At the end of the first year of her business plan, the owner of a commercial building maintenance company had met all three of her objectives. Two weeks later, the largest of the three property management firms that control 19 of her 41 buildings called for a bundled tender: cleaning, security and maintenance from a single supplier. Her dispatcher asked whether to cut prices, find a partner or let the buildings go. Her plan had no answer, because it had never decided where the company wanted to compete. What she lacked was a business strategy.
That is where Strategy and Competitive Positioning begins. It is the third book of The Modern Business Encyclopedia, the La Machine business library by Pierre Vinet, and you can read it free on maveco.ca. The company, Nordec Entretien, is fictional and its figures are illustrative. Here is the method in short.
What is a business strategy, and how is it different from a plan?
The book gives the word a narrow meaning: a strategy is a small set of coherent choices that answers the main obstacle a business faces. It says where the business competes, how it wins there and what it refuses to do. In Richard Rumelt's account, its kernel has three parts: a diagnosis, a guiding policy and coordinated actions.
A plan describes what you will do, with the resources, the sequence and the costs. It can be complete, approved by a lender and followed to the letter without ever choosing between two paths. The strategy is the reasoning the plan assumes.
Why is a revenue target not a strategy?
"Double revenue in three years" is a goal, not a choice: it does not say which customers, which rivals or what you will stop doing. Rumelt lists four hallmarks of a bad strategy, and you can look for them in your own documents:
- fluff that hides the absence of thought;
- a problem that is never named;
- a goal presented as a strategy;
- a long list of objectives that chooses nothing.
For a small business the stakes are concrete. According to Innovation, Science and Economic Development Canada, 68.0% of the businesses it follows are still operating after five years, and 48.2% after ten. Fewer than half reach their tenth year.
How do you find a competitive advantage that really holds?
Every owner can name quality, service and experience, but competitors would write the same list. An advantage is a wider gap than your rivals' between what customers will pay and what it costs to serve them, one that rivals cannot close quickly. The book offers five tests:
- do customers name it without being prompted?
- does it show in the numbers: a price premium, renewals, cost to serve?
- how long would a determined rival need to copy it?
- does it hold everywhere you operate, or only in part of your market?
- what would rivals do, and could they do it without harming their own model?
At Nordec, the fourth test changed everything. The advantage, a faster response from a technician who already knows the building, held in two territories and failed for scattered buildings. Only one renewal in nineteen had been refused after the price increase, and the premium over the competing bundle was 23.4%.
How do you choose where to play, how to win and what to refuse?
The book uses the five choices of A. G. Lafley and Roger Martin: the winning aspiration, where to play, how to win, the capabilities required and the management systems. A choice becomes strategic when it rules out something the business could have done, and when the choices reinforce one another.
Nordec wrote its choices in a single day. It would serve owner-operators and small portfolios, in two territories, on preventive contracts. It promised a 90-minute response on at least 95% of calls, a building record and a one-page monthly report. It refused bundled tenders, buildings outside the territories and one-off calls without a contract.
The options were compared with weights fixed before any score was entered. The chosen option scored 4.20 out of 5, against 2.50 at best for the others, and 4.10 when economics was raised to 35%. The ranking did not depend on a fine judgment about the weights.
A refusal has to cost something, or it protects nothing. Nordec's put eight buildings and $66,336 a year at risk. Matching the bundle's price across its 41 buildings would have cost $64,452 a year and repositioned the company without anyone having chosen to.
How do you turn those choices into measurable objectives?
An objective with no choice behind it is a wish. The book keeps three, one owner each, with two to four key results that carry a number, a baseline, a target and a date. Nordec set eight, for example: "buildings under contract in the two territories rise from 29 to 37 by December 31".
The test is simple. "Launch the building record" is a task, one you can finish on a Tuesday while nothing changes. "100% of contract buildings have a delivered building record by December 31" is a result. The book adds a balanced scorecard with four perspectives (financial, customer, internal process, learning and growth) and a "not now" list for everything deferred. Nordec first wrote twelve objectives, then kept the three that its choices explained.
How do you write your strategy in 30 days?
The book lays out four stages of about a week, each closed by a checkpoint that must pass before the next begins:
- Days 1 to 7, the diagnosis. Gather customers, work, and proposals won and lost. A person outside the business must be able to repeat the diagnosis.
- Days 8 to 15, the advantage and the options. Apply the five tests, compare the options, and check that one leads under two sets of weights.
- Days 16 to 23, the choices, the refusals and the scenarios. Check that the choices hold in four scenarios.
- Days 24 to 30, the objectives, the rhythm and the page. Sign the page and book the first quarterly review.
The page has nine sections: diagnosis, aspiration, where to play, how to win, refusals, objectives, initiatives, rhythm and the signposts that would change your course.
What does the strategy produce a year later?
Nordec lost five buildings to the bundle (about $41,460 a year) and kept three. A year later it had 46 buildings and $393,024 a year in contracts, against $339,972, up 15.6%. The share held by the three management firms had fallen from 46.3% to 30.4%. The $400,000 target was missed by 1.7%, and the book says so plainly: the company was a little smaller than hoped, but far less dependent on three decision-makers.
What legal limit applies to a strategy?
Prices, territories, customers, output and wages are decided alone, never with a competitor. Section 45 of the Competition Act makes an agreement on them a criminal offence, punishable by up to fourteen years in prison, and a court may infer an informal understanding from circumstantial evidence.
How MAVECO can help
Writing a strategy takes facts, method and an outside view. MAVECO supports small and mid-sized businesses in Québec in this work:
- business planning and business development planning;
- brand positioning;
- target customer identification;
- profitability analysis of products and services, and pricing optimization.
📘 Read the book free: Strategy and Competitive Positioning.
📅 Let's talk about your strategy: book a meeting with a MAVECO representative. In 30 minutes, we will tell you frankly where to start.
Frequently asked questions
Does a small business really need a strategy? Yes. It has less room to manoeuvre than a large one, so less room for effort spent in the wrong place. The book sees a strategy as protecting the scarcest thing a business has: its owner's attention.
How long does it take to write a business strategy? The book proposes 30 days, in about a dozen working sessions with the people who see the customers. The first version will be imperfect, and you correct it at the first quarterly review.
How many objectives can a small business follow? About three, one owner each, with a "not now" list for the rest.
Is the book free? Yes. Strategy and Competitive Positioning is free to read on maveco.ca.
General information for educational purposes only. This article is not legal, tax, accounting or financial advice. Consult a qualified professional before acting.
