The Metronomics Strategic System
Ged Roberts
?? Metronomics CEO + Leadership Team Business Coach, ?? Author ??? Podcaster | Showing High-Growth, High-EQ CEOs of $10M+ Businesses how to Achieve Strategic Success in their business and their lives.
The Strategic System
“The essence of Strategy is choosing what NOT to do.”
Michael Porter
The fourth system in Metronomics is the strategy system. It is a prescriptive, structured strategy formulation process that shows you how to build your strategy and then connect it through to execution. It looks at where we want to be in 3 years time, the market the company is operating in, who the core customers are, what you are good at and how this measures up to your competitor’s strengths and weaknesses. From this view it shows you how to identify your 3 - 5 differentiators. Once we have these differentiators we then build out a plan that will show us how to bring these differentiators to life to support our 3HAG, “3 Year Highly Achievable Goal”. Each quarter, over time we validate and refine the strategy so that it is always up to date and alive in the business.
The Metronomics approach to strategy is driven primarily from Michael Porter’s work on Competitive Strategy. Michael Porter defined strategy as “A unique and valuable position involving a different set of activities''. This perspective of strategy indicates to businesses that your strategy has to be unique. We use the strategy system to identify the different set of dimensions that separates the company from its competitors (white space) and formulates a clear game plan that will get you to the next step towards your Big Hairy Audacious Goal (BHAG?). You have to keep moving forward executing on your strategy, as Sun Tzu said “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”. In the Metronomics Strategic System, a key focus of the system is connecting the strategy with execution.?
Here is the Strategy System, starting with the foundations on the left hand side then moving to an evolutionary wheel that we cycle through year on year and as things change in our market and our environment. Strategy is not fixed, it needs to be refined and evolved over time.
?Foundations
To build a powerful strategic system you must understand the importance of a strong foundation. Every team needs clarity on each of the Core Purpose, Core Values, BHAG and Profit/X to drive forward with their goals.?
Core Purpose
It is important that everyone knows why your organisation exists. You may think that the answer to this question is simple but it's critical that everyone else knows why as well. Why did you start your organisation? What are you hoping to achieve and bring to the market?
Core Values
The core values in your organisation are attitudes and behaviours that your team shares. They should be taken into account when looking to hire new employees. When discovering and communicating your team's core values, hopefully you'll find that you are proud of the values that represent your team collectively.
BHAG
Your Big Hairy Audacious Goal gets you and your team to look at where you want the company to be in ten to thirty years. The thought of setting a goal so far into the future can be scary but that is why we push you to set a BHAG. It doesn't have to be super specific but it must have a clear finish line.??
Profit / X
Your Profit/X is effectively how you make money, Jim Collins described it as “the economic denominator that best drives our economic engine”. The X in your business is the thing that drives profit or cashflow so by definition, you want to push more of these through your business profitably to get sustainable revenue growth and profit.
Step 1: Gut It Out
You've got to start somewhere so at the the 2 Day Kick-Off we need to draw a line in the sand and come up with where we want to be in 3 years time. We call this process “Gutting It Out”.
With the entire leadership team discuss and come up with answers to the following questions:
You're looking to just get everything down. Come up with some “good enough” answers that you and your team are satisfied with for now. Good enough for now is what we are looking for.?
This is your starting line. It can be daunting, your team may be hesitant to discuss such topics and that's okay, it is meant to make people feel a little uncomfortable. But at the same time, your team should feel satisfied that everyone has had a chance to discuss these questions and have everything laid out in front of them. We use the “gut it out” process to encourage your team to work together to answer these questions. They are questions that most companies hold off on answering, but are so important. You want to work as a team, you want to look forward to the upcoming 3 years and feel motivated to validate your 3HAG.
I wrote an in-depth article on how to create your 3HAG way back in 2020.
Step 2: Key function Flow Map
The next step is to build our key function flow map. I have already discussed this in my “Why the Key Process Flow Map is critical to your strategic execution” article, but I will briefly touch on it again.?
We consider it a fundamental tool to achieving what you want from your business. At the 2 Day Kick Off, we outline the key functions within the business and identify who is accountable for each task. Although it seems small, it is a really powerful way of reminding team members of their duties and seeing whether certain members have taken on too many responsibilities.?
Once we have done this I then move on to the functional operation status for each key function. I like to use red, amber and green indicators of status. Green means that everything is ticking along smoothly, Amber means that there are some issues that need to be addressed, Red means that there are some serious issues that need to be addressed.
Next we add metrics/widgets to look at what flows throughout the functions. Each function will have some inputs and some outputs and these are normally things that can be measured. This data then becomes a leading indicator as to what functions are flowing or lagging.?
