Define Your Strategic Problem Statement

Summary

In this video, Steve emphasizes the importance of identifying a strategic problem as a crucial step in strategy formulation. He explains that many companies often confuse strategic planning with strategy and fail to recognize the key obstacles that hinder their growth. Steve outlines a framework for defining the strategic problem, breaking it into three parts: the core issue, why it's happening, and the consequences of inaction. He also highlights the importance of aligning initiatives with the strategic problem to ensure the company's success and growth.

Takeaways

• 📌 Defining a strategic problem is crucial for any company's strategy process.
• 🔍 Many companies confuse strategic planning with strategy, but they are different.
• 👥 The customer should be at the center of strategy formulation.
• 🚧 A strategic problem is an obstacle that prevents a company from achieving its full potential.
• ❌ It's important to avoid reframing problems as 'opportunities' to ensure clarity.
• ❓ To identify the root cause of strategic problems, use the '5 Whys' technique.
• ⚙️ A well-defined strategic problem statement includes the problem, why it's happening, and the consequences of not addressing it.
• 📉 An example strategic problem: declining profit margins and stagnant growth due to increased competition and lack of differentiation.
• 📝 Aligning company initiatives with the strategic problem ensures effective strategy execution.
• ⚠️ If company initiatives don't address the identified strategic problem, they may be misguided or ineffective.

Q & A

What is the main focus of the video?

The main focus of the video is explaining how to define a strategic problem, which is a critical step in the strategy formulation process for a company.

Why is it important to identify the strategic problem before exploring opportunities?

It is important to identify the strategic problem first because it clarifies the major obstacle preventing the company from reaching its full potential. Without addressing the problem, it's difficult to explore opportunities or create an effective strategy.

What are the four key areas of a company's strategy according to the speaker?

The four key areas of a company's strategy are shared aspiration, market focus and position, competitive behavior, and resources and returns.

Why does the speaker emphasize focusing on the customer in strategic planning?

The speaker emphasizes focusing on the customer because they are at the center of any strategy. A well-defined strategy must consider customer needs and behavior to ensure success.

What mistake do many companies make when creating their strategy?

Many companies mistake having a strategic plan for having a true strategy. Often, they fail to clearly identify the problem they need to solve, which is essential for crafting an effective strategy.

What is the purpose of asking 'why' five times when identifying a strategic problem?

Asking 'why' five times helps uncover the root cause of a problem by digging deeper into underlying issues, making it easier to focus on the core obstacle preventing the company's progress.

Can a strategic problem be reframed as an opportunity?

The speaker advises against reframing a strategic problem as an opportunity. It’s more important to identify the obstacle clearly rather than trying to sugarcoat the situation.

What three components make up a well-defined strategic problem statement?

A well-defined strategic problem statement consists of: 1) the core problem or issue the company is facing, 2) why this problem is happening, and 3) the consequences or implications if no action is taken.

Why is it important for initiatives to align with the strategic problem?

If the initiatives are not aligned with the strategic problem, the company’s efforts will be wasted on irrelevant tasks, and it will not effectively address the core challenges needed to succeed.

What example of a strategic problem does the speaker provide?

The speaker provides an example where a company’s strategic problem is declining profit margins and stagnant growth due to increased competition and a lack of differentiation in the market.

Outlines

00:00

🎯 Defining the Strategic Problem

In this opening segment, Steve introduces the concept of a strategic problem, explaining its pivotal role in the strategy process. He emphasizes the need to distinguish between strategy and strategic planning, underscoring how companies often fail to identify their key problem. The customer is central to the framework, but the primary focus of this video is on identifying the strategic problem as the first step toward forming a strategy. He shares an anecdote of a business owner who wanted to reframe the problem as an 'opportunity,' but Steve explains the importance of confronting the obstacle head-on without sugarcoating it.

