September 24, 2011

The Nebulous World of Strategy

Dedicating time and resources to strategic planning is never easy.  Even for people that generally appreciate its importance, strategy has a way of repeatedly becoming next quarter's priority, while today remains dedicated to servicing existing clients and pursuing the opportunities that are in front of us.

It becomes a daily battle between the "tangible" and the "nebulous".  We do have a real fiduciary duty to serve our advisory clients and a real need to manage those relationships.  Strategy?  Well, there's no regulatory mandate to think strategically.  And you can't pay your mortgage with dollars that you plan to earn next year.  Ultimately, the real, tangible realities of everyday work life win.  

Admittedly, strategy can be a nebulous subject.  But it doesn't have to be.  The basic elements of strategy break down into very familiar concepts that add structure and will help get you thinking about your firm's strategy.


Your mission defines the "scope" of your firm.  It defines what you are, what you are not and what your primary purpose is.  This sounds fairly simple, but it is amazing how many firms don't possess a defined, mutually-shared mission.  (Maybe they don't have competitors either?)


Objectives define the "direction" of your firm.  This step is sometimes dismissed because it forces you to look into the future, into a realm filled with unknowns and uncertainty (which is actually very natural--we have been trained to avoid uncertainty.)  But here's the trick:  just because you can't predict the future doesn't mean that you can't plan for it.  You are allowed to change objectives and goals as the facts on the ground change.  As John Maynard Keynes said when accused of inconsistency, "When the facts change, I change my mind.  What do you do, Sir?"

Strategic Planning

With a sense of purpose and direction, you can then develop a plan and determine what is needed to achieve your mission and meet your objectives.  (I don't mean to make this sound easy...because, of course it's not!)  The choices that make up your firm's strategy will determine:
  • Where you want to compete
  • How you differentiate your firm from competitors that offer alternative products 
  • What resources are needed for you to compete
  • What is the best timing and sequence for each of these choices
Many (most?) firms have trouble devoting time to strategic planning.  Real, tangible day-to-day activities tend to be much more satisfying because their payoff is immediate.  But as investors, you can appreciate that small investments today have a way of compounding into something much larger in the future.  Dedicate some time to developing your firm's strategy.  And if you get distracted, think about the power of compounding.


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