In a nutshell 2: Good strategy, bad strategy
Good strategy and bad strategy – what’s the difference?
The entire webinar can be viewed here:
Good strategy, bad strategy -> clear to the team
Strategies are often kept in the company’s founders minds, those who create the strategy. The owner comes up with a vision and it’s very difficult to transfer this vision to the team, especially if the team’s extensive. If we have a team of several, dozen or even several dozen people, it’s relatively simple, but if it’s several thousand people, then it gets very tough.
Good strategy, bad strategy -> coherent, consistent, carried out
I’ve got a saying: any strategy is good if it’s coherent and consistent and is being carried out. This strategy doesn’t have to mean team or revenue growth, it may simply mean a stable income. Company stability may be the company’s main strategy. Stable annual, long-term income that builds a sense of security for the team and the founders. I know companies that function this way, so every strategy is reflected in the world that surrounds us.
Good strategy, bad strategy -> A small company
Even if the strategy is focused on pursuing a sole proprietorship (and such strategies are very trendy, it can be observed in the number of books on the subject or the activities of people such as Tim Farriss), where the company strives to remain a small organization and not to grow on a scale, but to build small teams, then this strategy is good.
Similarly, when it comes to product strategies that Re:work promotes, like, for instance, 37signals: a small team, but global products. A team of a dozen or so who build a dozen or several dozen products – the company doesn’t need to develop in the sense that the number of people is growing.
We, as a company, once defined ourselves at the beginning that we would like to remain a boutique company, with no more than 60 people in total. I know companies that have defined that they don’t want to grow over 30 people, they want to remain small teams. Simply put, for them it’s a value greater than the increase in revenues.
Good strategy, bad strategy -> A big company
On the other scale are companies such as Netguru, a company that has 500 people now and is one of the fastest growing technology companies in Poland. The company has a low margin on its services – a lot of people on board whose services are sold at a low margin, but the effect of scale works for them positively.
Small annual volume
Large annual volume
|High margin||Low margin|
|Premium product||Mass product|
|Example: Rolls Royce Phantom, price from $ 450,000, 4107 copies in 2019.||Example: Toyota, price from
8 091 277 copies in 2018.
A similar situation occurs when it comes to automotive products or companies that build highly specialized products and earn on economies of scale. The number of products manufactured and sold is important. The margin may be small, sometimes even a few pennies, but on a scale, when we sell many such products, our revenue is growing.
There are companies that produce 10 cars a year, but the margin on each car is huge, so it’s always a matter of choosing a strategy.
A good strategy, a bad strategy is a matter of definition – it’s important that it’s being consistently carried out and communicated.
Articles aren't enough?
Would you like to learn about the whole process and how we could carry it out in your organization?