Strategy: The Choices that Guide All Your Business Decisions
A conversation between Elle Hill and Dennis Campbell
Strategy is a challenging topic for many businesses. Founders and CEOs know they need it, but taking those first strategic steps or starting work on a new strategy can feel overwhelming. We know that deciding on the right strategy is even more challenging in our industry where margins are being squeezed and it’s difficult to differentiate from the competition.
We sat down with Elle Hill, the founder and CEO of the strategic growth consultancy Hill & Co., which works exclusively with diamond, gemstone, and jewelry businesses, and Dennis Campbell, a Professor of Business Administration at Harvard Business School, Co-Chair of the GIA Harvard Executive Leadership Program, as well as Hill & Co.’s Strategy Lead. We want to help you think about your own business strategy. From understanding your customer to the power of differentiation, our conversation with two genuine strategy experts covered a lot of ground that should help simplify your own strategic approach.
It’s important to start with definitions; what are we talking about when we use the word strategy?
Source: Adapted from R. Simons, Seven Strategy Questions: A Simple Approach for Better Execution
DC: A colleague of mine characterizes a strategy as the smallest set of choices that guide all your other choices, and I think that's a really interesting way to think about strategy. It should help you create focus and clarity around what your business offers and who you offer it to. All your subsequent business decisions are then guided by those choices already made.
EH: I also like to think about strategy in a really simple way. I tell clients—particularly those who might be intimidated by the idea of strategy—that it’s really just a plan.
However, you can't make a plan unless you have all your “W”s covered, right? Those simple questions—Who? When? Why? Where? Who are you serving? What are you providing? Why are you uniquely positioned to be the best provider?
Building on Dennis's advice, a strategy should be the smallest set of questions to help you answer every other question that comes throughout the year. The real challenge can come from making space in your business and your busy schedules to make sure you’ve answered those questions.
Many businesses struggle to know where to start in designing their own strategies, and some may just give up on doing the work because they’re too busy. Why do you think a strategy is essential to a business’s growth over the long term?
DC: Fundamentally, retaining a competitive advantage over a long period of time is really hard. And there are good reasons for that. If you're on top today, lots of people will be looking at you, trying to copy what you’re doing. That means your gains can get eroded away. It’s really hard to maintain that edge unless you are constantly innovating and updating your approach. It’s also easy to become complacent in business; you reach a certain point when you get stuck in the ‘short term.’ You’re busy running the business, but gradually, your advantage is being eroded, and suddenly you’re falling behind.
EH: We often see this with ‘first movers.’ For example, Hill & Co. worked with Blue Nile 7 years ago. At its start, it was a really innovative business, the first to offer engagement rings for sale online in a very easily comparable spreadsheet-like presentation. Everyone thought they were crazy, but what Blue Nile understood was that their customers were mostly men who wanted to see data and charts, giving them color, clarity, and price comparisons. They were hugely successful with that ‘first move,’ but by the time we started working with them, they realized they hadn’t kept their fingers on the pulse of consumer behavior. Their customer wasn’t just a man with a credit card now. It was a man with a credit card and multiple Instagram and Pinterest links from their fiancée. They should have begun speaking, and selling, to her.
DC: And that’s why strategy is so important. Strategic direction creates focus; it allows you to consider these hugely important questions that you won’t have time to ask if you’re working without a clear strategy that you’re always iterating and improving:
Who is the primary customer?
What is it they truly value?
What kind of experience do you want to provide?
What kind of unique capabilities do I have to develop internally?
What kind of culture do I need to deliver on the strategy?
EH: That’s what we saw working with Blue Nile. All of those questions led them to their ‘first mover’ advantage, but without iteration and refreshing their strategy, by the time we were supporting them, their internal systems and the technology they were using couldn’t help them pivot. They needed a new strategic approach, so we helped them get back to the basics. It’s important to remember that strategy is not a fixed or permanent state. It must be evaluated in an ongoing manner to ensure that the answers to the most basic questions are still the right answers.
You’ve touched on some of it already, but what’s the cost of not having a strategy?
