simply how your business conducts its activities in a better, faster way than the competition. So if you are able to be more efficient at what you do, you get better than the competitor and are able to deliver value at a lower cost.
So why then doesn't this necessarily give you greater competitive advantage or strategic position? Because the standards, tools and techniques required to be operationally effective are not exclusive to ONLY YOU. They are global approaches that have been applied by thousands.
Any business can adapt these and achieve same results. Infact, as all players/competitors in a given industry emulate those same approaches, Harvard Business School calls it productivity frontier - where everyone has delivered the maximum value they can deliver at a given cost.
The more operationally effective businesses get, the more they look alike with the competitors in their industry. So at the end of the day, it's difficult for the customer to pick what separates you from your competitor. It's called competitive convergence. Just look at telecoms?
So being operationally effective doesn't necessarily set you apart. Strategic positioning is what does - put simply, it's doing things DIFFERENTLY from others. It is about differentiation - what differentiates your brand? How, where, when, why do you sell that varies from others?
For example, you can decide to start a cleaning business and join the market competing for business with thousands of other cleaning businesses - selling to families, offices etc and being as effective at it as possible, as everyone else does. So nothing distinctly separates you.
The dynamic immediately changes if you choose to start a cleaning business for ONLY widow(er)s, divorcees or single parents, etc. You've created a distinct market and separated yourself FROM the other thousands of cleaners. Your ad or business will likely attract interest faster.
You can then gather info on specific challenges/issues that such people have and customise your cleaning business to meet those requirements. You see, so while you are still in the same industry & adapting tools to make your business operationally effective for profitability...
You have strategically positioned yourself for long term competitive advantage by DIFFERENTIATING your services and carving a niche without even changing the nature of your business. So start thinking, now that I am effective, how can I position strategically? What can you do?
We’ll be teaching this and so many other things at the #LagosSMEbootcamp season 3 on July 25. Some of the finest experts will be teaching strategy, finance, corporate governance, brand, etc. to help your SME. It is free. Visit http://www.lagos-sme.com to register.
Don’t miss out on this edition. It’s bigger, better and for the first time, it’s virtual! Limited slots available. #LagosSMEbootcamp 3.0
