Strategy is finding the big aha (a smart, realistic, relatively fast way to gain sustainable competitive advantage) and setting a broad direction, putting the right people behind it, and then executing with an unyielding emphasis on continual improvement.

The strategy means making clear-cut choices about how to compete. You cannot be everything to everybody, no matter what the size of your business or how deep your pockets. Pick the product or the service and concentrate on that aspect.

To get to the big aha, there are 5 sets of questions to be answered:

A)    What does the Playing Field Look Like Now

1. Who are the competitors in this business, large, small, new and old?
2. Who has what share, globally and in each market? Where do we fit in?
3. What are the characteristics of this brand? Is in commodity or high value or in between? In is long cycle or short? Where is in on the growth curve? What are the drivers of profitability?
4. What are the strengths and weaknesses of each competitor? How good are their products? How much does each one spend on R&D? How big is each sales force? How performance-driven is each culture?
5. Who are the business’s main customers, and how do they buy?

B)     What the Competition Has Been Up To

1. What has each competitor done in the past year to change the playing field?
2. Has anyone introduced game-changing new products, new technology or a new distribution channel?
3. Are there any new entrants, and what have they been up to in the past year?

C)   What You’ve Been Up To

1. What have you done in the past year to change the competitive playing field?
2. Have you bought a company, introduced a new product, hired a competitor’s key salesperson, or licensed a new technology from a start-up?
3. How you lost any competitive advantages that you once had? for example a great salesperson, a special product, a proprietary technology?

D)   What’s Around the Corner?

1. What scares you most in the year ahead – what one or two things could a competitor do to nail you?
2. What new products or technologies could your competitors launch that might change the game?
3. What M& A deal would knock you off your feet?

E)  What’s Your Winning Move?

1. What change you do to change the playing field – is it an acquisition, a new product, globalization?
2. What can you do to make customers stick to you more than ever before and more than to anyone else?

The above questions ask what are you good at? What is your competitors good at? Why use them instead of you?

The next step is the Right People

Only if important people are assigned the strategy, will it be acted upon, if not the normal will continue. The people must fit the job, the business situation and right strategy.

To win companies do two things very well – they imitate and improve. When you find the best practices the strategy is to adapt them and continually improve on them.

As long as you are not a direct competitor, companies and their people love to share their success stories, all you have to do is ask.  Learn from them, what do they do well which can transform to your company or investments?

In terms of budgeting, Mr. Welch believes it should answer 2 questions:

How can we beat last year’s performance?

What is our competition doing, and how can we beat them?

Through these two questions, discussions will come forth with a growth scenario or an operating plan.

Linking to dividend paying stocks, as investors you are doing this work. Mr. Welch helps formalize the questions, but in the end you are concerned is why is the company you are investing in going to continue to make profits and pay you a dividend. The why includes the competition and what advantages the company has. Your research will help you answer and as you answer the question, more will come. You will look at the people in the company, both senior and next level people and do you expect the company to continue to perform?

There are more questions than answers, till the next time – to raising questions.