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How to find your strategic sweet spot and why it matters
Why sweet?
There are certain capabilities and resources that you, as a leader in your firm, should be helping develop and corresponding growth opportunities that you should also be pursuing. Working them out is a conundrum for many leaders, especially in today’s rapidly changing climate in which competition is rife.
A business needs something distinctive and special compared to its competition. This is how it creates value, and it does so either by having relatively lower costs and pricing aggressively, or by tailoring everything around customers or offering the best product/service to justify higher pricing.
Choosing the most appropriate capabilities and growth opportunities is hard though, as capabilities like great innovation, marketing and production, for instance, involve skills and talent that are organized in a process and embedded in a culture. It follows that they will need time to bear new fruits. As a result, you will need to make strategic decisions before you can pursue potential future opportunities.
All this means that perhaps the greatest challenge of strategic thinking today is making decisions about capability development given that you don’t know what the future is going to hold.
And yet, the ability to make these decisions is the key differentiator between good and great leaders; great leaders move the firm along, and in the right direction.
Perform the LEGO sweet spot search
This exercise will help you to identify, expand and deepen your sweet spot.
Once upon a time, LEGO paused to analyze three of its business lines (clothing, shop and theme parks). The firm found that it did not have a sweet spot it could protect among the three. The action taken was to phase out their clothing and theme park business lines.
Plastic building bricks, they concluded, were their sweet spot. But this area itself was both shrinking and getting shallower, and they were losing customers and profits in tandem. LEGO’s challenge therefore lay in expanding and deepening their sweet spot.
To do the same for your firm, ask yourself what challenges you have in expanding your sweet spot. These are top-line questions.
Next, ask what challenges you have in terms of deepening this sweet spot. These are bottom-line concerns.
Above all, remember that the strategic positioning of your business today (identifying your sweet spot) will put you in a position to look at alternative ways to expand and deepen it. That way you will add value to your firm, your customers and society at large.
How often should you do this exercise?
Good strategy is not done once a year. You always should be thinking strategically and with agility in how you operate and use resources. Agility may require divestment, rather than investment, to free up the resources needed to deepen and expand your sweet spot. Too many companies hesitate to kill their “sacred cows” until it’s too late.
The sweet spot is more commonly called the firm’s unique selling point, or distinctive competitive competence. George Tovstiga calls it the firm’s “unique competing space” in his book, Strategy in Practice: A Practitioner’s Guide to Strategic Thinking, 3rd edition, Wiley 2015.
Professor Stéphane J.G. Girod’s forthcoming book, Resetting Management, explores business agility more widely. It is available at Amazon.
To develop your strategic thinking, or create a strategy for your business or organization, consider IMD’s online program Strategic Thinking, starting 11 October 2021.
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