A lot goes into developing a business strategy for these firms. The work needs to be guided by four fundamental principles:
- 1. The elements of the strategy need to be the right things to make the firm more successful. — This means taking into account the firm’s clients and target clients as well as the competitive landscape. A key mistake to avoid is blindly copying competitors’ strategies. In his classic HBR article “What Is Strategy” (first published in 1996), Michael Porter defines strategy as committing to do things that are different from what others are already doing. He contrasts this with copying competitors which may be necessary to stay competitive but is not strategic. In the case of accounting & advisory firms, not only is copying competitors non-strategic, it may be suicidal. For example, building a practice focused on an industry that has matured and is saturated by competitors may be doomed to failure. Or, even if there is room left for a new entrant in this market, it may be the wrong time in the business cycle to try to penetrate.
- 2. The strategy needs to be embraced by the firm’s leadership. — Committing to particular strategic initiative just to make certain partners happy or because it sounds good in the moment is a mistake. Any strategy takes focus, resource commitments and strong leadership. A tacit leadership strategic decision that has weak underlying conviction and commitment is unlikely to succeed. If you aren’t enthusiastic, just say no! You’ll be glad you did.
- 3. The firm’s partners need to be capable of executing the strategy. — In theory, there are a lot of good ideas, but for them to be right for your firm you either have to have the talent on the ground that can execute the strategy or be certain that you can acquire and integrate it. Too many unsuccessful strategies lack these essential ingredients.
- 4. The firm’s partners need to be motivated to embrace the strategy. — Even the right strategy based on research, leadership support and partner talent will fail if the partners are not motivated to make it happen. To avoid this pitfall, involve the partners in the strategic process and gauge their commitment. Remember, managing partners can be like herding cats, particularly is they don’t believe in what you want them to do!