Define Your Strategic Problem Statement
Summary
TLDRIn 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
🎯 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.
🔍 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.
🧩 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.
Mindmap
Keywords
💡Strategic problem
💡Customer
💡Shared aspiration
💡Market focus and position
💡Competitive behavior
💡Resources and returns
💡Why five times
💡Implications and consequences
💡Strategic plan vs strategy
💡Initiatives, actions, and results
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
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