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Wednesday, January 15, 2014

How to Formulate Strategy for a Start Up Organization 01-15


There are excellent articles on business promotion, marketing, and sales strategies. However when it comes to strategic planning for running an enterprise especially in the small and medium scale sector.

The entrepreneurs are often found groping in the dark. The purpose of this article is to uncomplicate this complicated process and present it in an easy to understand “How to” format. This article is positioned for an entrepreneur with some management education or background running an enterprise or managing a startup.

The best practice is not often the best strategy.

Strategy is a way of thinking, not a procedural exercise or a set of frameworks. To stimulate that thinking and the dialog that goes along with it, it is essential to design metrics based on sound and practical parameters, and follow a set of action oriented steps aimed at helping executives assess the strength of their strategies. It is imperative to design steps focused on testing the strategy itself (in other words, the output of the strategy-development process), rather than the frameworks, tools, and approaches that generate strategies, for two reasons. First, companies develop strategy in many different ways, often idiosyncratic to their organizations, people, and markets. Second, many strategies emerge over time rather than from a process of deliberate formulation.

How to go about it?


  1. 1
    Understand strategy and its importance: You need a strategy that beats the market realities. There are certain common denominators for all the companies that operate like customers, suppliers, competitors, and potential entrants (competitive products). Now each of these try to demand and command attention in furtherance of their own cause. All these also can work towards reducing the gap between the capitalinvestment and returns (profit/loss). It is prudent to manage these denominators in a way that reverses the trend and makes returns, a healthy multiple of capital investment.
  2. 2
    Identify the source of advantage and exploit it: There are many sources of advantage for an entrepreneur -- two of the most important being, location and special capability. Now these are scarce commodities and any strategy plan conceived around attributes puts the organization ahead of the rest of the competition and positions you along with the best of the competition, and makes success that much less complicated.
  3. 3
    Position the organization appropriately: Focus on the markets and the marketing factors that synch with the nature, culture, size and technological advantages and constraints. Determine and discriminate between the markets while allocating funds. The strategy should reflect a clear understanding of markets and should result in intelligent defining of the segments that could result in refined resource allocation. This should of course be preceded by microscopic market research at granular level to see direction of trends in those markets.
  4. 4
    Do not follow the trends, but set one: Far too often it has been observed, that the strategies are woven around the existing market trends. This is considered a way of playing safe, but how safe it is, is the question. The word “trend” itself denotes a temporary existence and ease of replaceability (imminence of change). The strategy should be to peep into the future and identify what could be tomorrow’s trend. Identify and formulate the strategy accordingly, or better still plan a strategy that could make you a trend setter.
  5. 5
    Base your team strategy on privileged insights into futures, not on past history: It is a common practice, to collect heaps of information on the history, do some arbitrary interpolation or extrapolation and then base team strategy on this data. This will no doubt allow your team to sustain past commitments without losses -- but if growth is your objective and market leadership the ultimate aim, you'll need to have an insight into the future. A glance into people’s pulse regarding what they have versus new things they would like to have -- gives a fairly accurate insight into the future. It pays to organize frequent market research (controlled advancements are not moved forward randomly). With the availability of so many social media platforms, it is now easier to gauge people’s aspirations by seeing and assessing interests and frustrations in your network.
  6. 6
    Plan to enable success, but respect the glorious uncertainties of the market.An all weather strategy often keeps you always afloat compared to one planned for normal (current) market behavior. Planning for the event of a failure (such as maintaining liquidity by renting or leasing versus owning capital assets) is always better than failing to plan.
    • Uncertainties of the future can be classified into four levels.
      • Level one gives a fairly clear view of the future, and an inkling of what to expect. Level two is a little more hypothetical about the action and outcomes, but rather concrete expectations. Level three works on the law of probability for likelihood of returns. Level four represents total ambiguity (on a hunch for example) about the outcome and delivers shockers.
      • A formulated strategy can reasonably be expected to provide for the first two levels. Strategy for the third and fourth levels depends upon various factors, and should be best left to the ingenuity of the entrepreneur and enterprise.
  7. 7
    Stage your strategy to have a correct balance of commitment and flexibility:Commitment (of resources) and flexibility (variations) are inversely proportionate and more often than not, they are malefic to each other (jumping in contravenes edging in, one toe at a time). It is all about trade-off between the two, and success depends on the timing and intuition. If it is a leap in the dark, how you land your market for your new product depends on your expertise and experience in creating a new markets -- or vice-versa.
  8. 8
    Make your strategy to be understood and "bought into" by your team: Your planning should be done in such a way that it is backed by a strong conviction in the team who must deliver on the plans. This is possible, if you take into confidence the department heads during the planning stage, take their views, and where ever feasible implement them. Ownership at the planning stage naturally ensures ownership and informed support at the implementation stage.
  9. 9
    Translate your strategy into an implementable action plan. First, define clearly what you are moving from and where you are moving to with respect to your company’s business model, organization, and capabilities. Develop a detailed view of the shifts required to make the move, and ensure that processes and mechanisms, for which individual executives must be accountable, are in place to effect the changes. Quite simply, this is an action plan.
  10. 10
    Be sure that everyone knows the timetable for what to do and being proactive, not reactive. Be sure that each major “from–to shift” is matched with the energy and assets to make it happen. Since the totality of a major change often represents a corresponding organizational transformation, make sure you and your senior team:
    • Draw on research and experience offering solid advice on successful change management revealed by the large body of information of actual, successful change.
  11. 11
    Align your strategy to the required resource allocation: That is the final -- but most important point -- Most of the startups have to do heavy bootstrapping in the face of heavy resource constraints. The strategy should be aligned with what is available or what can be made available. to make sure your ongoing resource allocation processes are aligned with your strategy. This will help a seamless resource flow, when you do implement changes, you can take advantage of matching resources to the opportunities, in your new niche, product and market.
Make a draft first and critically evaluate it at every stage, make as many changes as possible every time based on cohort input. Continue to make and edit the draft even after you are satisfied as you must be open and inclusive to get department buy-in to own their project