05:03

🔍 Using '5 Whys' to Uncover Root Problems

Steve introduces the '5 Whys' technique to help companies identify the root cause of their strategic problems. By repeatedly asking 'why,' businesses can drill down to the core issue, rather than getting stuck on surface-level symptoms. He shares a hypothetical example involving customer order fulfillment to demonstrate how this method reveals a pricing problem as the root cause. The goal is to refine multiple problems into one critical obstacle, which will then guide the company's strategic efforts.

10:03

🧩 Structuring the Strategic Problem Statement

This paragraph outlines how to build a clear strategic problem statement using three components: identifying the main problem, understanding why it is happening, and recognizing the consequences of inaction. Steve shares a real-world example of a company facing declining profit margins and stagnant growth. By following this structured approach, the company identified increased competition and lack of differentiation as key reasons behind the problem, and understood the urgent need to optimize processes, strengthen their talent base, and improve bandwidth to survive.

Keywords

💡Strategic problem

A 'strategic problem' refers to the primary obstacle preventing a company from achieving its goals or full potential. In the video, the speaker emphasizes the importance of identifying the company's key challenge before moving on to explore opportunities. The strategic problem serves as the foundation for developing an effective strategy.

💡Customer

The 'customer' is central to the strategy framework, positioned at the heart of decision-making. In the video, the speaker points out that many companies fail to mention the customer in their strategies, despite their crucial role in shaping competitive behavior, market focus, and other strategic decisions.

💡Shared aspiration

'Shared aspiration' refers to the collective vision or purpose that drives a company’s efforts. It is one of the four key areas in the strategy framework. The speaker notes that this often represents the ultimate goal or treasure a company seeks to achieve, which lies beyond the strategic problem.

💡Market focus and position

'Market focus and position' involve how a company defines its target market and positions itself within that market. It is one of the core elements of the strategy framework, helping a company to clarify where it competes and how it differentiates itself from competitors.

💡Competitive behavior

'Competitive behavior' refers to the actions a company takes to differentiate itself from its competitors and maintain a competitive edge. The speaker highlights that many companies struggle with this aspect, often leading to commoditization, which diminishes their ability to stand out in the market.

💡Resources and returns

'Resources and returns' refer to the assets and investments a company needs to successfully execute its strategy, as well as the financial outcomes it expects to achieve. The speaker mentions that without properly aligning these with the strategic problem, a company’s initiatives may not yield the desired results.

💡Why five times

The 'Why five times' method is a problem-solving technique that involves asking 'why' repeatedly to uncover the root cause of an issue. The speaker uses this approach to help companies drill down into the fundamental reasons behind their challenges, helping to identify the strategic problem more clearly.

💡Implications and consequences

'Implications and consequences' refer to the potential outcomes or risks a company faces if it fails to address its strategic problem. In the video, the speaker emphasizes listing these consequences to understand the gravity of the problem and the necessity of taking corrective action.

💡Strategic plan vs strategy

The speaker distinguishes between a 'strategic plan' and 'strategy,' stating that many companies mistakenly think their strategic plan is a strategy. A strategic plan outlines actions, whereas a strategy focuses on addressing the core problem. The speaker encourages companies to focus on strategy rather than just planning.

💡Initiatives, actions, and results

'Initiatives, actions, and results' are the specific steps and outcomes a company pursues to execute its strategy. The speaker stresses the importance of aligning these initiatives with the strategic problem to ensure they drive the company toward resolving its key challenges and achieving its goals.

Highlights

Strategic problem is a critical step in the strategy process.

The strategic framework consists of shared aspiration, market focus and position, competitive behavior, and resources and returns.

The customer is at the center of strategy formulation.

Many companies confuse strategic plans with actual strategy.

A strategic problem is the obstacle preventing a company from reaching its potential.

Identifying the strategic problem is essential for determining the right strategy.

Strategic problems should not be sugarcoated as opportunities; they are obstacles to overcome.

Asking 'why' five times helps identify the root cause of a problem.

A root cause can be a pricing problem affecting customer orders and internal processes.

A strategic problem statement includes the problem, the reason why it’s happening, and the consequences of inaction.

