By Matt Pesce, Technology Executive Specializing in Strategy, Product, Marketing & Business Development
Before we get to the single most important question you need to answer when setting strategy, let’s start with a simple exercise. Imagine your boss (or your board of directors) instructed you to buy a car for the company. Easy enough, right? But should you get one of top 10 fastest cars in the world or a car with the best gas mileage? Or maybe one with the most seats? You get the idea — you can’t make a good choice without answering a fundamental question: What is the goal?
It’s the same when setting strategy. Is the goal for your company to grow as quickly as possible and expand market share? Or is the goal to maximize profits? Perhaps the goal is to maximize customer satisfaction and raise your Net Promoter Score. Each of these different goals would lead to different strategies.
It’s also critical to be specific about your goal. It’s not sufficient to state the goal is something generic like “growth.” To illustrate, complete this brief exercise. In the next 30 seconds, brainstorm five ways that you could make $10 in the next few hours. Go!
Ready? Typical responses include things like delivering lunches and washing cars. Those definitely seem viable for generating $10. But which of your ideas could you turn into a $1 million business? How about a $10 million business? I'm still waiting for the day when someone jumps up enthusiastically and runs out of the room to pursue their brilliant $10 million idea.
When setting your goal, be specific about scale and metrics. Is the goal to become a $10 million company or a $100 million company or a $1 billion company? A strategy that might be very effective for reaching $1 million might never work for reaching a bigger size. Is that target amount revenue or profits? Without establishing the goal with sufficient detail, you cannot identify viable strategic alternatives.
Strategy Comparison: Apple Versus Google
Let’s take a look at a real-world, high-profile example. Do you know which mobile OS dominates the marketplace? Is it iOS (Apple) or Android (Google)? It turns out that the answer depends on how you define the goal. Apple has the goal of maximizing profits from its mobile hardware products (such as iPhone, iPad, and watch). That seems to be working exceptionally well. According to Strategy Analytics, Apple Captured Record 91 Percent Share of Global Smartphone Profits in Q3 2016.
Google is taking a very different approach. Just take a look at www.apple.com and www.google.com and the difference is obvious. Apple is focused on direct commerce focused on its physical (hardware) products. Google is focused on leveraging the network effect to generate revenue — often indirectly. Google's strategy is to maximize Android market share with the belief more users will create the platform for more indirect revenue from things like targeted advertising. Google’s strategy is very effective, too. According to Statista, Android market share is approaching 90 percent. Impressive!
In business, there is not a single “right” strategy. In the case of Apple and Google, both strategies are immensely successful. Based on market capitalization, Apple and Alphabet (Google’s parent company) are the top two companies in the world. What’s important is that each company has a clear strategy for how they want to accomplish their goals.
Answering the question “What is our goal?” does not guarantee a winning strategy. But not answering that question almost certainly ensures a losing one.
Matt Pesce is a technology executive with expertise in strategy, product, marketing, and business development. With a broad background from startups to Fortune 100, he blends traditional business expertise with the innovative practices that are required to be successful in today’s fast-moving, customer-centric world. He has served a variety of industries including healthcare, IT, mining, ecommerce, entertainment, restaurants, and consulting. Matt is an advisor to startups and growth-stage, scale-up companies. He recently completed a yearlong sabbatical and is now looking for the next great opportunity in his career.