A Short Guide To Strategy For Entrepreneurs

A Short Guide to Strategy for
Entrepreneurs
October 17, 2017
ilyakalinin/istock
It sometimes appears that the traditional rules of business are being

upended by today’s mega-trends of multisided platforms, big data,
machine learning and AI, crowdsourcing, the internet of things (IoT), and
more. These trends have transformed the world of business immeasurably.
But they have certainly not repealed the timeless rules of strategy.
Yet for too many entrepreneurs, especially those steeped in tech and
devoted to product, strategy often seems to be an afterthought. Experiment
and create a great product, the thinking goes, then scale, and then figure
out the business model once you’ve succeeded. It’s true that nothing beats
having a compelling product that customers badly want. However, while
good products and good “shopkeeping” are surely good business, they are
no substitute for clear-minded strategy.
Savvy entrepreneurs and business founders might come across any

number of tool kits and frameworks — from jobs to be done to business
model canvases to disruptive business models and industry forces, all
while seeking blue oceans, and so on. Each of these has value and can be
the source of useful ideas, but each represents only part of what strategy
can offer.
The challenge of strategy is to develop an integrated view of the workings

of your business and how it creates and captures value within its operating
environment. So, rather than develop allegiance to one piece of the
strategy puzzle, founders are best served by familiarizing themselves with
the basic tenets of the field.
What’s more, my academic research on strategy in the contexts of

multisided platforms, crowds, big data, machine learning, and IoT shows
that it is only when timeless tenets are applied that entrepreneurs can
sensibly plot strategy. Today’s strategy is just too complex, dynamic, and
demanding to rely on partial storylines.
As a professor teaching strategy, most recently at Harvard Business School

and Northeastern University, I have tried to offer the minimum essential
explanation of an integrated view of strategy, to combine the best of the
many frameworks that exist, show how they relate to one another, and
distill the field to the essentials that entrepreneurs need to know to get
started.
I’ve published my notes to that effect in a hundred-page working paper,

and I won’t try to sum up the entire effort here. Strategy is hard work, and
there are no magic shortcuts. What I offer here is a starting point: the most
basic questions that every successful business must answer. Entrepreneurs
who design their business around these questions will have a leg up when
it comes to crafting strategy.
To begin, you can sketch out your answers to these questions on a single
index card.
What Value Are You Intending to Create, and for
Whom?
Customers buy products and services because they perceive value in them.
The first step toward a successful strategy is to clarify how you plan to
create value, and for whom. That means defining who your customers are.
That’s the first blank space on the index card above: Whom are you
serving? Your customers may be defined by any number of
attributes — age, geography, interests, the particular scenario or use case
they find themselves in, or any number of other things.
The next step is to define your value proposition, also known, among other
things, as a job to be done or a problem you intend to solve. That’s the
second space: What are you offering? This is an area of strategy that
greatly overlaps with other fields such as design thinking, and there is
endless reading and an endless numbers of frameworks and practices you
can refer to. Central questions to ask include: What dimensions of a
solution does your customer value — speed, cost, customizability? In what
dimensions is your solution better than the competition? Where is it at
parity? Where is it worse? (Remember, it is usually not possible to be
better than the competition on each and every dimension.)
You can think of the value you intend to create in a marketplace as akin to
a position on a game board. Your position is defined by the combination of
your customer scope and your value proposition. The best imaginable
position is to offer a product that is highly valued and demanded by
customers and sufficiently unique as to defy duplication by competitors
(more on that in a bit).
If you’re not sure how to answer these first two questions, think about your
customers and their preferences. What do they want more of, and what do
they want less of? For example, perhaps your customers value both variety
and lower prices. How do you compare with competitors along those
dimensions? Perhaps your value proposition is to offer the lowest possible
price, but at the expense of the variety offered by your competitors.
How Do You Plan to Deliver That Value?
In plotting your position in the market, defining how you’ll create value
and for whom, you also need to define your operating model. The
operating model is the set of choices and practices defining how to carry
out the business. This will typically imply a set of trade-offs in trying to
find a combination of activities that allows you to stake out your position —
delivering certain dimensions of your solution better than the competition.
This may be the most difficult of the questions listed above, since designing
the operating model means sorting out choices across the entire enterprise
that need to work together. A successful operating model is more than just
“how you make money”; it’s a set of decisions that together create more
value than each would on its own. It’s about doing things that reinforce
each other, to create a whole that’s more valuable than the sum of its parts.
To get started, think about the steps in your value chain, and list any key
practices that appear to distinguish your company. Then think about how
those practices fit together. Where are there complementarities, where one
activity is made more valuable by another? Finally, think about how these
practices connect to the position you’ve sketched out. How do these
complementary activities create value for your customers?
What Is Your Competitive Advantage — Your

Sources of Uniqueness?
The last question on the index card is perhaps the central question of
strategy: Why won’t you be copied? Even if you’re delivering a great
product that customers love and making money doing it, if competitors can
easily enter the market and copy you, economic theory suggests they’ll
drive your profits down to zero.
There are many sources of competitive advantage, but they come in

roughly two broad categories. Resource-based advantages are based in
unique assets or inputs that are valuable, rare, hard to imitate, durable,
and specific to your organization. Position-based advantages involve your
role and the position you occupy in your industry — things like scale and
incumbency or network effects and early entry. Think about the resources
you have that would be hardest for competitors to copy, as well as any
advantages that your position confers. What would keep another company
from replicating your operating model?
Understanding LinkedIn’s Business
The questions I’ve outlined leave out plenty of aspects of strategy. (Again,
have a look at the full notes for a complete account.) Nonetheless, they
offer a starting point for understanding a business and how it plans to
succeed. Consider how LinkedIn might have answered these questions: It’s
a multisided platform, so its index card may look more complex than most.
It has one value proposition for job seekers and another for recruiters and
consultants. Its operating model emphasizes free access and easy
onboarding, which in turn creates scale. Scale offers a competitive
advantage in the form of network effects. The more users LinkedIn has on
the platform, the more valuable it is for everyone. (In my notes you can see
an example where I’ve sketched LinkedIn’s answers, along with other
businesses.) The card suggests some fit between LinkedIn’s activities. It
has a theory of the value it will provide, how, to whom, and why its model
won’t be easy to copy. In other words, it has a strategy.
One big limitation of this analysis is the fact that this depiction is static: It
ignores how competitors react to each other and how industries and
technologies change. As you design your business, whether from the
ground up as an entrepreneur or by evolving a legacy operation, you’ll
want to go deeper into the field of strategy, to expand your theory of how
you create and capture value. But don’t lose sight of the fundamental
questions that underscore a business’s success: offering products and
services that customers want, selling them for more than they cost to
deliver, and having some plausible reason for why competitors can’t easily
copy you if it works.

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A Short Guide to Strategy for

It sometimes appears that the traditional rules of business are being

Savvy entrepreneurs and business founders might come across any

The challenge of strategy is to develop an integrated view of the workings

What’s more, my academic research on strategy in the contexts of

As a professor teaching strategy, most recently at Harvard Business School

I’ve published my notes to that effect in a hundred-page working paper,

How Do You Plan to Deliver That Value?

What Is Your Competitive Advantage — Your

There are many sources of competitive advantage, but they come in

Understanding LinkedIn’s Business

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