Earmark specific time for strategy formulation and do not allow any physical or mental activity to interfere in expediting reaching agreement and acting on the strategy going forward.

Hold informal one to one meetings with the domain heads, casually discuss the draft and invite their suggestion. People are more forthcoming with their suggestions during the informal meetings than the official conferences.

Whenever you implement someone’s suggestions, make it a point to tell him that his suggestions have been incorporated. This gives him the satisfaction of being the author, and naturally implies that the person has to take the ownership for successful implementation of the strategy.

In case you are not in a position to implement the suggestion, please explain to him as to why you could not do it. Give a patient listening to his grouse. Allocate as much time as possible and needed to convince hm. Show how much you value him, his contributions, and the occasions you have implemented his suggestions. The other man will understand and appreciate your gesture of spending so much time with him, and explaining in detail your inability. He may be a little sad but he will still take the responsibility and ownership for successful implementation.

Try to keep the strategy within your resources right from the first step and do it for every step. It is easy to align the strategy to the resources bottom up than top down.

Evaluate obsolete, mechanical equipment and its concomitant processes versus new and emerging markets using electronic, Internet age devices; keep an eye on market movers.
  1. Video
  2. Business strategy Prof. Carlo Alberto Carnevale Maffe'. A firm's ability to survive and succeed in an increasingly competitive global arena depends on its ability to understand competitive dynamics and to enact strategic responses.

High level of secrecy is to be maintained during the formulation of the strategy. You have to ensure that the top managers involved in the exercise also maintain the confidentiality.

Do not be ambiguous about anything. Every piece of strategy has to be based on sound analytics, market realities.

Ensure that your employees get the strategy directly from your team. In case of indirect transmission ensure that there is no dilution at any level. Make senior team executives, to give mock presentations before you and the rest of your team, and ensure that their perceptions of the strategy are in synch with those of your whole team's understandings and intentions.

I I wrote this atilcle for wikiHow Click Here to view this and my other articles on wikiHow

Please also view the videos of the event  at IIM Ahmedabad titled "How Tp Start a Startup" Successful entrepreneurs like the founders of Naukri.Com. Taxi For Sure, OYO Rooms, and others spoke about their efforts, travails, tribulations , successes and failures in setting up and running their startups.  

Please view the videos here