At its core, strategy is about choosing to focus all your activities on what you do best in a way that is valued by your target market.  Those that have worked with me have heard this time and again.

But study after study has proven that very successful companies (those earning higher-than-average margins consistently over time) focus intensely what they are good at–not sort of, not just a little bit, not when its convenient– but intensely. This level of discipline is what sets them apart.

When I work with companies that are unfocused, they are almost always less successful than they could be–and running the company becomes harder than it should be. When all of a company’s activities are not reinforcing its strategy–or a strategy is not clearly defined–complexity and inefficiency creeps into operations, margins begin to slip and competition seems to become more formidable.

So, how do you know if you’ve Got Strategy? The following questions might help.

1. Does your company offer something that is meaningfully different and unique that gives it a right to charge more and/or earn higher margins that your competitors?
2. Can you articulate the three to four inward-facing activities that you do better than any of your rivals?  Note: “Great customer service”, “High Quality Products”  or “Its Our People” dosen’t apply here as these are fundamental requirements for being in business.
3. Do the activities in #2 above directly support or “fit” your strategy in #1 above in terms of how you compete? (Example: Southwest Airlines’ set of activities focus on running a very lean operation which supports how it competes as a low-cost, no-frills airline. It does not have nor does it want the capability to serve meals because that does not fit its strategy.)

So, how did you answer these questions? A little unsure? Then you might have a tremendous opportunity to Get Strategy in 2012 by reconnecting to what you do best in a way that is highly valued by your market. Higher value means higher prices and operational focus cuts waste, all of which generates above average margins.

Happy New Year!

For small businesses (me included), its a challenge to stay focused on your strategy and say no to new opportunities that don’t fit. But very  high-performing companies do just that–in almost a fanatical way.

A recent piece by Booz & Co. —Turning Tight Money into Smart  Money— shows how limited funding can focus a company in much the same way as focused strategy can. Said differently, Booz & Co makes the case that business owners and managers invest more wisely when they have less money to play with. Companies that have limited funds tend to make more prudent  investments that lead to higher profitably when compared to companies that had  more access to funding.

So how might business owners use the results of this study?

• Intentionally keep budgets tight and allocated heavily towards strategic activities.
• Starve those activities that don’t support where you are headed or those that take you into unfamiliar territory.
• Or better yet, just stop doing those things that your gut tells you no longer matter.

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