Step 3: The Market Map
The Market Map focuses on placing your company in the ‘white space’, your own dimension where you're competing to be unique, not competing with your contenders. We usually create the Market Map at the First Quarterly Planning session. The Map is a visual opportunity to see who loves you, who hates you, who your competitors are and who holds the most power in your marketplace.?
By creating a Market Map, you and your team are able to see how your business is doing, where you fit in and what actions may need to be taken to become more unique. It's an opportunity for your team to understand what you're doing well and what areas may need improving. I will release a more indepth article about The Market Map in the next few weeks and explain the steps we take to get you into the ‘white space’.
Step 4: Core Customer
Being able to identify your core customer and understand their needs is a critical part of the strategic process. Knowing your customer better than your competitors will help create your unique position in the marketplace. It is important that you focus on the customers who will provide you with the greatest return. We use a process developed by Robert Bloom to find out “Who Is Your Who” by identifying the characteristics of the Core Customers who:
If we can identify this type of core customer, then we can focus our marketing, sales, product and engineering efforts directly at this core customer. This doesn’t mean we won’t work with other customers, it just means that we don’t try to be everything to everybody.
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Steps 5 through 8
I like to group the next stages (steps 5 through 8) of the strategy system together. These steps look at what you want to be better at than any of your competitors so that you are in white space against the dimensions that you choose to compete against.
Step 5: Attribution Framework
The attribution mapping process makes the strategic evaluation of the marketplace more straightforward. It is a tool directed at the market NOT the core customers, we want to take into consideration the broader market. By doing this you are able to identify a bigger or more profitable core customer to the one you are currently serving. You might then decide to pivot your strategy to target this newly identified core customer.
We use the attribution framework to assess whether you are meeting the needs of key attributes of your market. My article “How to find your white space” explains the steps you need to take and shows you what your attribution framework should look like. Ultimately, once you have completed your own attribution framework, you should be able to identify your “white space” There should be a clear space on the attribution map, if you choose to compete in that space, you have little or no competition that can touch you along those specific dimensions. This is your whitespace!
Now what? Well, now that you have found your white space, you need to position your business and your team to control your whitespace. We use the Activity Fit Map - Level 1 and 2 to find a way of meeting the needs of this gap in the market and then strengthening your ability to serve this gap.?
Step 6 and 8: Activity Fit Map - Level 1 and 2?
Now, it looks like we're jumping ahead here but I don't actually like to split the Activity Fit Map into two levels. I have combined both steps 6 and 8 in my article “How to Identify your Differentiators”. These steps are all about finding a way to fill in the gap in the market and strengthening your ability to serve in this gap.?
We use the Activity Fit Map - Level 1 to display the differentiators that you think will put you in a? unique and valuable position. At this point we are referring back to the Attribution Map and are focusing on the clusters that you find the most interesting and/or demanding. This is where you're hoping to find your differentiators, what will set you apart from your competition. Once you have identified your differentiators you will put them on the Activity Fit Map - Level .?
Next, the Activity Fit Map - Level 2 identifies the supporting activities needed to bring these differentiators to life. We add these activities onto the map to capture what you need to focus on to build your unique position in the market.??
I like to use these Activity Fit Maps to show teams how to build a strategically significant and strong position in their market. It is important to know that you will constantly need to assess and update your strategic position as the market changes. Just because it is relevant to the market today does not mean that it will be tomorrow.?
Step 7: One Phrase Strategy
Putting your strategy into one phrase means that your whole team will understand this strategy and help you maintain your unique position in the market. I encourage you to come up with a one phrase strategy to keep you and your team focused. Remember, everyone in your team should know what this one phrase is and how it's relevant to your business. Your one phrase strategy should focus on the key aspects of your business that differentiate you from your competitors. Shannon Byrne Susko suggests that to develop your one phrase strategy you should get each team member to think and write down their answers to the question “what do you want to be known for in three years’ time?” It may take some time to come up with a phrase that your whole team agrees with, however, it is important that you do to ensure it really resonates with your goals.
For example, SouthWest Airlines one phrase strategy is ‘Wheels Up’. The airline decided that if they spend more time in the air than their competitors, they will make more profit. Their one phrase strategy is short and effective. It tells their customers how they are different from their competitors and meets their customers needs.
