The words strategy and entrepreneurship aren’t very often heard in the same sentence and there is a good reason for that, they are complete opposites. Strategy is a plan that centres on a clearly defined path while entrepreneurship is the embodiment of opportunism, which requires new ventures to continually pivot in the direction of the market, as and when it shifts. But even though they are very different, the two need one another. Strategy without entrepreneurship equals planning with no action. Entrepreneurship without strategy equals chaos.
Entrepreneurs need to realise that rather than squashing entrepreneurial efforts, effective strategy actually encourages entrepreneurship by identifying appropriate boundaries in which to experiment and innovate.
Below are 7 things that strategy can help you with as an entrepreneur.
1. Choosing a feasible opportunity
A meticulous strategic analysis can help you to determine successful markets from ones that only offer the illusion of success. This is a critically important step to follow as many businesses have failed because they didn’t do the analysis and chose the latter. Markets who promise the illusion of success are typically low barrier to entry businesses, which unfortunately opens up the door to anyone with an even remotely similar idea to yours. Allowing them to launch their business and flood the market with too much supply. These types of businesses are short-lived and in the end, no one makes money.
Another mistake is entering a large market without investigating first whether you can build a sustainable competitive advantage in it or not. It’s better to go after several smaller, less risky opportunities that can (when combined) contribute to a successful business in the long term. Doing the necessary market research can save a business from going down the wrong path.
2. Opportunity Cost
As an entrepreneur, learning that the opportunity cost of doing A means that you can’t do B early on is an invaluable lesson, especially when running a resource-constrained business. In addition, every choice you make, whether A or B, will create a completely unique path coupled with a different outcome and unexpected consequences. It is for this reason that you can’t merely do A now and B later. Circumstances will change down the road. Good examples of this include, competitors launching their own version of your product or service, suppliers committing to other clients and potential customers being influenced by the competition. Every choice you make is an irreversible one and a rejection of something else.
3. Gaining clarity
There is no doubt that all entrepreneurs suffer from a lack of money, talent, intellectual property, distribution channels, etc. at one time or another and that acquiring additional external resources will solve half of those problems. But it’s just as important to make sure that internal resources are being conserved and directed as well. The business must make good use of the resources that it already has in order to thrive. This kind of thinking is what strategy is all about. It helps you to get clear on what not to do as well as on what to do. It also provides general direction and agreement within an organisation.
Strategy lets employees be creative and experiment while making sure that they remain on the same page and follow only rewarding opportunities.
4. Setting boundaries
Entrepreneurs need to make sure that their scarcest resource (people’s time) is spent on tasks that are business-critical. Unlike a start-up, an established business will have parameters put in place by design, per department to help ensure consistency among any initiatives and innovations. A new business, however, often lacks those departmental parameters which makes it critical for entrepreneurs to set boundaries.
5. Staying focused
Businesses who lack boundaries often spread themselves too thin by trying to do too much all at once. They don’t concentrate their available resources and end up losing valuable business within their niche. As an entrepreneur, becoming seduced by too many opportunities will make you lose focus and your employees will start to compete for resources which will ultimately inhibit growth.
6. Keeping communication open
Start-up founders who have a small team will be able to speak to employees directly and coordinate work activities via a daily meeting, but when the business becomes bigger, its a good idea for the founder to put project managers in place to effectively manage employees. This will ensure a strategy that allows a leader to empower all employees while avoiding duplicative efforts and conflicting agendas. An aligned strategy will also ensure that every aspect of the business is designed in a way that supports the business’ culture and values.
7. Making an investment
Once an entrepreneur has decided on which opportunities to pursue, they must commit to the necessary investment needed for success. Tests and studies should be conducted to minimise risk and maximise value. It is rare, but sometimes an investment must be made without a guarantee of return or the ability to be tested in phases. In those cases, it’s advisable to perform a careful study and analysis before going ahead. The investment must also be a strategically good fit.
