Strategy Achieves the Vision
FastTrac, Kauffman Foundation
On a bright day full of promise, a premier sculling coach took his team to a race. After weeks of dedicated practice, they lost. So the coach had them practice harder. They lost the next race. The coach used tactics to boost the team’s morale. They lost again. The coach was so frustrated that he wondered if he should look for a new career. In desperation, he had the boat removed from the water to examine it. The problem was clear. The boat was poorly constructed and was producing a strong drag on its forward movement. They had been trying to win the races in what amounted to a square boat.
Entrepreneurs are like the coach and need to pay attention to the fundamental design of their business. The boat is like a business strategy—the how to reach your vision. Everyone can be doing their best, but if your boat is not constructed properly, you won’t win many races. The right boat can carry you to the winner’s circle.
This module will help you examine your strategic direction. As you are planning your strategy, you will be asked to think about your competitive advantage, your business model, and your exit strategy. Your vision is more certain to become reality if you have a well constructed strategy detailing how your company will achieve its goals, compete effectively in the marketplace, and evolve with market changes.
Creating a business strategy and a plan to implement it is an iterative process. You start out with certain assumptions and, through implementation, learn which of your assumptions are accurate and modify your strategy accordingly. Goncalves found that PeopleAnswers needed to adjust its strategy based on slower than expected sales to its initial target market—recruiting firms. You will find that each time you analyze your business performance and fine-tune your strategy, the closer you get to the best strategy for your business.
A business strategy provides the foundation for your entrepreneurial venture. The strategy helps you achieve your business and personal goals, define your position in the market, and meet market needs. If you devote the time to develop a well thought out strategy, it will provide the direction you need to build these pillars of strength and contribute to your entrepreneurial success.
Achieve business and personal goals – The vision describes what you want to achieve for your business and for yourself. For your entrepreneurial venture to be successful, it must meet both your business and personal goals. Your business strategy should allow you to meet both sets of goals. After all, what is the point of achieving all of your business goals but feeling shortchanged on what you want the business to do for you, your family, or the community?
Meet current and emerging market needs – An effective business strategy helps the company meet current market needs and has the foresight to anticipate emerging or future needs. This is not always easy to do. You can get caught up in running the business and putting out daily fires. As you consider how to build market knowledge into a business strategy to help your business grow, keep the market's current needs in mind.
Maintain competitive advantage – Your chosen business strategy will make the most of what your company does best—its competitive advantage—and define a profitable position in the marketplace that will be sustainable over time. A company has built a competitive advantage when it accomplishes the following:
- Provides products or services deemed valuable by its customers
- Differentiates from other competitors in the market
- Exhibits expertise, processes, or formulas that are difficult for others to copy
New Strategy Creates Sales Momentum
As a start-up, PeopleAnswers, Inc. focused on selling its innovative software package for assessing job applicants to recruiting firms around the country. Although initial feedback had been enthusiastic, founder Gabriel Goncalves realized he needed to change his business strategy. With the slow economy in 2001, recruiting firms weren’t getting as many assignments. More importantly, they didn’t want to handle the assessing of the candidates. They preferred that their clients undertake that task.
Goncalves’s product, a software package geared to analyzing individuals’ personalities in order to determine the likelihood of their performing well in a job, was useful not only to the recruiters but also to companies doing the hiring. In addition, companies evaluating current employees could use the program (especially if they were preparing to lay off staff), and it might even be of interest to the job seekers themselves.
Which way to turn? After much deliberation, PeopleAnswers decided to market the software to companies looking to hire. They quickly ruled out the job seekers, because they didn’t want to handle 1,000,000 accounts at $19.95 apiece. They preferred 100 accounts at $199,500. In a tight economy, they thought companies would be less likely to focus on the soft issue of evaluating current employees, and they could not get too excited about making downsizing efforts the focus of their business.
Corporate hiring managers would be particularly interested in a tool that would help them recruit candidates who could perform like the best on their staff. They would be able to pitch their software as a way for them to decrease hiring costs, increase productivity, and reduce turnover.
As part of their strategy, they decided their product would be available by means of a password on the Internet rather than as a stand-alone software package. In turn, that meant they would license their software rather than sell it. They decided to target large organizations and offer a fixed annual license for unlimited use of the software, based on the number of employees in that organization.
Now they had to get the word out. The issue became how to do that with limited resources. Their strategy was to land some name brand accounts and then leverage the good press they received. The name brand accounts took a lot of work and entrepreneurial perseverance and the press coverage was a combination of luck, contacts, and a good story. By leveraging their brand accounts and press coverage via e-mail marketing campaigns, they were able to generate the sales momentum they needed to grow the company.
PeopleAnswers also implemented a channel Value Added Reseller program, targeting organizations that offer services which complement those PeopleAnswers offers. They considered, but ultimately decided against, building a large internal sales force. Instead, they began training independent dealers to sell PeopleAnswers software on an exclusive basis around the country.
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.