Question: Why do most small business owners fail at strategy?
It is well documented that small businesses do fail at strategy: according to the SBA approximately 600,000 small businesses are created every year and less than 1% make it to ten years and $10M in revenues.
Ephor Research has found that failure is primarily because of resource constraints (capital and talent), lack of defined processes and operating model, and shortage of strategic options.
A “Chief Strategy Officer” (CSO) can create an effective and relevant strategy which addresses resource constraints resulting in strategic options with scenario plans as well as connection of the strategy to both the financials and daily execution of the business.
While the CEO makes the ultimate decisions; a CSO explores alternatives and creates options.
The role of the CSO is not one of “business planning;” as the job of budgeting/forecasting should be left to the department heads and finance.
The CSO’s job is focused on exploring strategic alternatives, examining potential acquisitions and alliances, ensuring healthy dialogues, and facilitating creative tension among executives and the Company’s Board. CSOs perform primary market research, market intelligence gathering and ensure that the executive team and Company Board are able to understand implications of various choices in order to make informed decisions.
A CSO is a consultative role; part leader and part doer, an experienced visionary with the responsibility of ensuring execution follows the company’s strategy. This unique background takes a multitude of different operating experiences, must include being both a creative thinker and influential collaborator (not a dictator or “me first” commando), and must ultimately be a detailed tactician / project manager.
A small businesses by its nature has limited options: either grow organically, increase the financing, merge, or sell. Ultimately, the #1 job of the CSO is to create “Optionality” for the team. As a business grows and becomes profitable it creates options for itself and the stakeholders such as:
- Financial and Capital Raises
- Strategic Partnerships and/or Technology Partnerships
- Joint Ventures and Alliances
- Market and/or Product/Service Expansion
- Strategic Investor
- Alternative Product Distribution
The CSO role need not be an internal or dedicated resource. Many firms have elected to outsource this role to domain experts and advisory firms that can bring experience, intellectual capital and best-of-breed processes.
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