2021: Good strategy, bad strategy or no strategy at all?

Legendary GE chairman Jack Welch liked to say, “The first step to making a strategy real is figuring out the big ‘Aha!’ that gives you sustainable competitive advantage.” Following that logic, Welch said: “If you don’t have a sustainable competitive advantage, then don’t [try to] compete.”

I know what you’re thinking: “Our firm is doing well, but I don’t know if we really have a sustainable competitive advantage.” Actually, you do have a competitive advantage: It’s called your relationship with your clients. And if you’re thinking to yourself: “Geez, now I have to develop a strategy on top of getting through busy season,” that’s actually a good thing. It puts you ahead of most of your peers.

I’ve found that many highly motivated people confuse goals with strategy. There’s a big difference. There’s a great book by Richard Rumelt called Good Strategy, Bad Strategy. Rumelt believes there are three key elements at the core of every good strategy:
1. The diagnosis;
2. The guiding policy;
3. The coherent actions.

Rumelt calls those three elements the “kernel” of a strategy. Let’s take them one at a time.

Step 1: The diagnosis. Like most people, many CPAs have a hard time simplifying all the complexity in their lives. It could be figuring out how to bring in great people to their firms, or improving their systems and processes. or getting better at marketing. Well, you can’t solve tough problems unless you diagnose them properly.

Charles Kettering, the iconic former head of research for General Motors liked to say, “A problem well stated is [already] half solved.” Using an "Impact Filter", which I discuss later in this article, can be a great, simple tool for helping you ask the right questions.

Step 2: The guiding policy. After diagnosing the problem, the next step is figuring out how you are going to deal with it. What’s your overall approach? What’s your big-picture plan? January is when most people, full of hope, talk about all the things they’re going to accomplish in the year ahead. Unfortunately, just talking about what you’re going to do is not going to move the ball down the field. Instead, you must be very intentional about how you plan to use your firm’s resources.

You only have so many resources — time, money and people — to go around. A truly coherent strategy forces you to pull resources toward areas of higher expected return and away from areas of lower expected return. You can’t allocate all your resources to every single initiative on your list. If you do, you’ll find yourself spread too thin and not making progress on anything.

Sound familiar?

Step 3: The coherent actions. According to Rumelt, these are the clear steps that need to be coordinated to carry out your guiding policy (see Step 2 above). In other words, identify what needs to be done, by whom and by when to implement your strategy.

Famed Silicon Valley venture capitalist Peter Thiel believes that with the right strategy in place, you can reach your 10-year goals in just six months. You don’t have to be a high-flying tech firm or a pharma company developing a COVID vaccine to accomplish this. You just need to determine the areas of your business that you need to be accelerated ASAP — and then allocate the necessary resources to support those areas.

What I learned the hard way

When I started my firm, I was full of boundless energy. I thought I had really solid 10-year goals and enough energy to tackle every opportunity that came my way. I learned over time that I did not have a coherent strategy. I did not have a kernel, as Rumelt would say. I simply had aspirations such as growing 10 percent each year, making three great new hires a year, or providing best-in-class client service.

Great ambitions, but I wasn’t thinking carefully about how many additional resources I’d need to deploy to reach those goals. I wasn’t thinking about where I’d have to sacrifice resources from other areas.

Resources and techniques to help you prioritize

One of the best ways to formulate a well-asked question is to use a simple Impact Filter. It’s a simple one-page form developed by Dan Sullivan, a.k.a. The Strategic Coach. The filter forces you to crystallize your thinking about an idea or initiative and helps you arrive quickly at a tangible go/no-go decision. If nothing else, the Impact Filter will prevent you from meandering and wasting precious time and resources.

90 Day Rocks, pioneered by EOS Software, are great for prioritizing your goals and resources — and for measuring your progress as you pursue them. Write down the top five things you could accomplish at your firm over the next 90 days:
1. Having a better client onboarding process;
2. Building a better client portal/vault;
3. Implementing a better CRM;
4. Just making April less stressful;
5. Improve your staff’s continuing education program.

Now pick one of those items above — just one — and cross off the other four. Be 100-percent committed to doing the one thing you selected. Make sure everyone at your firm is onboard with that decision, too.

Often the hardest part about developing a new habit is just getting started. Once you do, you’ll become a bona fide Anti-Fragile CPA before you know it — a trusted advisor who adapts well to change and who always helps clients and team members make better decisions.

Talk about a competitive advantage!