Strategy framework - dave bailey

Dave Bailey proposes four questions to clarify your strategy:

1. Where are we competing?
2. What unique value are we bringing?
3. What resources and capabilities do we need?
4. How will we sustain our advantage?

It can be summarized as:

Our competitors today are [competitors and substitutes]. The environment has been characterised by [summary of Porter’s 5 Forces].

We realised that [unique insight]. That’s why we’re focused on [underserved niche of the market] that cares deeply about [specific needs] at [price point].

To that end, we decided not to offer [benefits competitors offer], but instead, we’re the only company that offers [unique value proposition].

We can do this because we’re building [strategic resources] and we’re developing [strategic capabilities].

Even if [biggest competitor] tried to compete with us, we have [one or more strategic moats]. We’ve already [proactive steps taken to build a moat].

Where are we competing?

• Decide what customers you'll disappoint so other customers will love you.
• It could be advantageous to define your customers differently from the rest of the market.

What unique value are we bringing?

You have to decide which benefits you’re willing to give up, so you can deliver something your competitors can’t.

1. Offer something differentiated that customers are willing to pay more for.
2. Have a lower cost-structure than your competitors.

What resources and capabilities do we need?

This can't be "best practices", those are table stakes and what everyone is doing. You need to decide what you'll do differently.

How will we sustain our advantage?

According to Hamilton W. Helmer in 7 Powers, there are 7 types of moats:

1. Scale Economies, where unit costs decline as volume increases
2. Network Economies, where the value of a service increases as new users join
3. Switching Costs, where the time, effort, and money required to change suppliers preserves the status quo
4. Branding, where an otherwise identical product generates more value by eliciting good feelings, or giving ‘peace of mind’
5. Counter Positioning, where incumbents won’t copy a business model due to anticipated damage to their existing business.
6. Cornered Resource, where a company has unique access to a coveted asset, such as IP, talent, or relationships
7. Process Power, where company organisation enables lower costs/superior product