How would you explain the term
“strategy” to a child?
Once I heard that if I couldn’t explain what I do for a living to a six-year-old
child, I knew nothing about that. It made me think about how I would tell kids about
business strategy, and then I had a couple of chances to test my ideas. So that’s how
I do this.
Pottery factory
Imagine that you decided to earn some money, so you buy some clay, make a pot, and
sell it. You sold the pot for a higher price than you bought the clay, didn’t you? You
can do it because you have added value to the clay. Nobody needs clay, but many
people need pots.
You see it as a business opportunity. So you buy more clay and make more pots.
You create value for your customers, and they are ready to pay.
But then you notice that people need more pots than you can make alone. So, you hire
workers to help you. You pay them a salary and provide good working conditions, so
now you create value for them also. If you don’t, they will go to make pots
somewhere else.
Then you notice that people don’t want to buy simple clay pots anymore. They want
lovely, painted pots. They want to buy beautiful cups made of glass, etc. You would
like to offer them these things, but to do so, you need to build a big factory full of
machinery. But it requires a lot of money, and you don’t have it. So, you look for
people or organizations (banks, for example) who can lend you enough money to
build the plant. And if you find them, you need to create value for them. They want
to get more money back than they lend you.
Other kids look at your success and build their own factories. So, now you have
competition, which means you must create even more value for your consumers. For
instance, you may want to offer them better products for a lower price.
Now you are an owner of a large factory manufacturing different kinds of pottery. To
make it run, you need many suppliers of clay, sand for glass, paints, etc. You need
reliable suppliers, so you have to create value for them also. For example, you may
promise them to buy their materials regularly and for a reasonable price.
Then your neighbors come to you and complain that your factory pollutes the river
where they fish and wash their clothes. You respect your neighbors, so you buy
equipment that cleans the river. Now you create value for the environment as well.
So, business is creating value for many groups of people. We call them
“stakeholders,” and among them are customers, investors, employees, suppliers,
neighborhood, etc. Your business must create value for you, too — otherwise, it isn’t
worth doing. You may make a lot of money and are proud of the value you create for
so many people.
But the laws of nature are such that all these stakeholders (including you) would like
to have more value yearly. So, a strategy is a long-term plan on how to provide more
value for all of them in the future.
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Svyatoslav Biryulin in Red and Yellow strategies. Foresight and strategies