7-Strata Strategy Framework: A Step-by-Step Tutorial on the Art of Scaling Up

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Short Version

The 7-Strata tool helps everyone in your company get on the same page, from the top executives to the employees working directly with customers. It makes sure everyone understands and is working towards the same big goals and vision.

  • By defining an ambitious long-term goal, the promises your brand makes, and what makes you unique, the 7-Strata tool helps your business stand out from the competition and gives customers a clear reason to choose you.
  • The 7-Strata approach to planning for the future is adaptable, so your business can change and update its strategy when needed to keep up with the market. This helps your company keep growing and stay strong over the long run.

It's no secret that a strategic plan forms the backbone of any successful enterprise. This roadmap provides direction and ensures a common understanding among all stakeholders regarding the company's purpose, vision, and mission. One of the most robust frameworks for crafting this strategic plan is the 7-Strata tool, as taught by Verne Harnish, author of the bestselling book, "Scaling Up."

So why would a company use the 7-Strata tool? This tool provides a company with a concise, clear, and compelling strategy that is easily communicated and understood by everyone involved – from the boardroom to the breakroom.

Why Use the 7-Strata Tool?

Clarity of Strategy

The 7-Strata tool provides a simplified and comprehensive roadmap for your organization's strategic intent. It breaks down your strategy into seven layers or strata, each addressing a critical aspect of your business. From defining your core values and purpose to understanding your brand promises, this tool ensures that your entire team is aligned and working towards the same objectives.

For example, a company like Apple uses clear strategies that everyone easily understands. They are known for their emphasis on innovation, attention to design details, and providing top-tier consumer experience. These fundamental aspects, undoubtedly a part of their strategic plan, align all their efforts, allowing them to maintain their industry-leading position.

Streamlined Communication

The 7-Strata tool ensures that the strategy is easily communicated across all levels of your organization. It allows you to articulate your strategy so that everyone can understand, believe in, and execute it. It brings everyone on the same page and fosters a sense of unity and purpose within the organization.

As an example, Southwest Airlines has a well-defined strategy that is communicated and understood across all levels – "Wheels Up." They understood that they make money for every time the wheels of their aircraft go up. Therefore they aligned their strategy and execution to get their "Wheels Up" quicker than their competition. 

Consistent and Coherent Decision Making

Companies can ensure consistent and coherent decision-making with a clear strategy in place through the 7-Strata tool. It provides a solid reference point, helping leaders make decisions that align with the company's long-term goals. It minimizes reactive decision-making and reduces strategic drift, allowing companies to maintain their focus and drive.

Amazon is a great example in this context. Their strategy, focused on customer obsession, low prices, and vast selection, guides decision-making, allowing them to maintain their status as a dominant player.

Now, let's walk through a tutorial on implementing the 7-Strata tool in your company.

How to Implement the 7-Strata Tool: A Step-by-Step Guide

Step 1: Define a BHAG

(I like to simply call it an Ambitious Goal)

The BHAG is a 10-25 year goal that galvanizes the organization around a shared vision. It should be bold, daring, and energize people. Think big on what you want to achieve over the next decade or two.

For example, Nike's BHAG is to "Crush Adidas!" It's a perfect example of a competitive BHAG. SpaceX is to "Establish a colony on Mars by 2035." 

When crafting your BHAG, ensure it meets a few key criteria:

  • Bold - It's a stretch goal beyond what seems immediately achievable. Think 30% likelihood of success. 
  • Measurable - Define a tangible end point you're shooting for.
  • Time-bound - Set a long but defined time horizon.
  • Memorable - It should inspire people and be easy to repeat.

The BHAG lights the path forward. It provides direction and rallying cry as you undertake the challenging work to get there. A clear, concise BHAG unifies teams and focuses efforts.

Step 2 - Identify your X-Factor

The X-Factor is the core advantage or capability that makes your organization 10x-100x better than the competition. It's the magic ingredient that enables your success.

For example, Apple's X-Factor is its unparalleled commitment to design and user experience. This focus is evident in every product they release, from the intuitive interface of the iPhone to the sleek design of the MacBook. Their focus on design and user experience has set them apart in a highly competitive tech industry.

When defining your X-Factor, ensure it meets a few criteria:

  • Quantitative - Frame it in numeric terms like 10x faster or 100x more selection.
  • Sustainable - It must be hard for others to replicate without incurring some pain to do so. 
  • Demonstrable - You should be able to prove and illustrate the advantage.
  • Memorable - It should be simple and repeatable.

Identifying and articulating your X-Factor focus on the core strengths you will need to win. It guides decisions on where to invest and highlights what your team needs to protect. An insightful X-Factor succinctly captures what makes you uniquely positioned to succeed.

Step 3 - List your Differentiating Activities

The Differentiating Activities are the 3-5 things your company focuses on to leverage the X-Factor. These are the key capabilities and processes where you will excel.

For Disney, key differentiating activities include:

  1. Storytelling - Creating compelling stories and characters that resonate
  2. Theme Park Design - Crafting immersive physical environments with a wow factor
  3. Customer Service - Ensuring seamless, magical customer experiences
  4. Licensing & Merchandising - Leveraging characters across products and experiences

Disney's storytelling capability and meticulous approach to the customer experience represent core organizational strengths. Their differentiating activities all connect to leveraging the power of their stories and characters to create magical customer experiences across platforms.