Example of a strategic problem: 'Profit margin and growth are suffering due to increased competition and lack of differentiation.'

If companies don’t optimize processes, strengthen talent, and improve bandwidth, they may struggle to survive.

Aligning initiatives with a well-defined strategic problem ensures focus on the right actions.

Vanity initiatives, like redoing a website, won't solve core issues like process optimization.

Defining the strategic problem enables a company to create a strategy that leads to better results.

Transcripts

hey it's Steve in this video I'm going

to show you how to define your strategic

problem which is a critical step in the

strategy

process all right I'm going to draw some

pictures here for you to drive home this

point at the very

top of my strategy

framework is the Strategic problem and

then down below we have four different

boxes where a company defines its

shared

aspiration its Market focus and position

its competitive Behavior and the

resources and returns required to pursue

this strategic option successfully now

at the center of these four

boxes is the customer right the customer

is very important as it aains to

strategy formulation all right so we

have the customer at the center but at

the top here this is what I want to

focus on in this video is the Strategic

problem too many companies that I work

with will show me their strategy at best

if they have a strategy but too many

companies they have a strategic plan and

they think that's a strategy more than

that you could check out my other video

where I walk you through the difference

between strategy and planning so be sure

to check that out if you haven't already

that's really important but companies

will show me whatever document they have

whether it's their strategy or their

strategic plan and often times I'll scan

through it and number one I won't find

the customer mention that frequently

that's a whole another issue but the

bigger issue is that they don't identify

the problem they're trying to solve or

overcome with their strategy and that's

why this is such a critical first step

now I was working with a business owner

just the other day and he said Steve

instead of calling a strategic problem

can we reframe it and make it more

positive and talk about it as an

opportunity and I said okay we're not

going to do that we're not going to

Wordsmith things we're not going to just

like sugarcoat it we want to identify

what is the biggest obstacle that is

getting in the way of a company

achieving its fullest potential think

about it you have this

team right here all these excited people

on a team and in the way is this problem

this is the Strategic problem right here

and the company has to get over this

strategic problem if they want to

achieve this treasure chest of whatever

this is right so this let's just say

this is the company's purpose the whole

reason why they exist why they're in

business or their shared aspiration or

whatever it may be this winning this pot

of gold this treasure on the other side

side of this wall this obstacle is where

the leadership team exists in this

organization and if a company cannot

clearly identify what that problem is

then they're not going to be able to

clearly identify what strategy they need

to put in place to overcome that

strategic problem that's why it's real

critical you don't want to start

identifying opportunities we're not

there yet this framework right here will

help you to explore possibilities and

opportunities

but you won't even know what to explore

if you don't first start with your

strategic problem so that's what I'm

going to help you do here in this video

so let me keep going here now if you

feel like you have clearly identified

your strategic problem in your

organization respond with either a yes

or no in the comments box right now okay

I want to hear from you I want to know

where you're at right now in the

strategy Journey now with a strategic

problem you have to start here you have

to spend a lot of time identifying this

sometimes I'll work with companies for

days or for weeks to clearly identify

this and sometimes this isn't fun let's

face it because you're pointing out the

problems of the organization and

oftentimes that requires us to take

accountability and responsibility for

our leadership because maybe we've

caused these problems or maybe the

problems are external but there's a

formula that you can follow to identify

this strategic problem and to put it in

a very very clearly articulated

statement so the first part of a

strategic problem statement is going to

include the

problems the

problem or the

issues that your company is currently

facing now the reason why this isn't

called a strategic problem statement is

because you have to get really macro and

you do this by asking why five times

that's a really great resource that can

use or a tool rather to figure out what

is the root cause of all these

interrelated problems within a company

because otherwise some people will come

to me they say Steve we have like three

or four problems how do we refine it

down to one and I'll say well ask why

five times so if you say hey look our

number one problem is that we can't

fulfill customer orders and I'll say

okay well why can't you fulfill customer

orders well because our process is

broken well why is your process broken

because we don't have the right

