Do You Really Need a Business Strategy?

Last Updated Oct 12, 2010 9:02 PM EDT

I sit on the board of a company, HTM, which we will probably close before the year is out. It never was a great or important business, but it was full of creative, highly committed individuals who did excellent work with a passion. But HTM's leadership was always keen to plough new ground, innovate and move forward. Management saw this as a means of diversifying risk: serving so many different kinds of client meant no dependency on any one of them.

I always took the opposite view. I thought HTM spread itself too thin. The business lacked focus. We did too many new things without discovering any leverage or efficiencies across projects. To my own astonishment, I found myself arguing that the small team was too innovative, expending too much energy inventing new things when they needed to be re-selling old things, lowering costs, increasing margins.

Like many companies, HTM had its best year in 2008. When the banks failed and it didn't, the company felt almost invincible. And my argument for focus seemed perverse.

But now we're in a recession, all our clients are short of cash and they can all live without our services. HTM never made itself important enough to any single group of customers. And we have no single core competency valuable enough for anyone to buy. To sell or merge a business, you need something to sell: customers, intellectual property or hard plant. We don't have any of those assets. We have creative people -- but anyone can hire them. This business had lots going for it -- commitment, drive, creativity, experience. What it never had was a strategy.

I used to complain that strategy was something professors taught at business school because they had no direct experience with the daily grind of running a business. But HTM showed me what happens when you have no strategy, when all you do is chase cash. Without a strategy, you can build revenue, but you don't build value.

Now I regret those meetings when I argued for more focus. I should have fought even harder. What I didn't appreciate at the time was that a clearer definition of the business could have forged the strong strategic partnerships that, right now, might have saved our bacon.

HTM isn't the company's real name of course. HTM stands for hand-to-mouth, the only strategy it ever had. If HTM closes, the recession will get the blame but, truthfully, it's our fault. Unprepared to make hard choices, pursuing short-term gains in the absence of any long-term plan, the company sacrificed strategy to cash. A hard lesson -- and tough to absorb in a recession -- that cash is not the only king.

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.