Are you employing tactics or strategy in your franchise or enterprise?
After so many years in business and another ten years in sailing – I finally get the difference between strategy and tactics thanks to a recent lecture at the Sorrento Sailing Couta Boat Club.
Strategy
This is the big plan: how we should get around the course in the least amount of time with no other competitors to worry about. This means considering how many people are on the boat, the weather, the start line bias, which sails to use, and all those elements that help the crew navigate the race course as quickly as possible.
Tactics
This is what happens on the race course – and how I deal with the situations (like avoiding a collision or a dunking).
The interesting point is that in a handicap race, beating another boat by the slimmest of margins, even as little as 10 seconds, is pointless if the competitor has to give you a two minute handicap. The sailors you are directly racing against could actually be some distance away from you.
But you can lose heaps of time by engaging in a match race with a boat you already have beaten on handicap – just to soothe your ego.
In this type of handicap racing it is probably 70 per cent strategy and 30 per cent tactics.
On the other hand, if we were racing in the Olympics, all in the same design boats, it is probably 30 per cent strategy and 70 per cent tactics – as the boat that is the first over the line is the undisputed winner. This can even be down to two boats in a match race, like the America’s Cup.
What this means for franchisors and business owners
If your business is unique, and you are building on the differences between you and the rest, then you are more like the couta boats, or more focused on strategy.
I have previously worked with Salts of the Earth, and I asked them about their competition. They said that they do not have any, so their business is all about long term strategy.
Many other businesses have a unique product or set of skills and their long term growth is focused on strategic long term plans. In franchising we see many of these like National Drones, ICMI Speakers & Entertainers and Base Zero.
The decision-making they undertake is where to open new locations and whether the population is sufficient to support the business without cannibalising existing trade. Issues like discounts, short term specials and other pricing issues are much more in their strategy, than any need to change tactics.
Probably their biggest fear is a price war break out between over-zealous franchisees.
We work with many other businesses for which the opposite must be said. If for example your business is a coffee shop or a pizza business, then it’s all about tactics.
Just look at the pizza wars between Dominos, Pizza Hut and others over the last few years. This shows a focus on tactics (normally called discounting) – or the race to the bottom.
As we all know Pizza Hut Australia was sold off by Yum! Restaurants, Eagle Boys went into receivership and was purchased by the new look Pizza Hut, and Dominos has continued to grow.
The collateral damage for this tactical approach has been very unhappy franchisees. Just think of the legal case of franchisees against the Pizza Hut franchisor for its rock bottom prices. Other franchisees left the business or have discovered that they cannot meet their own expectations.
Compare these actions to another sector driven by discounting and tactics, the oil industry. When the oil businesses stopped training sales representatives to save on training costs, the long term effect was a generation of untrained people who were making major and costly decisions.
The oil industry turned this around, and became very profitable – partly due to consolidation of brands. The pizza business chose more tactics than strategy. However, as with the oil industry, when profitability returns, companies can again take on a longer term strategic view.
Lessons to be learnt for franchisees
If franchisees understand the difference between strategy – a longer tem set of aims, and tactics – the short term, day to day events, they will probably save themselves a lot of money.
Skirmishes driven by ego are unnecessary. I hear on a regular basis that ‘if a similar business opens somewhere near me, it will kill my business!’ This may occur, but in many cases competing brands can actually work as a positive, bringing more people into the area to become their customers.
Why do homemaker centres exist with four bed retailers and four electronics retailers? It isn’t just because they like each other. No, the answer is that from a strategic viewpoint, they actually benefit from each other. The tactical position is what happens day to day with local area marketing, specials and pricing.
Don’t fight with shadows, and pick the battles you need to be in. Franchisees and franchisors need to think about long term strategy, and then support that with shorter term tactics to tune the business to win the race.
Contact Spectrum Analysis if you would like more information or advice.