technology in order to you know track

these um processes okay why don't you

have the right technology because we

don't have the capital in order to you

know buy this technology well why don't

you have the capital and it's like well

because our we can't raise our prices

Bingo there it is it's a pricing problem

that's causing all these interrelated

problems and that's why when you ask why

multiple times you could get down to the

root cause so that's a super helpful

tool but what we want to do is identify

the problem or these issues which I'll

get into that are leading to this this

bigger obstacle then the second part so

I'll put plus number two is you want to

identify why this is happening

abbreviate why this is happening is

number two number

three is we want to list out the

implications or the

consequences if you fail to take action

so you don't have to follow this exactly

this is what I've used multiple times

it's been helpful to me maybe you have a

different way of doing it but these

three parts have allowed me to

successfully identify the Strategic

problem and put it in a statement that

everybody could get aligned on and to

start taking action so I have an example

here let me try to write it out I have a

sticky note as a cheat sheet because I

don't have this memorized but I I just

did this with a company recently and

this is their strategic problem that

they identified profit margin and growth

are suffering right this is the first

part the problem the issue that they're

dealing with profit margin and growth

are suffering okay profit margin is

declining growth is stagnant the

business is really struggling here

here's the second part why is this

happening they've identified due to

increased competition I'm abbreviating

here and a lack of differentiation

meaning that the market is commoditized

every company looks like each other

there's not a lot of differentiation so

therefore the customers have a lot of

choices and that drives margins down

lower because competition is more Fierce

now here's the third part the

implications the consequences if we

cannot optimize our processes strengthen

the talent base and improve

bandwidth then we may struggle to

survive I wanted to write this down on

the board so I can break this down for

you and you understand how it combines

back into these three parts so first the

problem or issue at of hand like I

mentioned the company is dealing with

profit margin and growth issues that's

the core fundamental problem that the

company is experiencing right now okay

why is this happening this is happening

because competition is increasing and

there's this lack of differentiation all

right so that's part number two if the

company cannot optimize its processes

strengthen its Talent base and improve

its bandwidth guess what it will

struggle to survive which means it may

go bankrupt right draw a little picture

here this is cyanara to the

company now the reason why the Strategic

problem is so important to identify is

because when we go back into these four

quadrants shared aspiration Market focus

and position competitive behavior and

resources and returns ultimately as this

strategy then leads to the company

identifying what we call at cvar I ARS

initiatives actions and results guess

what this statement better be aligned

with the initiatives that the company is

pursuing otherwise there's going to be

this major disconnect and that's why I

love spending so much time up here on

the Strategic problem and getting this

right because when you can nail this and

you can clearly articulate what's going

on here based on these three parts then

your initiatives will be aligned with

your strategy and you'll be focused on

the right things if you create a

well-defined strategic problem and then

you look at the initiatives and the

initiatives are totally Off the Wall

then you're going to know that your

strategy is not going to drive the

results that you want to achieve in

other words they're dealing with profit

margin Decline and stagnant growth

because they don't have optimized

processes they don't have a strong

Talent base and they don't have improved

bandwidth well guess what here are their

initiatives right here optimize their

processes strengthen their talent base

and improve their bandwidth if their

initiatives instead up here are let's

redo the website okay that's not an

initiative number one but let's just say

it is and it's like okay how's that

going to improve your processes how's

that going to strengthen your talent

base and how do that improve your

bandwidth you're just pursuing

initiatives that are just vanity

initiatives and that's not going to take

your company where it needs to go so

that's why I love this framework does

this make sense to you if it does can I

get a yes in the comments box below also

like I said before I would love to hear

from you so please provide some feedback

because this will help me to know what I

need to focus on in future videos all

right good luck to you as you put this

in place within your organization make

sure you take the time upfront to

identify your strategic problem because

when you do that you're going to be in a

great position to maximize value in your

organization and to build an iconic

company remember to subscribe so you get

notified every time I drop a new video

like this into the future and in the

meantime take care of yourself cheers

[Applause]

sh