Strategy is all about choice: what we will not do is at least as important as what we will do.
When you dig a level deeper into the generic ‘will I or won’t I’, you come to the question of how do you make what are almost always difficult choices between options in the absence of full information.
At a top level, that choice is driven by two factors:
Cost structure.
There is always a cost to delivering product. Understanding the cost drivers associated with your product and business model is essential. You will then be able to make informed choices about how best to minimise those costs without compromising the value you deliver to customers.
Value creation.
Selling a product of any type depends on a buyer seeing the value created by their purchase as being greater than the cost of the purchase. ‘Value’ is a very personal term. The value of an expensive watch is not in the ability of that watch to tell the time, it resides in a range of psychological drivers that drive individual behaviour and choice.
Until recently, most of the costs involved were of a physical nature, now they are increasingly behavioural. Similarly with value creation, in the past it was the utility you got out of a physical purchase, but physical utility has been usurped by digital and emotional utility.
Understanding both is critical to success.
