Page 174 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

74 CLEAR STRATEGY

Developing strategy is often over-elaborate and over-complicated.
Strategy is simply about understanding where you are now,
where you are heading, and how you will get there. It involves tough
choices in three areas: who to target as customers, what products
to offer, and how to implement the strategy efficiently. The most
common cause of failure is the inability to make clear choices in
these three areas.

The idea

The importance of making clear choices in the three elements
of strategy—who to target, what to offer, and how best to implement—
is best shown by the example of Nespresso, a simple-to-use espresso
machine developed by the Swiss giant Nestlé. Though it is simple
in appearance and use, Nestlé spent more than ten years developing
the product.

After several years of limited success, a new strategy improved
profitability. The system consists of two parts: a coffee capsule
and a machine. The coffee side of the operation was separated
from the machine side, with the machines being made and sold
by other companies. Nestlé was no longer responsible for the
sales or maintenance of the machines—which was not its area of
expertise—but, crucially, the machines could only use Nespresso
capsules, guaranteeing future sales of coffee. The target customer
was changed from offices to households, and the sales process was
managed exclusively through the Nespresso Club (by phone, fax, or
website, with capsules shipped direct to the customer).

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