Principles

“We’ll double our sales.”

“We’ll expand into international markets next year.”

“We’ll become the leading company in our industry.”

“We’ll adopt AI and make our work much more efficient.”

“We’ll hire strong people and take the company to the next level.”

These may be good goals. None of them is a strategy yet.

A goal describes where you want to go. A strategy must explain which choices, assumptions and actions will get you there, and why that particular approach should work.

If there is no credible causal link between the goal and the outcome, it is not a strategy. It is wishful thinking.

Ambition Is No Substitute for Strategy

Almost every business leader wants to grow, become more profitable, find better customers and build a stronger team.

Wanting these things does not distinguish one company from another.

Strategy begins only when a leader can answer the following questions.

Why should a customer choose us? Which customer are we deliberately working hard to serve? Which problem do we solve better than our competitors? What capability are we building our advantage on? What are we prepared to give up? What must change within the company for our chosen direction to become a reality?

If there are no specific answers to these questions, the company does not yet have a strategy. It has a desired outcome.

The difference is greater than it may first appear.

A goal can inspire people. A strategy must help them make decisions.

Wishful Thinking Often Begins with a Forecast Spreadsheet

One of the most common imitations of strategy is a budget or sales forecast.

Last year’s revenue was one million euros. Next year, we want to reach one and a half million. Sales are increased by 50 percent, costs are spread across the months, and the result is a spreadsheet that looks precise and reliable.

But the spreadsheet does not explain where the additional half a million euros will come from.

Will existing customers buy more? Will prices be raised? Will a new customer segment be found? Can the sales team handle more opportunities? Does the company have enough production or service delivery capacity? Are there even enough suitable buyers in the market? Why should sales grow faster next year than they have so far?

If the answer to these questions is “the salespeople need to try harder,” there is no growth strategy.

A number in a spreadsheet does not become a strategy simply because it has been given a deadline and an owner.

A Vision Can Be Bold. A Strategy Must Be Credible

A good vision does not have to be modest. A vision should show what kind of future you want to create and why it is worth working toward.

The role of strategy is to build a bridge between today’s situation and that future.

Wishful thinking leaves the bridge unbuilt.

A company says it wants to be the market leader, but has not defined the market in which it competes.

It wants to enter an international market, but does not know why a customer in another country should trust it over a local provider.

It wants to grow, but delivering its service depends entirely on the founder’s personal time.

It wants to hire better people, but cannot explain what outcomes they will be accountable for.

It wants to use AI to increase efficiency, but its existing processes are undocumented and work moves through the company haphazardly.

The ambition may be right. But without a functioning bridge, it remains on the other side.

Strategy Means Making Choices

The easiest way to recognize wishful thinking is to see whether the strategy includes trade-offs.

If a company wants to serve every customer, offer every service, operate in every market, use every sales channel and develop every product at once, it has not made a strategic choice.

It has made a wish list.

A real strategy states, for example:

• which customer we will focus on first;
• which costly problem we will solve for that customer;
• which offering we will build around that problem;
• which channel will enable us to reach that customer;
• which capability will set us apart from others;
• what we will deliberately not do during the next period.

A choice limits possibilities. That is precisely why it is useful.

If everything remains a priority, nothing is truly a priority. People then have to decide for themselves what matters, and each person creates their own version of the company’s strategy.

Seven Signs That Your Strategy Is Wishful Thinking

1. The Outcome Is Described, but Not the Mechanism That Will Produce It

“We’ll grow by 30 percent” describes an outcome.

A strategy must show where that growth will come from: which customers, which offering, which price, which sales channel and which new capability will generate it.

If there is no clear causal chain, the growth figure is merely a hope.

2. The Strategy Includes No Trade-Offs

If, after the strategy has been approved, all existing activities continue and a few new ones are simply added, the strategy has not changed the company’s focus.

A real strategy frees up resources for the chosen direction. This means something must be stopped, postponed or scaled back.

3. The Plan Is Based on Untested Assumptions

The company assumes that customers want the new product, that a price increase will not affect demand, that partners will be easy to find in an international market or that a new salesperson will deliver results quickly.

All strategies contain assumptions. The problem arises when assumptions are treated as facts.

A strong strategy identifies the critical assumptions and explains how they will be tested.

4. Market Feedback Has Been Replaced by Internal Conviction

Management may be completely convinced by the idea. Employees may also express their support for it in a meeting.

That does not prove that a customer is willing to pay.

