Guest post by Tim Berry, founder of Palo Alto Software, entrepreneur, blogger, and business planner. The original post can be found on Quora: What makes a good business strategy?

What Makes a Good Business Strategy?

There are some obvious easy answers to this question if you take it from after the fact, looking at strategies that worked. From that point of view, a good strategy is one that worked. Every successful business had a good business strategy.

Would you agree that the great business strategies, the ones we all know that really worked, all looked obvious when you go back and study them after they made it? Federal Express, Google, Apple, McDonald’s … all a matter of focus, carving out identity and product-market fit … all obvious to all later?

During the several years that I was a VP at a firm called Creative Strategies I thought the name, with its reference to strategy, was a business problem. I decided strategy was like driving, and sex, in that everybody is sure that he or she is very good at it. That made it hard to sell consulting. Or so I thought.

But I think the real question is how to determine a good strategy before it’s executed. What qualities make a good business strategy?

You could start with this: strategy is focus. A good business strategy focuses on a well-defined target market, with a business offering that matches. Think of how MINI-cooper addresses a market subsegment with a specialized product offering.

Obviously there are whole careers spent on analyzing strategy, and people have PhD degrees on strategy. But I think it has to be simple to work. And obvious, afterwards, as if it were always there.

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I’m working on something I call IMO, which stands for identity, market, and [business] offering. They are three factors that work together (this is from Lean Planning Practical Business Strategy: 3 Key Factors).

• On identity: Every business has its core identity. How are you different from others? What are your strengths and weaknesses? What is your core competence? What are your goals? Take bicycle shop as an example. One shop was started by a bike racer who loved the sport and the bicycles with a passion. Her core competence is high-level bicycles, racing bicycles. She’s comfortable with the obsessed enthusiasts. Another shop was started by a couple with kids, who liked the bikes as a family activity. That’s identity.
• On choice of target market: Your identity influences your choice of target market. The bike racer focuses on attracting enthusiasts, offering expensive high-end bicycles and equipment. The couple focuses on attracting parents with kids, concentrating on medium-level bikes, trailers, and family-friendly accessories.
• On the business offering: Your business offering is your product or service. You can already see with the bike shop example how one shop needs one kind of inventory and the other needs a different kind. That’s strategy at work. Your identity influences your choice of market, which influences your choice of product. Your choice of product influences your choice of market. They have to work together.

I think this three-way strategy framework works well for real businesses. It’s not as elaborate as some of the more well-known frameworks, like Porter’s five forces; but those were done for analyzing large business successes, and after the fact.

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