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Have you ever had an experience trying to read difficult business strategy books and
always fell asleep? Or maybe you learned but realized it didn't
work in the real business world? If yes this video is for you.
In this video you will learn the very basics of making strategies and we'll also talk
a little bit about business leader mindsets in the end . Anybody
could understand this easily.
This video is the ultimate book summary written by a famous Japanese business leader Mr. Saegusa
who is also known as a business consultant who worked in Boston consulting group.
Okay let's dive right into it. The goal of a strategy theory is to simply
win the competition, nothing else.
Strategy theory are made to simplify what's going on in company and to capture the problems
laying inside. There are problems that can't be easily
cut off or deleted because in a company many relationships and politics
are always there. The strength of a great strategy theory is
that it can drastically cut in directly to the essence of the problem.
From a strategic point of view, it's important to first know how your company is doing compared
to the competitors.
When you look around in your company and you think everything is running fine but actually
you're being crushed by your competitors, there isn't a bright future.
Vice versa , even if you think your company has poor performance but you're doing better
than the competitors you're still winning. Competition is always a relative thing.
Now in order to judge whether your business is doing relatively good or bad or to build
any kind of strategy you need a criteria. By building a hypothesis on where your company
is positioned in the competition is very effective So how do you find out a hypothesis of your
company's position in the market? It's by using the "product life cycle".
Now those who have already learned strategic theory in the past , you might say , everyone
knows that. But you should never underestimate how powerful
this theory is. Let me explain.
In the introduction stage, it's easy for you and your competitors to enter the market.
The gates are open. Here the content of the product itself is
the most important factor to gain competitive advantage.
The trust of the product is not yet built in the market so lowering the price will not
be an effective tactics here.
In the growth stage, many companies are providing similar products.
In this stage, the sales force and after-sales service is important to expand the business.
In the maturity stage, the battle of lowering the price begins.
Even if you try to provide better service, you can't avoid price war.
Lowering the price is the competition of lowering the cost.
In order to lower the cost you need to increase the sales quantity .
And to win this severe competition where volume matters the most , the one who has more money
and capital wins.
In the final decline stage, market share is already fixed.
There is no room to build new edges and there is no place to attack.
The gaps between companies remain as it is regardless of the reason why.
Next. A good strategy must be simple as possible.
A complicated strategy that takes hours to explain is a bad strategy and means that the
output of it is low. A good strategy is so simple as if a child
can understand. A bad strategy is something that takes a whole
day to explain but ends up fuzzy.
Same thing goes with product marketing. When the product is in the maturity stage
in the product life cycle the description of the new product becomes more and more
complicated to explain. That's because the difference between the
competitor's product becomes less to explain.
In other words, if the product can be explained very simple, the product has high possibility
to dominate the market.
One of the keywords in making strategy is"focus" and "concentration".
The tip to succeed in business is to be number one in any kind of small segment.
A successful company that has a good strategy knows their strengths and which battle field
to focus on . Without focus it's impossible to gather
all the energy in the company and execute the concentration.
On the other hand, if the focus is weak and where there's too much "dreaming like
I wanna do this and that", the battle field will be too wide to succeed
Also a good strategy requires extra stretch
and anxiety in the company.Means that a good strategy can't be peaceful for everyone.
A CEO must be a good story teller to his employees but if the business strategy has no focus,
the top can not explain in simple words the management goal.
It's just like a salesmen having difficulty to sell a product that has less competitive
advantages.
Focus means abandon. Business resource is limited and a company
can't do all kinds of businesses. We need to decide what to quit.
If you postpone the decisions to quit, you will just keep on doing worthless investments.
Segmentation is a very useful tool to figure out what to focus and abandon.
It can be used in various ways like business strategy, development strategy and sales strategy.
The process in working on the segmentation requires a little bit of art and creativity.
"Segmentation" is to divide your business market or customers into segments that
have same type of shared characteristics.
The criteria on how to divide must be in line with the strategy goal itself.
There are two different approaches. One is when there is already a product existing
and to figure out who or which customer to sell.
You can put whatever you want in the vertical and horizontal axis depending on
what your product is. In this example Y axis is "the potential
profit the product can gain from customer" and the
X axis is "how the customer engagement looks like in mid and long term".
You can divide your customers in the chart accordingly.
Another is when there is already a market existing and to consider what kind of
new product or business should be developed.
In this example, the vertical axis is "the future potential of the industry" and horizontal
axis is "how high and low the competition is".
Obviously here the upper right side corner is where
The attractive market exists.
Dividing the matrix should be 2 times 2 or 2 times 3 or maximum 3 times 3.
The reason why 3 times 3 is maximum is because any strategy should be simple as possible.