A strategy does not become right because everyone within the company has reached a consensus. Claims about the market must be supported by evidence from the market: customer behavior, real purchasing decisions, usage data or, at the very least, sufficiently strong validated signals.

5. The Strategy Requires Capabilities the Company Does Not Actually Have

The plan may require international sales, more sophisticated product development, greater management capability or an entirely new service model.

If the company lacks the necessary people, processes, money or decision-making ability, stating the goal is not yet a solution.

The strategy must also answer the question of how the necessary capability will be created.

6. People Cannot Say What They Need to Do Differently

If management presents a new strategy but people’s work continues in exactly the same way the following Monday, the strategy has remained in management’s presentation.

An effective strategy changes choices in day-to-day work.

One customer group becomes more important. One activity is stopped. One decision is assigned to someone else. One process is redesigned. The responsibilities of one role change.

If no one knows what will change in their work, the strategy has not made its way into the company’s operations.

7. There Is No Agreement on When the Strategy Will Be Declared Wrong

Wishful thinking protects itself indefinitely.

If results fail to materialize, people say that more time, more marketing, better people or a larger budget are needed. The original assumption is never questioned.

A strong strategy has checkpoints. The company knows which early result it expects, by when it must appear and what evidence would require the chosen direction to be reconsidered.

A strategy is not a belief to be defended at all costs. It is a reasoned hypothesis that must be tested against reality.

In a Young Company, the Founder’s Conviction Can Easily Become the Strategy

A founder must have strong faith in the company. Without it, enduring uncertainty, setbacks and a long period in which results are not yet visible is difficult.

But that same quality can become a threat.

The founder knows the product is good. Therefore, the market is bound to understand it soon. If sales do not come, more marketing is needed. If customers do not stay, features must be added. If people cannot cope, stronger people must be hired.

In this way, a company can spend years improving an offering that the market does not need enough, or expanding the organization before it has found a viable business model.

The situation is particularly dangerous when a company has been operating for five or ten years, done a great deal of work, hired people and built a substantial product, but still has not gained traction.

The more that has been invested, the harder it is to ask whether the original core assumption was ever right.

But sometimes that is the most valuable question of all.

Strategy Must Connect the Market and the Company

A good strategy is not limited to describing the market. Nor are internal company goals enough.

At a minimum, it must connect the following chain:

customer problem → value proposition → differentiation → sales approach → service or product delivery → required processes → required roles and people → measurable outcome

If one link in this chain is missing, a disconnect emerges between the strategy and the actual work.

The company may find the right customer, but its offering is not differentiated.

The offering may be strong, but the sales channel does not reach the decision-maker.

Sales may work, but the company cannot deliver the promised value profitably.

The processes may be in place, but the right people are not in the critical roles.

The right people may be there, but they lack clear accountability and decision-making authority.

The quality of a strategy is not demonstrated by how convincingly it is presented. It is demonstrated by how well the entire chain works.

Eight Questions to Test Your Strategy

If you want to know whether your company has a strategy or merely wishful thinking, ask:

1. Which costly problem are we solving for which specific customer?
2. Why should that customer choose us over the existing alternatives?
3. What evidence supports our assumptions?
4. What must be true for the chosen strategy to work?
5. What are we deliberately giving up in favor of this direction?
6. Which capability must be added within the company?
7. What do people need to do differently in their day-to-day work?
8. Which result, or lack of one, will show that the strategy needs to change?

If the answers remain vague, the problem is not how the questions are worded. The problem is a lack of clarity in the strategy.

A Good Strategy Reduces Confusion

A strategy does not have to predict the future perfectly. That is impossible.

It must, however, provide the company with a sufficiently clear shared logic for making decisions, allocating resources and evaluating results.

A good strategy says:

• where we are going;
• why we are going there;
• how we intend to win;
• what we will not do in pursuit of it;
• what kind of system we need;
• which people can execute it;
• how we will know whether we were right.

Wishful thinking describes a desired future.

Strategy changes today’s decisions.

If your company’s strategy does not help you decide which customer to say “yes” to, which opportunity to say “no” to, what to stop, where to invest and who is accountable for what, it is not ready yet.

Challeng.ist helps a company determine whether its chosen direction is based on a genuine opportunity, whether the company’s processes can support it and whether its existing people can execute it.

If you have a strategy that looks good on paper but has not begun to deliver results, send me that one specific problem.

The strategy may not need more activities. It may need one honest choice.

Mikk OrglaanChalleng.ist