Do you know the difference between strategy and tactics? Most leaders who think they are talking about strategy are really stuck in tactics. Many times it is hard to see the difference. A business owner called me today because he read “Mastering the Rockefeller Habits 2.0 Scaling Up” by Verne Harnish and was honest in admitting he was confused. When you think you are developing a strategy for your business, could you be confusing it with tactics?
Two Strategic Questions Every CEO Must Answer
Strategy is the plan of action to achieve a major or overall aim. While strategy can be used in many contexts, I recommend that you and your executive team be able to clarify your strategy from two vantage points.
- What is the critical strategy you will use to turn your business in to a cash-producing machine?
- What is the unusual strategy that you will use to cause customers to choose you over your competition without violating strategy number 1?
I recommend that each of these questions be distilled down to a one-sentence answer. The simpler you can keep your answer, the more likely it is that everyone in your organization can understand and execute on it. A good strategy clarifies the dos and don’ts. For example, a story Gazelles coaches use to help illustrate this point is IKEA. Their strategy could be described in the phrase “flat pack furniture”. They have chosen to ignore the desires of customers to have multiple, easy-to-access locations at which to shop, and IKEA also does not assemble or install their products unless you purchase those services at an additional cost. It is up to the customer to drive distances to get to their locations, complete the transport of the goods, assemble and install them. In exchange for these trade-offs, they have a significant price advantage over their competitors in the residential and small office furniture industry.
Tactics Are the How of Strategy
Tactics are the steps you take to achieve your strategy. The blessing (or curse) of the entrepreneur is that they are problem solvers. They get things done! However, many times they are not getting the “right” things done. Do you find that when you are having strategic discussions, you and your team very quickly jump to problem-solving? Too often this need for activity causes organizations to have to do 2 and 3 times the work required to achieve the desired outcome. Leaders will be proud of the outcome and not realize they unnecessarily worked everyone to death; including themselves.
So the challenge is to know which tactics matter and to focus them on the right problems, and that is why Strategy is so important. The Pareto principle (also known as the 80–20 rule, states that, for many events, roughly 80% of the effects come from 20% of the causes. Your job as a leader is to determine which 20 percent of the activities (tactics), when given the most attention, will have the 80% impact. This includes identifying those things you must “stop” doing.
Many companies achieve their numbers and not their plans. We can maximize your team’s business strategy. Contact us for a free consultation to learn how Business Coaching can help your organization, or check out the testimonials page for stories from other leaders and organizations we have helped.