Bad news. There is a key ingredient that is sadly absent from about 90% of all business strategies and strategic plans.
I use the word sadly because businesses that operate without this ingredient perform far below what they are capable of. They waste precious time and resources pursuing opportunities with little chance of success and only marginal ROI potential.
Now chances are, this ingredient is missing from your strategy too. And if it is missing, and has not been discussed and debated as part of your strategic planning process, then you have a problem you need to fix.
The ingredient I’m referring to? A strong strategic position.
Over 2000 years ago military strategist Sun Tzu gave an insight into the importance of strategic position when he stated, “Therefore the skilful commander takes up a position in which he cannot be defeated and misses no opportunity to master his enemy.” (From The Art of War)
And, in a landmark article from 1972, strategy consultants Al Ries and Jack Trout wrote, “If a company has positioned itself in the right direction, it will be able to ride the currents of change, ready to take advantage of those opportunities that are right for it.” (From The Positioning Era Cometh)
As you can see, the concept of a position has been around for a long, long time – both in the military and in business. And as suggested, a strong strategic position can make defeat impossible and help a firm to take advantage of opportunities. A great place to be in, that’s for sure.
What then, is a strong strategic position? We’ll look first at strategic position generally, compare the differences between a weak and strong position, and then I’ll outline the key criteria for establishing a strong strategic position.
Strategic position defined
I define a strategic position as your business’s competitive status or standing. Stated simply, it is what makes you better than your competitors. Your strategic position most often starts with your product-target concept and how well differentiated it is when compared to the competition. The other big opportunity is when you can position and differentiate an entire business, thereby making the business the focal point of competitive advantage.
As well as being a focal point, you can also think of a strategic position as your “stake in the ground” that highlights your firm’s single, biggest competitive advantage – whether it be a flagship product, or the whole business.
Your strategic position is the springboard for your business, marketing and brand strategies. Which is why you need to get it right. And that’s why businesses who don’t get their positioning right end up wasting a whole lot of time and resources.
Types of strategic position
There are six main types of strategic position a business can adopt, and these are:
This is where you are positioned as the only provider of a product or service category, where you have entered a category or market first, or where your brand reputation is so compelling, you have what investment guru Warren Buffet calls a castle and moat business. A monopoly or first position is great, provided the market you’re serving has high growth potential, and that you execute your strategy quickly and effectively.
Early mover position
An early mover position is one where the market is in the early stages of a growth phase, which gives early movers the opportunity to establish and grow with the market. All attractive markets draw in competitors, which is why you must not muck around if you’re in this position.
As a market moves along the growth curve, market leaders begin to establish themselves. A leadership position is one where an established market leader has emerged.
In this position you compete head-to-head with other competitors, with price being the main determinant of a customer’s buying decision. There is little differentiation between products and the market is typically dominated by the largest competitors with the most resources and economies of scale.
Underdog or follower position
This strategic position is defined as one when a smaller competitor competes in markets similar to an established leader, but is not considered big enough to be a serious threat to market leaders. As a result, firms adopting this position are left alone by the big boys. Sometimes called a guerrilla or local market position.
Stupid head-to-head position
This is the silliest position to adopt. It is where a business with limited resources tries to take on an established incumbent in head-to-head competition. Don’t laugh. This form of positioning happens on a regular basis in the business world.
Strong vs weak strategic position
A strong strategic position is one where you are vastly superior to your competitors. It is where you own and dominate a market. And, through the eyes of prospective customers, a strong strategic position highlights the ways in which your business, products and services are superior to your competitors, and why are you are the preferred – or only – choice.
A weak strategic position on the other hand offers no such dominance. Instead you are seen as one of many in an ocean full of similar competitors.
With a weak strategic position there is little opportunity to get growth traction, and your brands have very little chance of standing out.
The criteria for creating a strong strategic position
A strategic position is much more than a product or service benefit. It is the heart of what a business is all about. It is the anchor upon which a firm’s activities are based. And for a strategic position to be considered powerful, it must meet all of the following criteria:
1. There must be a genuine competitive advantage. The product or service is the fastest, slowest, cheapest, most expensive, best-performing etc.
2. The competitive advantage must meet a genuine market demand. Put another way, there is a clearly defined target audience and the market is growing.
3. Your strategic position must have the right focus. It can’t be too broad-based, and therefore lacking focus. Conversely, it can’t be too nichey and over-focused, meaning that the market may be too small.
4. You have the opportunity to own the market – either by being the first or an early mover in the specific category you’ve identified.
5. Your strategic position allows you to take full advantage of your biggest strengths and competencies.
6. There must be a high barrier to entry. In other words, it must be something that competitors or substitutes find hard to copy.
7. The economics of the opportunity need to add up.
8. You must have the skills and resources to develop the position and subsequent strategy, build the necessary structures and systems, and execute.
9. The strategic position must be communicated simply and succinctly. This starts with concise vision and mission statements and follows on through to product names, taglines and all other marketing communication.
All the above criteria must be met or the strategic position and subsequent strategy will be weak and sitting on shaky foundations.
As stated above, all high-performing business build their vision and mission statements upon their strategic position, and many even integrate their positioning into their taglines. For instance:
BMW – The Ultimate Driving Machine
The Warehouse – Where everyone gets a bargain
Resene – The paint the professionals use
Buckley’s cough syrup – Tastes awful but it works
In all these instances the competitive superiority of the businesses are made very clear and succinctly, highlighting why these businesses and their products are better than their competitors’.
Relationship between strategic position, strategy, vision and mission.
An important part of a strategic plan is your vision, which is a picture of how your business will look in the future. However, many business owners do not get clarity around their vision, which often leaves it wishy-washy and fuzzy.
The best way to establish a clear, compelling vision and mission? Firstly create a strong strategic position. Put simply, you identify and establish your strategic position first, and then you craft your vision and mission around that. Then after that, you develop your strategy. So the process goes something like this:
1. Spark initial vision
2. Establish strategic position (after SWOT analysis)
3. Clarify and outline vision and mission
4. Develop your strategy
5. Build structure and systems
A strategic position is the foundation upon which strategies are created and executed. It sets the platform for the success of your strategy.
A quick check. Does your business have a clearly defined and strong strategic position? Do you discuss strategic position often in your strategy meetings? And is your strategic position highlighted in your strategic plan?
Congratulations if you gave a big “yes” to those 3 questions. If not, then it’s time for you to analyze, revisit and work on strengthening your firm’s strategic position.