By: Jeremy Turner, MBA – Founder & Managing Director of EPIC Mission, Inc.
Last week we discussed how empathy fuels great strategy by connecting you intimately with those you seek to serve through your organization. This week, we’re going to walk through the primary types of strategy your firm might adopt.
According to Harvard Business School professor Michael Porter, who may be best known for developing the Porter’s 5 Forces Model, there are really only three strategy options from which to choose. Let’s see if one might be a proper fit for your organization.
Option 1: Cost Leadership
By leveraging the cost leadership strategy, a firm is seeking to create massive efficiencies within their operations to produce high quantities of goods (products or services) that are then sold at prices which are considerably lower than their competition. We can look to Walmart as a firm that leverages this strategy.
In considering if this strategy is for you, determine if you wish to be perceived as the inexpensive option for whatever you provide. With this strategy, volume is the name of the game, not quality or relationships or brand loyalty. If you don’t care about image, can develop efficiencies to drive down the cost per good and offer your goods at a lesser price than your competition, this strategy may be worth considering.
Option 2: Differentiation
Here, an organization is operating within a niche market, having created a good that is not easily duplicated. Due to the unique nature of the good, the firm can enjoy a high markup, offering said good at a premium price. Not everyone can afford goods from this firm, and that’s the point. Consider the automobile brand Bugatti.
In considering a differentiation strategy, the first question to ask is whether what you offer is truly unique and if this difference is your secret sauce. Also, you must consider if you’re fine with fewer transactions at higher dollar amounts as compared to the competition. Just remember that the higher price will come with higher expectations around quality and service.
Option 3: Market Segmentation
Market segmentation is when a firm identifies and targets gaps in the marketplace where larger firms are not currently operating to solve needs for a defined subset of the population. Dollar Shave Club, for example.
For this strategy, you must determine if there is an unresolved problem in the market that is sufficiently painful for enough motivated buyers that you can sustain your firm. Empathy is an especially crucial skill within this strategy. If you can successfully leverage this strategy, you might just be lucky enough to celebrate a $1B acquisition the way Dollar Shave Club did in 2016 after just five years in operation.
Next week, I’ll wrap up this series by exploring the commonly held belief that developing a great strategy takes gobs of time, lots of money, and more human resources than you likely have available. Spoiler alert: this is a myth. See you next week as we get lean and mean with your organizational strategy.
Jeremy Turner is the Founder & Managing Director of EPIC Mission, Inc. a coaching and consulting firm for impact-driven entrepreneurs, nonprofits, and small businesses. As one of our valued referral partners, Jeremy and EPIC Mission, Inc. will be working in collaboration with MD Andersen, CPA, PA this month to bring you more information and topics to consider regarding strategy in the business world. To learn more about Jeremy Turner or EPIC Mission, Inc. please visit their website at https://yourepicmission.com/
You can also find his bio at https://www.mdandersencpa.com/community-partners/