8 min read
About the author: Volodymyr Khmil is the co-founder and CEO of NERDZ LAB. Under his direction since 2017, NERDZ LAB has grown to a world-recognized company with more than 90 completed projects in development and IT consulting, as well as several successful startups. Clutch and GoodFirms recognized NERDZ LAB as an industry expert and top development company.
Most likely, you know what a business strategy is and why you need it. Wait, don’t roll your eyes! We aren’t going to bore you with scientific terms. When someone asks you to define a strategy, the first definition that springs to mind is probably “an action plan you need to accomplish a particular goal.” And it’s quite enough for what we’ll talk about here.
In this article, I’ll share the methods and techniques I used to develop a strategy for NERDZ LAB, a software development company and a startup founder. You won’t find empty talk or fancy words here—only hands-on recommendations that worked for me.
Yes, I mean it literally. Write your problem down on paper and sketch out the steps to solve it. It is the easiest yet the most underrated method to identify the direction in which to move.
Too often, you don’t write a plan—you think it through in your head. But your imagination is limited, and it won’t always cover all the pitfalls and challenges you might face in the future. When you put the idea down on paper, you can discover the overlooked aspects of the problem.
Writing helps you clarify and structure your thoughts. It might be hard to build a six-step plan all in your head, but a notepad offers enough space to write out a multi-page strategy.
Zoom out, Zoom in is a simple and convenient technique to analyze data faster and more effectively.
Whenever you have a problem you need to solve, look at the bigger picture first. Take a few steps back (zoom out) to examine the business areas and bring out all the factors affecting them. Once you pinpoint your problem, zoom in on details.
For example, if your company exceeded the budget, don’t look at your company’s income and spending trying to find what exactly went wrong. Zoom out instead. Check the profit and loss statement for the last six months. Are your expenses higher than planned? If yes, zoom in and find out what department overran the budget and in which month.
Zoom in even more until you understand precisely where it all started from.
The Zoom out, Zoom in technique might seem obvious at first glance, but I rarely see people using it to make decisions. Instead, they try to analyze everything at once, looking for a needle in a haystack. Don’t be like them: divide your haystack into smaller piles.
The biggest hurdle to developing a business strategy is the volume of information you need to analyze. Not all of it is accurate or to the point. And this is where strategic instruments come in handy.
Strategic instruments allow you to structure the information and analyze your idea. They are not magic wands, though. You can’t develop a proper strategy only by looking at data, but you’ll better understand what to do.
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Portfolio analysis shows the correlation between the products or services a company offers and those that customers want. Let’s have a look at a simple example.
At NERDZ LAB, along with IT advisory, we offer two main services—outsourcing and outstaffing. Either of them would work for two customer categories: startup founders and existing businesses. If needed, we can segment each category into subcategories to focus on a specific customer group.
Once you identify the groups, ask yourself these three questions:
An honest answer will help you better understand your product or service portfolio. It will also generate new insights or help discover cross-selling synergies.
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The SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is probably the most common instrument you can use to assess your position before starting a new business or adopting a new idea.
The SWOT matrix (see the picture below) is a 2×2 grid of four fields representing helpful and harmful factors. Strengths and weaknesses are internal factors that you can change, while opportunities and threats are external factors that you can’t influence directly.
SWOT is usually used for a superficial analysis when you need to zoom out to see a bigger picture of your current situation. The results of SWOT will help you take stock of your business advantages, weak points, and risks.
Porter’s five forces analysis helps understand the level of competition in your market or across the industry. Before starting a new business or entering a new market, you can use it to assess customers’ interest and your potential success rate.
According to Porter, competitors are not the only factor that affects market rivalry. It depends on these five forces which you need to analyze:
Porter’s five forces will benefit you the most at the early stages of analysis. For the best results, combine it with other instruments.
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Chan Kim and Renée Mauborgne described the blue ocean strategy in their seminal book in 2004. If you haven’t heard about it yet, here is a gist of their ocean metaphor:
Like Porter’s five force analysis, the blue ocean strategy helps determine what level of competition is in the market and who your competitors are.
Let’s have a closer look at how you can use this instrument:
The blue ocean strategy can also help you discover new niches within your market. Instead of playing by traditional red-ocean rules, try to let go of limited thinking and shift attention toward customer pains and needs. By unlocking new demands and closing supply gaps with innovative products, you’ll take advantage of the market with high payoffs and no competitors.
All these instruments show us where we stand and help calculate our chances for success. Yet, they don’t show us how we can solve the problem or achieve the desired results. Let’s explore this in more detail.
Business analysis can generate a lot of data and insights. How to bring all this information together and make the right decision? By asking yourself the right questions and giving honest answers.
Your business strategy should tell you where to go and how to get there. Here are three questions you can start with to pick a direction:
Once you answer them, dive deeper into your situation:
These questions will also help if you want to go beyond your current market and create a strategy on how to stand out in the entire industry. Ask the same questions but think on an industry scale. For example: what will I do more to meet and exceed industry standards?
Unbiased and creative answers are key to a sound strategy and decisions. And this is where we move on to our next point.
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Even the best instruments and questions won’t save you from unconscious bias and mental errors that distort the truth and sway your decision-making. Let’s get off our high horse for a minute and acknowledge the fact: none of us is rational.
People tend to make mistakes by:
The list goes on. More often than not, our brain takes shortcuts and plays tricks. Instead of rushing into decisions, take your time to analyze your business performance and determine its vision and values.
Return to your drafts repeatedly to review your conclusions, ask more questions, or add new information.
Strategic instruments and recommendations described in the article might seem quite simple. Still, they can help you generate insights, find extra questions to ask yourself and discover new areas to focus on. This happened to me: these straightforward techniques have opened my eyes.
I truly hope these tips will help you develop an effective business strategy, whether you are a business owner or only launching a startup company. And should you need help along this road or any startup product development services, NERDZ LAB is here to give your project a jumpstart. Contact us for a project estimate or consultation.