Business strategy is about focus and choice. Strategy answers the question, what will we choose to focus on and what will we choose not to focus on? The struggle that many organizations deal with when trying to think strategically is a fear of bypassing any business opportunity. But not every business opportunity is a good opportunity. By failing to focus, the organization spreads its limited resources too thinly. Business strategy, when defined well, forces the organization to focus its resources on the business opportunities that are expected to provide the highest leverage, generating greater returns on the investment made.

One of our early consulting projects was with a manufacturing company that had been acquired by an equity fund. The owners brought us in to help the operating company define a growth strategy. When the owners described the company, they referred to “valuable, proprietary technology.” Their description was hard to understand but on my first visit to the company’s shop floor I saw this manufacturing process. To me it seemed “proprietary” as I had never seen or heard of their process elsewhere in their industry, but it was not “valuable.” In fact, it was a legacy manufacturing process. The business had its roots as a startup serving very low volume applications. This particular process had been “valuable and proprietary” when the company was a startup and trying to grow to $5million. But they were now a $50million company tasked with doubling again in size. This legacy manufacturing process was still in use serving a small percentage of their customers and applications. While it only represented a small portion of business, it required an inordinate amount of organizational energy to keep the process running and to serve these low-volume customers. In fact, it took so much energy to serve this small segment of business that they could never find resources, especially the energy, to achieve their objective of growing to $100million. In developing a strategy for growth, they were forced to make a choice.

Business strategy defines where and how to compete. A successful strategy requires making choices about where, in other words, with which products, in which markets, for which customers, will the organization serve. It also requires choices about how to compete, in other words, at what level of pricing, with what combination of products and services or features and benefits. In order to provide this choice of particular value offering, the organization needs to make choices regarding how to produce and deliver, in other words, with what manufacturing processes, at what level of integration, at what level of quality, etc. Strategy, then, describes the choices made regarding the value offering and the customers to be served.

Many organizations struggle to make these choices. They fear that, by focusing on the highest and best opportunity, they bypass other opportunities and, therefore, miss out on sales revenue opportunities. But, by failing to focus, the organization dilutes its potential to maximize return on investment. By failing to focus, companies fail to maximize efficiencies in production and confuse the organization and the market.

On the other hand, a strategy that has made clear choices provides direction for the entire organization. The engineering function knows what the product should and should not contain. Operations can optimize their manufacturing processes. Sales and marketing can identify the right customers and communicate the right message that responds to the needs of the chosen market segment. While the organization may bypass some sales revenue, the return on sales and return on investment is maximized when the organization has a clear sense of what it is, who it serves, and how it provides value.

Does your organization’s strategy have the clarity to identify the right focus and choices?