The Four Most Important Questions in Business Strategy

by Sameer Jagetia

Plans are useless, but planning is indispensable.

– Dwight D. Eisenhower

In a recent presentation I attended, a prominent VC commented that none of their successful companies are still executing against their original business plan. These companies, however, iterated around their original idea to find product-market fit. 

This anecdote may appear to make the case against planning around business strategy. On the contrary, such planning is what creates the conditions for future success. Rather than providing rigid constraints, this planning increases agility and product iterations. 

Business planning creates a forcing function around strategic thinking. It requires entrepreneurs to express key assumptions, allowing for future validation or rejecting incorrect assumptions. With a business strategy in place, entrepreneurs can quickly assess incoming information and potential opportunities.

Business Strategy Framework - the How

We know that business strategy and planning is important. The how is through a four-prong framework of questions presented below. These questions overlap with how investors evaluate prospective investments (even if the wording or groupings slightly differ).

Question 1: What is the market opportunity? And why now?

Is there a problem worth solving, and is there a corresponding (achievable) solution? 

And, what has changed to make now the right time for your solution? Has the customer problem not yet been solved because it is new? Or is it because the solution is only now available? The latter often coincides with big platform changes such as mobile/smartphone adoption, blockchain, etc.

The next step is to evaluate the broader market: the market size, the market growth and also the rate of change. The market size and related TAM/SAM/SOM* address whether sufficient economics exist to make this a worthwhile market to be in. The market growth and rate of change determine whether there will be headwinds or tailwinds in entering the market. All things equal, it is easier to target a growing market where the rate of change (and acceptance of new solutions) is increasing.

Relating back to the original premise that planning is indispensable - having a point of view on how the market will change over time helps reveal business opportunities as the market evolves. If your initial solution does not find product/market fit right away (which is often the case), understanding your end market is critical for successful iterations/pivots. 

Question 2: Where are the margins in the market?

Pricing a product should correlate with the value provided; not the company’s cost to deliver and its associated sales/marketing costs. Margins are the result of this interplay.

By understanding value provided and margins through the full supply chain, you’ll have a better understanding of potential areas to target. As Jeff Bezos said, “Your margin is my opportunity”. These are the areas to iterate against. Conversely, if there is no margin or limited margin in a part of the value stack, either move to the next area or be sure of a massive scale opportunity.

Question 3: Is this the right team?

The key here is to evaluate the level of functional and/or industry expertise the team brings to the company. And, maybe more importantly, identify the passion for what you are building. When building a new company, success never comes in a straight line. Founders will need a ‘walk through walls’ mentality to get through the inevitable troughs on the journey. 

Judging functional and industry expertise is important as an honest assessment of the team’s skills and viewpoints - and where any gaps may be. While domain expertise is often preferred, somebody new to an industry can bring outside thinking to something that “has always been done that way”. 

Knowing the team’s strengths (and weaknesses) helps guide which potential opportunities to test, validate and explore.

Question 4: Can the team execute?

The proof here is showing traction. And on the right metrics. 

Set the right milestones. And meet or exceed them.

Companies need to execute across so many areas - building the right product, marketing/selling, recruiting talent, fundraising, managing finance, legal and HR - that it may seem disingenuous to distill execution into just one question. 

What is important is to create the expectation of success and the confidence that the team can write the playbook to succeed across all these areas. 

Putting it together

Building a startup is difficult. Entrepreneurs are trying to shape and create an inherently unpredictable future. 

Increase your odds of success by following this four-prong framework. The best opportunities are easier to find with a deep understanding of the market opportunity and the team’s capabilities.

Luck is what happens when preparation meets opportunity (Seneca).

* TAM is Total Addressable Market, SAM is Serviceable Addressable Market, SOM is Serviceable Obtainable Market