What strategic decisions look like

Most companies fall into the “do-it-all strategy” trap. Failing to make choices, and making everything a priority. The result is underperformance and employees lack of beliefs that their leaders truly want them to act strategically.

For employees strategy can look like a black box. They are thinking: “Leaders have spent more than 3 months to come up with that? I can’t even understand what our strategy means!”

But defining strategy is "simple". Strategy is about making choices. A company must choose to do some things and not others.

In Playing to Win: How Strategy Really Works, Roger Martin describes two important decisions that leaders need to make:

• Where will we play: Which customer segments, channels, product categories, and geographies do we serve?
• How we will win: Do we compete on low cost or differentiation?

The story of Star Laundry is indicative of what a good strategic decision looks like.

Yaakoub Hijazi took over his family commercial laundry and dry-cleaning business when his father died. He faced two strategic problems: the business was on the brink of bankruptcy and laundry is a cutthroat business, price-cutting to gain market share is rampant.

To save the business, he first focused on Where to Play decisions:

• Product categories: cut the dry-cleaning business.
• Customer segments and geography: large and luxury hotels in Manhattan, where occupany rates are high and steady.

These decisions allowed him to decide on How to Win:

• The selling point of Star Laundry is quality, not low cost.

By focusing on quality and on large and luxury hotel it allowed to set rates in the mid-to upper range while maintaining profitability. Furthermore, it protected Star Laundry from pricing pressures and enabled them to create delivery-route efficiencies. The Where to Play and How to Win choices paid off as the business grew to $70 million in revenue.

Hijazi story is a reminder that if you’re going to pursue a strategy, you must be willing to make hard choices and act as if you truly believe in your own strategy. The greatest value of a leader is in ensuring that the strategy is implemented. Executing a strategy takes courage. You must be willing to practice what you preach, when it is convenient and, most importantly, when it is not.

And yes, it means there is often a choice to be made between strategy and short term cash.