6 Reasons Why Strategy Matters for Your Startup’s Success

Boris Manhart
5 min readOct 26, 2021

--

Credits: Shutterstock license

Here’s a true story to start with, which still makes me smile: The Dean of IMD Business School, Stefan Michel, took me aside before a lecture I took part in as a guest speaker and literally told me this: “You can say anything, but please don’t say that strategy is not important for startups.” I think he was quite relieved when I told him that I’d never do such a thing.

So why was he afraid I might say strategy isn’t important? Probably because he was well aware that more often than not there is too much focus on the business model. Don’t get me wrong, I’m not at all against following the Lean Startup method to first test out the business model and market hypotheses. It’s totally possible to treat the company strategy as a rolling task in the first months of a startup.

But always remember that strategy is much more than a business model, which can change quickly, especially in today’s world. Strategy lasts longer and in fact, actual strategic thinking often involves choosing between different business models and sometimes switching to a new model if necessary (like the trend towards “subscription” business models, away from a one-off purchase, etc.). So let’s say it like this: You can start by building an initial business model and then follow up with designing the business strategy right after.

What Is A Business Strategy?

A business strategy is a long-term plan to achieve the desired goals and objectives. It’s the most important tool of the executive team and a form of alignment with the investors and board of directors. It might include the following:

  • Your vision, mission, and core values
  • A description of the problem you’re solving and for whom
  • What you need to get there in terms of resources and capabilities
  • A sustainable business model
  • A SWOT analysis
  • How to measure success

Before you can even formulate a strategy, you need to know a lot about your customers, the market, your competition, and your limitations. Therefore, a step-by-step, experimental approach makes sense here. This applies to creating a business model, as well as strategies: Nothing is set in stone, and your strategy is only as good as your knowledge at the time. The more advanced your company is, the better you can set long-term goals. The younger the company, the more often you will have to adjust your strategy.

“You have to keep your vision clear, cause only a coward lives in fear.” Nas

So why formulate a strategy at all, which could already be outdated tomorrow?

1. Strategy Keeps You On Track And Focused

Once you’ve done all the work and formulated the strategy, you can shed a lot of baggage, and suddenly everything becomes more evident. All these thoughts around the future goals, the way to get there and all the unspoken things lead to psychological stress and misunderstandings.

“Gotta just keep on rolling. Gotta keep at it, gotta stay focused.” Wale

Once it is written, you align with your key stakeholders, and you focus on execution. This means that you can now set the key steps to reach your business goals and then focus only on taking the next one(s) at a time. You can stop worrying about your long-term strategic goals in the back of your head because they are written down.

2. Strategy Helps You Shine

As a good leader, you are kind of a lighthouse for your team and other stakeholders. Oh yeah, and this metaphor is extra-fitting, not just because you are leading the way like a lighthouse, but a strong strategy also WILL ACTUALLY MAKE YOU SHINE. Why? Because when you know exactly where you are going, that gives you and your team confidence, and having that is obviously a key component of successful leadership. At the same time, as great as having a strong strategy is, make sure to not share the company’s long-term strategic goals with everyone too often. Because long-term goals can create uncertainty by being too far down the road and your people might wonder: How are we supposed to get so far so fast??? It’s not their problem to worry about. It’s yours, as a leader. Think strategically big, but always communicate smaller goals.

3. Strategy Is Your Big Red NO-Button

Credits: Giphy

One of the most prominent problems startups face is not a lack of options but having too many. This leads to doing many things, but often doing nothing well. Here, the strategy offers a clear direction and is thus something like the NO button that you might have to press more often than you would like. You can ask yourself every time: Does this pay off for my strategic goals? No? Push the button and point to your strategy if anyone asks!

4. Talkin’ ‘bout M’s

Short-term tactical thinking and actions cost time and therefore money. Tactics that do not lead towards a significant strategic goal are often unnecessary or even counterproductive.

“Make ’em talk about, make ’em talk about M’s.” ASAP Rocky

The considerable effort you should put into strategy development will pay off twice in the medium term. It helps you make fewer mistakes in your communication (like expensive marketing campaigns going in the wrong direction) and you will know how to build up the right resources within your team. You will be more effective and save money — every day.

5. Strategy Creates Competitive Advantage

Knowing your strategic plan and how you plan to achieve your long-term goals, helps you focus on your strengths. You know them, you know your weaknesses and you can use this information to build your competitive advantage, making your company unique in the market environment.

6. Strategy Prevents You From Failure

Credits: Giphy

CB Insights has analyzed the top twelve reasons why startups fail, and seven of them are directly related to strategic issues: No market need, got outcompeted, flawed business model, regulatory/legal challenges, pricing/cost issues, poor product, and disharmony among team/investors. All these topics can be addressed early on in a comprehensive strategic plan. I have to admit that the strategy won’t protect you from failure. Still, it lowers the risk because you know the market, your competition, possible business models, the legal conditions, and it creates alignment with your team and investors.

Final Thoughts

A business strategy is part of every company, whether it is a startup or a big corporation. The difference is that in a startup, you will probably have to adjust the strategy more often. Treat it like an open document: In an early phase, I recommend reviewing the document every month and changing it if necessary, then every quarter in line with the team’s short-term objectives (e.g., OKRs) and new market insights. The strategy is your tool for successful business management, and you should use it.

👉👉👉 Let me know if this article was useful for you by hitting the applause button and/or leaving a comment below. It would mean a lot to me.

--

--

Boris Manhart

I'm a serial entrepreneur and startup advisor at GROWTH UNLTD. Get your startup to product-market fit and beyond: https://www.growthunltd.com/