Strategy as a set of choices
Choose whom to serve, why customers should prefer your offer, and what you will limit to deliver it.
State which customers a company serves, how it will win, and one trade-off that makes its strategy more than a growth target.
Overview
The owner of Lane Bicycle Service wants to increase annual revenue by 20%. She is considering same-day commuter repairs, custom racing bikes, and discounted family tune-ups.
Each could bring customers. Each also requires different inventory, skills, scheduling, and prices. Her next decision is which promise the shop will organize itself to deliver.
All companies, customer findings, and figures in this lesson are fictional teaching assumptions.
Recall Lesson 008: Besides another bicycle shop, what alternative could satisfy a commuter's need to get to work? Hold your answer for the debrief.
The choices behind a strategy
A goal states a desired result, such as increasing revenue by 20%. A strategy describes a connected set of choices about customers, the value offered to them, and the work needed to compete successfully. Michael Porter's framework emphasizes a distinctive offer, supporting activities, and trade-offs. Source: Harvard Business School.
Start with three questions. Which customers will we serve? Why should they choose us over their realistic alternatives? What will we decline or limit to deliver that value reliably?
“Win” here means earning enough customer preference and revenue to sustain the business. You do not need to serve everyone or eliminate competitors. Customers can prefer different combinations of speed, convenience, selection, service, and price.
A useful answer names the reason a particular customer would choose the offer. “Excellent service” leaves too much unspecified. “A commuter can book a standard repair before work and collect the bike by 5 p.m.” gives the team a concrete promise to support.
The owner must also check that enough customers value the promise, will pay the proposed price, and can be served at an acceptable cost. A clear strategy can still rest on a mistaken assumption.
Trade-offs and supporting activities
A trade-off means accepting less of one desirable thing to obtain another. Strategic trade-offs often arise when serving different needs requires incompatible activities. Offering unlimited customization, for example, can make predictable completion times harder to maintain. Source: Harvard Business School.
Lane might decline complex custom builds to keep room for routine commuter repairs. It gives up potentially valuable orders in exchange for a more reliable daily service.
Activities have fit when they support one another. In Porter's framework, managers connect the work across the business so that the chosen offer is practical to deliver. Source: Harvard Business School.
For Lane, online intake could identify eligible repairs before arrival. Stocking common parts could reduce waiting. Reserving daily repair slots could support the collection promise. Advertising speed without these operating choices would expose customers to disappointment.
Improving an existing process also matters. A tidier workshop may help any bicycle shop. Strategy helps the owner decide which improvements deserve scarce time and money for the customers she has chosen.
Worked example
Suppose Lane chooses local weekday commuters who depend on their bikes and value predictable collection times. It offers a defined same-day repair package for $120, limited to specified common repairs. Parts and labor cost $70 per completed package. Its mechanic has six available productive hours each day.
A standard package takes one hour. One proposed custom build takes all six hours, sells for $600, and has $390 of parts and labor costs. These costs change with the work accepted; other daily expenses are unchanged. Assume enough demand for six packages and reliable payment. Ignore taxes.
| Daily choice | Revenue | Costs that change with the work | Amount left for other expenses and profit |
|---|---|---|---|
| Six standard packages | 6 × $120 = $720 | 6 × $70 = $420 | $720 − $420 = $300 |
| One custom build | $600 | $390 | $600 − $390 = $210 |
On these assumptions, accepting the custom build gives up $90 of the amount available to cover other expenses and profit: $300 − $210 = $90. Neither amount is the shop's total profit.
Declining the build also preserves capacity for the chosen customer promise. But if only three standard packages would sell, their remaining amount would be 3 × ($120 − $70) = $150. The financial comparison would change.
The owner should test demand and actual repair times. Strategy guides which business to build over time; a single day's calculation cannot establish that it will succeed.
Exercise
Allow 6–8 minutes. PlainDesk, an established software company, serves small repair shops that need to schedule jobs and send invoices. Customers can instead use spreadsheets or larger software packages. Interviews suggest its customers value getting started within one day with little training.
PlainDesk charges $80 per month and provides standard workflows and group training. A national chain offers $40,000 for custom approval workflows. Delivering them would use the entire six-person product team for three months, delaying planned improvements to setup and invoicing. Maintaining the custom workflows would require continuing support. The contract's total costs and renewal terms are unknown.
- Write two sentences stating whom PlainDesk serves, why those customers would choose it, and one trade-off.
- Name two activities that support that strategy.
- Recommend whether to accept the chain's offer now. Identify the apparent conflict and one missing fact that could change your recommendation.
- Explain why “grow revenue by 25%” would leave these decisions unresolved.
Answer
A reasonable statement is: “PlainDesk serves small repair shops that need scheduling and invoicing running within one day. It offers standard workflows and simple setup, while limiting custom development that would delay improvements for those shops.”
Useful activities include testing setup with first-time users, maintaining ready-made repair-shop templates, and providing repeatable group training. The team should measure actual setup time to check whether it delivers the promised benefit.
Defer acceptance until the team understands the contract and explicitly considers the strategic choice. Three months of custom development would postpone work supporting the current customers' main reason for buying. The $40,000 is revenue; without development and support costs, it does not establish profit.
The chain could be worth serving under a deliberate change of direction. Evidence of repeatable demand from similar chains, credible costs, and attractive renewal terms could support that choice. Hiring a separate team might reduce the conflict, but its cost and availability are not supplied.
A revenue target gives no guidance on which customers, features, or commitments to prioritize. The strategy should help people make those decisions consistently.
Recall answer: A commuter might take a bus, drive, or work remotely where permitted. Lane must understand whether a fast repair is preferable to those options in the customer's circumstances.
Applying this lesson
Try stating a business's strategy in three parts: the customer it chooses, the reason that customer should prefer it, and an attractive opportunity it will limit to keep its promise. Then name the activities needed to make those choices work.
Next: From goals to operating decisions. We will connect a broad goal to a measurable outcome, a practical action, and an assumption to test.
Sources
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