The big picture on strategy: 3 situations when tech leaders need one

Effective leadership goes hand-in-hand with strategy.

How many times have you encountered business leaders who struggled to communicate strategic priorities, behaved “opportunistically” without pursuing a clear direction, and, when asked to describe the long-run vision for their organizations, gave generic and broad answers?  

During my 15 years in tech, I’ve dealt with such managers time and time again. I found that “opportunistic” executives without a clear strategy and thought-through operational plan can hardly earn the respect from employees and stand little chance in encouraging performance. 

► Here I’d like to briefly look at the three (3) hand-picked business situations commonly faced by Ukrainian tech leaders to illustrate that strategic thinking and formal planning are essential ingredients of effective leadership and they ought to be prioritized in the management’s agenda.

But let’s first start with definitions…

What is a strategy and why good leaders need one? 

Business strategy is a set of goals a company chooses to focus on and takes collective actions to achieve. 

► Classical strategy development is a process of designing the VALUE PROPOSITION and GO-TO-MARKET to satisfy the needs of the TARGET clients better than competitors. 

► Depending on the particular business challenges faced by a business, there exist uniquely different strategy types that a company needs to focus on to succeed.

Picture 1. A business model and common strategy types

To illustrate the point, I’d like to make an example of one of my prospective clients – a leading  IT  services company that has been looking to grow profitably faster than the market. The company has requested help with facilitating planning sessions, building executive consensus, developing the growth and operational game plans. Below is a fragment of the performance driver tree prepared for this client that embeds a number of strategy types –  from Market Strategy to Customer Segmentation Strategy to Distribution & Sales Strategy to name a few.

Picture 2. Growth strategy tree for a Ukrainian IT company

For a typical tech company, a strategic masterplan is formulated at three levels, namely, the Business Model (to define all the elements of a business model), Organizational & Financial (to convert ambitions into organizational reality), and Functional (realize goals and objectives).

► Good leaders use the established planning frameworks and methodologies for planning. They leverage strategies to set the direction and establish priorities for their organizations, teams, and individual employees. They communicate them widely and frequently to drive focus, establish goal alignment, and set performance expectations. 

3 usual business situations when tech leaders need a professionally crafted strategy

Let’s review the three selected business situations commonly faced by the Ukrainian tech leaders and explore Business Model and/ or other types of strategy in play.

Situation #1  “Need to define a business”:

This is a classical situation when a company led by a talented non-business founder has reached a critical mass, however, a leadership team inadvertently delayed formal “definition” of a business (purpose, aspirations, goals, etc.) and the implementation of a formal planning process.

Solution brief: defining business and establishing strategic planning involves solving for all three levels:

1️⃣ Business Model Strategy: define all the elements of a business model and focus on long-term (3~5 years) customer value and differentiation;

2️⃣ Organizational Strategy: forecast financials, allocate resources and capital, and determine company wide-initiatives; 

3️⃣ Functional Strategies: define functional goals and initiatives that need to be reviewed annually with quarterly and monthly adjustments.

Situation #2 “Need to find the path to growth”:

This is a typical situation for top-tier Ukrainian IT services companies that are looking for new sources of growth – organic and inorganic – and have the ambition to enter new markets, expand their share of a market, or share of a customer.

Solution brief: developing a growth plan involves the analysis of all paths to growth and choosing a subset of options that drives the most value. 

1️⃣ Business Model Strategy: improve/ optimize all elements of a business model that affect growth, focus on maximizing existing clients, attracting new clients, pursuing innovation of product-service mix, and/ or expanding geographically among other strategies.

2️⃣ Organizational and 3️⃣ Functional Strategies: commit to a growth strategy, focus, and align the organization to execute.

Situation 3 Need to react to a worsening macro situation or industry dynamics

This is an ongoing situation when software products or IT services companies become severely affected by the disruption to the core clients/ markets from recessionary pressures and changing client behaviors.

Solution brief: Define strategic crisis response, improve business resilience, and cash position. Solve for all three levels of strategy:

1️⃣ Business Model: analyze the impact of a crisis on all the elements of a business model, reduce negative effects, and capture new growth opportunities brought by a crisis (or the pandemic); 

2️⃣ Organizational & Financial: assess the mid to long term impact on operations and build an adaptation plan for all the primary and secondary activities. 

3️⃣  Functional: take actions to increase efficiency and optimize cost base using the latest economic outlook; manage the change through regular and open communication.

Conclusion

Strategy is about setting goals and mobilizing resources to achieve those goals. Strategy development rests on well established planning frameworks and methodologies. If created professionally, the strategy helps motivate the workforce, guide decision-making for resource allocation, and build strategic alignment, thus making it an essential ingredient of effective leadership in tech.

Of course, the mentioned three business situations are just three of the many that require (and even scream for) effective strategies. I have no doubt there exists a strong need for a professionally crafted strategy in the tech community.  Beggs a question, why hasn’t a formal analytically designed strategy yet been prioritized in the management’s agenda? And why tech companies are still quite reluctant about hiring consultants?

Prepared with love for the Ukrainian tech community.

Konstantin Besfamylnyi, Founding Partner at Very Good Advisors (VGA)

welcome@verygoodadvisors.com

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