When defining your differentiating activities:

  • Limit it to 3-5 - Resist the urge to list everything. Prioritize the vital few.
  • Consider full value chain - Include key activities across the value chain.
  • Focus on capabilities - Identify organizational abilities more than specific tactics. Tactics will evolve.
  • Connect to X-Factor - Each activity should leverage your X-Factor.

The differentiating activities guide where you will focus resources and management attention. They are the activities most critical for delivering on the value proposition. Focusing on excelling in a few differentiating activities leads to a competitive advantage.

Step 4 - Summarize your strategy in One Phrase

The one-phrase strategy succinctly captures how you will succeed in the market. It describes, in simple terms, how you will create value for customers.

For Southwest Airlines, the one-phrase strategy is:

"Providing no-frills, low-cost air travel through quick turnarounds and point-to-point service."

Or more simply:

"Wheels Up!"

This captures the essence of Southwest's approach - efficient operations, low costs, and no-nonsense service to provide affordable air travel.

The "Wheels Up!" rallying cry embodies Southwest's focus on keeping planes moving to maximize utilization while minimizing ground time. This drives overall low costs.

The one-phrase strategy neatly summarizes Southwest's differentiating capabilities and value proposition. It provides guiding direction for decisions and keeps employees aligned around the approach. For Southwest, "Wheels Up!" encapsulates the strategy and mindset they've used to disrupt an industry.

When crafting your one-phrase strategy, aim for:

  • Simplicity - Can it be understood in under 10 seconds?
  • Accuracy - Does it capture the core elements of competitive advantage?
  • Memorability - Is it distinctive and repeatable?

An effective one-phrase strategy provides clarity on the company's positioning and approach. It serves as a decision filter and guides resource allocation. If an initiative doesn't align with the one-phrase strategy, it's likely not worth pursuing.

Distilling your strategy into a concise phrase brings discipline. It forces you to be clear on the essence of the strategy. This clarity and alignment is invaluable as the organization grows.

Step 5 - Define your Brand Promise Guarantee

The brand promise captures the primary commitment you make to customers with your product or service. It's the expectation you set for their experience.

For example, Zappo's Brand Promise is to "Deliver WOW through service." However, their Brand Promise Guarantee is "If you are not 100% satisfied with your purchase from Zappos, you can return your eligible item(s) for a full refund within 365 days of purchase."

When crafting your brand promise:

- Lead with value - Explain the primary benefit you provide.
- Differentiate - Make it distinctive rather than generic.
- Keep it simple - Use clear, concise language.
- Make it credible - Set an expectation you can fulfill.

An effective brand promise goes beyond a slogan or tagline. It sets a clear pact with the customer on what you guarantee to deliver. It guides decisions to align actions with the promise.

Fulfilling your brand promise earns trust and loyalty. A compelling but achievable brand promise is a competitive advantage.

Step 6 - Define Sandbox & Brand Promises

Sandboxes represent target customer segments. For each, define:

- The "Juicy" Core Customer
- What you sell
- Brand Promise
- Key Performance Indicators

For example:

Sandbox 1:
Core Customer: Small businesses with <25 employees
What: HR management software
Brand Promise: Easy, integrated HR software that saves you time
KPIs: Customer acquisition cost, retention rate

Sandbox 2:
Core Customer: Fast growing startups
What: HR software plus contractor payments
Brand Promise: HR that scales rapidly with your startup
KPIs: Revenue growth rate, customer satisfaction

Defining the core customer and products for each sandbox allows tailoring the brand promise and metrics to resonate.

When mapping sandboxes:

- Profile the core customer - Identify key attributes.
- Define your offering - Tailor products/services for each group.
- Set measurable KPIs - Establish targets to track progress.

Focused sandboxes guide effective execution across functions from product development to sales and marketing. Customizing for core customers in each sandbox drives growth.

Step 7 - Determine the Words You Own

The words you own represent the key terms and phrases you want associated with your brand in customers' minds.

For example, Volvo aims to own:

Safety, reliability, durability, trustworthiness

Owning words creates mindshare and shapes the perception of the brand.

When selecting words:

  • Align with brand - Choose words that reinforce brand image.
  • Distill essence - Pick words that encapsulate the brand.
  • Limit to 5-7 words - Being concise creates focus.
  • Make them "ownable" - Target words competitors can't easily steal.

The words you own guide marketing messages and product development priorities. They help establish your brand's personality and positioning.

Consistently using and reinforcing your words builds mental connections with your brand. This mindshare makes growth easier over time.

In Conclusion

The 7-Strata framework is about alignment, clarity, and culture. Alignment across the organization on the core purpose and strategic direction. Clarity for employees on where to focus their efforts to drive success. And building the culture to make decisions independently but in line with the growth strategy.

This methodology allows leaders to turn strategy into memorable, actionable elements that resonate across the business. It provides a toolkit for growth that gets the entire organization on the same page. By unifying teams around bold vision, customer focus, and competitive advantage, the 7-Strata fuels execution.

This is the power of strategic alignment through simple, focused tools. Rather than vague statements or generic principles, the 7-Strata cuts through the noise. It allows leaders to communicate with clarity, get buy-in across the business, and guide focused action tied directly to long-term goals.