Step 9: Map out swimlanes
By mapping out your swimlanes you're looking at transforming your strategy into execution. It is now time to bring it all to life. It doesn't matter if you have the best strategy in the market, or in the world for that matter. What is important is knowing that you are actually going to be able to execute your strategy. You want to look back at your differentiators from steps 6 and 8 to create your swimlanes. Each swimlane is split up into 12 quarters so three years in total and in the swimlanes you put the key outcomes or milestones that map out your path to fully implementing your differentiator. We use these swimlanes to give your team a chance to discuss and understand what action needs to be taken to achieve your goals. You may find that it will take your team a while to decide as you agree, disagree and eventually finalise your plans but by the end, everyone should have a clear and concise idea of how these swimlanes will work.
If you're interested in learning more about swimlanes and differentiators, you can read further in my article “Strategy to Execution - Know where you are going with Differntiators and Swimlanes”
Step 10: 36 Month over Month Rolling P&L
A budget is a licence to spend money regardless of what is happening in your topline, we don’t use the term budget for this reason. A forecast in Metronomics is a predicted and calculated set of current to future numbers (financial and non-financial) that connects $$$s to things. We start by forecasting cash, then revenue and expenses month on month over three years into the future. From there we look at the number of key widgets we need to sell to achieve these cash, revenue and expenses numbers.
This probably sounds complicated and even a little scary but by doing it in phases, firstly for Year 1 and then for Years 2 & 3 we can make it more manageable and build confidence the the numbers are correct. Oh, and this is NOT the CFO’s job, this model should be owned by the whole leadership team. Finance may prepare the first cut but the leadership team should take ownership? of the model and evolve it month on month.
I will be writing a separate more in-depth article on how to create a 36 Month over Month Rolling P&L over the next few weeks.
Step 11: Brand Promise with Guarantee
A brand promise with guarantee sets you apart from your competitors by identifying what your consumers need and then being able to meet those needs better than the other business on the market. Your brand promise should show your commitment to your ideal customer and guarantee your commitment to them. It should tell you customers that you have found a void in the market and only you can fill that void with your offerings. It should be a short statement that leads to a promise. If you find that customers are responding positively to your brand promise with a guarantee then you can feel confident that you have aligned your strategy with your 3HAG. If you dont think this is the case, you have an opportunity to come back together with your team and rework your brand promise with a guarantee.?
An example of a brand promise with guarantee is Apple’s “Think Different”. Their guarantee is to create products that show the world in a different way and while doing so, promising to inspire their customers to see it differently as well.?
Step 12: Confirm 3HAG
Now that we’ve reached Step 12 we have completed a full year of the Strategy System. We know that the Strategy system is a never ending process. Not one strategy is constant, it will evolve as your company and team evolves.? At the end of the 12 steps you and your team should be able to confidently explain your strategy and share why it is so unique from your competitors, but we're not done yet, we've only completed the first year. We're brought right back to Step 1, where in the next two years you will follow the same steps as your team continues to learn and grow.?
As we come to a full circle, we want to confirm our growth foundations, our Core Purpose, Core Values, BHAG and Profit/X. These are the foundation for a successful business. They are the key to ensuring that your team is confident and focused and able to outrun your competitors. You and your team should be checking in on your growth foundations every quarter to ensure all is running smoothly.?
You should meet regularly with your team to discuss the progression of your strategy system and where you think you need to head next. By giving your team the chance to communicate their thoughts, concerns and opinions hopefully you'll find that you are all heading in the same direction and are working towards your goals.?
Step X Secret Sauce?
Step X or your Secret Sauce is a critical part of the strategy process. According to the book 3HAG Way by Shannon Byrne Susko, your secret sauce is “the unique solution to a problem in your industry that no one wants to solve”. It gives you significant competitive advantage as only you will know the resolution to such a big issue in the market. Your secret sauce should specifically benefit your audience, master the market and be something that only your business can offer. It may take you a long time to figure out/decide what your secret sauce is so here are some ways you and your team can determine your own secret sauce.
Remember, there is no point having a secret sauce if it is available to all your competitors therefore, do not share it! You and your team want to stay ahead of the competition by being the only ones that know your secret sauce.?
Summary and Conclusion
The Strategy System is a 12-step process designed to help businesses identify their unique position in the market and develop a strategy to ensure they stay ahead of the competition. The process involves assessing the market and identifying a gap in the market, creating an attribution framework to identify potential core customers, creating a one phrase strategy, identifying differentiators, mapping out swimlanes, creating a rolling P&L, creating a brand promise with a guarantee, and identifying a secret sauce. All of these steps should be revisited regularly to ensure that the business is staying ahead of the competition and adapting to the ever-shifting context.
This doesn't happen overnight and can be involved, after all if strategy was easy, then every business would have their strategy nailed from Day 1. Want some help to guide and coach you through this process, give me a call on +61 415 534239.
This article was written by Ged Roberts and Aoife Roberts in December 2022 and January 2023.