If it's more complicated no one would be able to understand.
After dividing into segments what's next?
Prioritization. Which box to tackle first second and third.
In the example of which company to target. Corporation S has the first priority,
Then the priority should go from A B C D and finally E.
A good segmentation should show which customer or market to focus.
But not only that , it shows which market and customer to not focus.
In order to complete the matrix you need to find the right criteria.
And you need many data to judge where your product is positioned in the matrix.
The segmentation process is a great example how much your company knows about the customer
and market.
After the segmentation is finished the people in your company and sales men clearly knows
where to go selling. That' the power of segmentation.
You can gather the energy in your company and create a guideline of where to focus and
concentrate. But a good segmentation usually brings pain
to the sales staff because it's sometimes out of their comfort zone.
The market place or customer they need to go after is usually where the sales are not
used to go in the past. That might be obvious because they don't
have share there. It might be challenging if the sales staff
is weak. But when you know the segmentation is right
, you need to force the sale team to execute. If the segmentation doesn't have the edge
and enough logic to persuade , the sales will easily lose credit on it.
Now once you came up with a good segmentation , it has to be married with execution in the
real field. And must be monitored very carefully and strongly.
There has to be a reporting tool to follow the progress and results.
The important thing is to build up a system that can follow up the progress.
Without this any segmentation is meaningless.
Next let's talk a little about gross margin and price.
Working in a business with low gross margin means no matter how much you work
it's difficult to create profit. And it's very easy to fall into deficit.
There's only one reason that the gross margin is low.
It's simply because the pricing is not higher than the cost.
And the reason why the price can't be set higher is because that's the only value
customer can see in it.
A price should be set based on the benefit that customer receives not by the cost.
For example , if the benefit for the customer is 100$ even if the cost is a cent it can
sell. Even if the cost is 100$ if there is no benefit
for the customer nobody will buy it for 1 cent.
Fixing price is like game on reading customer's logic.
If the business can not foresee a drastic cost reduction, there is high possibility
that the business isn't fundamentally attractive.
You have to be extremely careful when investing in a project that has low gross margin.
How to deal with a business that is deficit depends on the business manager's sense.
If it's a good deficit which means it's necessary for a certain period for the business
to succeed, that's no problem. But when the business is in the corner and
bleeding that's a bad deficit and actions must be taken to stop it.
Of course even if it's a good deficit, if the company can't bear it and if it's
over the limit it's a bad deficit.
In such kind of situation the golden rule is to run away regardless of all the shames
or relationships.
You see judging a deficit includes strategic interpretation.
If you hold on too long or too short to the deficit you're making the wrong decision.
And that's why you need the right tools to be able to judge strategically like we've
seen in this video. Next about business leaders.
Leaders who are fascinating and tolerant as a human being have one side of the
important element of a business leader. But when they try to run their business by
using only that element they tend to runaway from strategic responsibility.
A leader needs to learn the basics of strategic theory in order to build up the knowledge
and hunch to make proper strategic decisions.
In any era an excellent strategy must be married with an excellent leadership in order to
create great success.
Means a strategist has to go out into the fields.
He must combine theory with execution in the battle field.
And that makes a "strategist professional".
What are the conditions to be a "strategist professional"?
(1) Have the determination to show leadership. Explain why that goal has to be achieved to
the subordinates. Increase morale, encourage them to be creative,
show example that you will think along and fight along with them.
(2) Master the steps to build a new strategy. Understand what choices there are in each
step and be responsible to dig into the details.
(3) Take risks for the new strategy . Be able to sleep tight even when the pressure is on
what no one ever has done before. Lastly here's a question.
"Suppose you have to choose one out of 2 companies to invest that have similar business
contents, which would you choose?"
Company Y has an excellent CEO that is ranked A and has good technology that is ranked B.
Company Z has a good CEO that is ranked B and an excellent technology that is ranked
A.
Which would you choose to invest your money?
Most of venture capitalists would generally say they will invest in company Y.
The reason why is , an excellent CEO is able to judge that his company's technology is
only B grade. And that he would make strategies and tactics
accordingly. But if the CEO is not excellent, you never
know where he might make the wrong decisions. Make sense?
Thank you for watching . In this channel I make book summaries of Japanese
famous business & self-development books. My passion is to introduce great wisdom that's
definitely inside Japanese books to the world. So if you're interested pls hit the subscribe
button so that you don't miss the new videos coming up.
Also if you liked this video pls click the like button and share any comments because
it really helps growing the channel. And if, just if you know any Japanese business
books that you would like me to summarize I would be more than
Happy to hear that from you too. Lastly there is another video that I made
on "how to build a strategy" so if you liked this video pls don't forget to
Check that out too. See you in the next video. Bye bye.
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