EH: Let’s take a really relevant example for IDEX Online’s readers. We’re seeing a lot of inquiries right now from diamond manufacturers and traders. We know this part of the industry is under a lot of pressure from all sides, from falling profit margins to sanctions and new entrants to the market, particularly lab-grown diamonds, who are having their own issues. These businesses come to Hill & Co. because they have a real challenge in understanding how to capture their profit in this new market landscape. Most will have already taken action in a certain direction, usually thinking, “We’ve got to make our own jewelry and sell direct to consumers”. Many will have made this decision without any clear strategy. They just hire a designer and get started.
They haven’t asked those crucial questions:
Who are our customers for this jewelry?
Who needs another jewelry brand?
Is there a gap in the marketplace where we could do something new?
Do we even have the relevant skills in our business?
The bottom line is this: having no strategy costs your business money. It's a false economy because you end up spending money on something that doesn't necessarily have a home, a place in the marketplace, or any customer need at all. Then you’re back to square one.
“The bottom line is this: having no strategy costs your business money.”
DC: What we’re getting at is that ignoring your strategy makes the rest of your operations and growth really difficult. You can’t service your customers if you don’t understand them. You can’t develop implementation plans if you haven’t done the strategic work. It’s also challenging to understand how you build a culture to deliver those plans and understand how and where to allocate your resources without a strategy. I see it all the time in my work: well-intentioned leaders who implement performance goals but haven’t clarified their strategic direction around what their customers truly value and how they should spend their budget to get the most value. These are common problems that are preventable by taking the time to develop your business strategy.
EH: We’re seeing the lack of strategic thinking impacting the jewelry industry right now. If you’re a jewelry business and you’re not thinking about taking a new strategic direction (or any strategic direction at all), then there’s a good chance you won’t survive. Consolidation is rampant in our industry at the moment—the latest figures from the Jewelers Board of Trade about retail closures in the U.S. suggest that the trend is only accelerating. In my view, consolidation is happening primarily because many businesses aren’t thinking about strategy until it’s too late.
You’ve both mentioned the importance of understanding customers as a foundation for an effective business strategy. Many readers might feel like they have a good grasp on who their customers are, but how should they incorporate them into their business strategy?
DC: Your strategy should always start with focusing on your customers, but more specifically, your Primary Customers, those who unlock the most value and profit in your business. You primary customer may not be the end-consumer who buys your products and generates the most revenue.
There’s an interesting example which I often use about Agero, the roadside assistance provider in the U.S. Agero’s paying customers are the auto companies that offer their roadside recovery services to the drivers who have purchased their cars. However, Agero is actually a third-party supplier — they use local tow-truck providers across the U.S. — so it took an important realization by the leadership team there to understand that it wasn’t actually the auto companies that were creating the most value in their ecosystem, it was those local ‘mom and pop’ tow-truck companies:
They asked a pivotal question: “what if we could actually provide value for them?” We could attract more of them to our platform. They’ll be of higher quality because they see the value we can offer. That means they'll actually get to drivers more quickly, which will help the auto companies because our service will be better. And so on.
This realization about who was actually providing value in their supply chain led to Agero reallocating resources from simply maintaining relationships with the auto companies to improving their provider network. Their strategy then became supporting these ‘mom and pop’ businesses. They helped them get their equipment at better rates; they educated them to focus on increasing the utilization of their assets rather than just focusing on the price they're getting. Eventually, Agero ended up with this high-quality service provider network, which means they can now provide better service and create more profit for the business. It all came from asking the simple yet powerful question, “Who creates the most value for my business?”
EH: There’s a similar example in the jewelry industry with Plukka, the designer jewelry retailer I launched and brought public on the stock exchange in under 5 years. We were successful because we did something radical. We were an online jewelry retailer, but we came to the market and said, “There’s no shortage of fantastic jewelry designers, but often they lack marketing or retailing talent. And no one needs another jewelry retail outlet. So what can we do differently? Well, we can attract the most amazing designers by offering them a platform and marketing the heck out of them, and we have the expertise and culture to make that happen.”
We were quickly able to attract a diversity of young, creative designers who were incredible at what they did but couldn’t grow a business or market themselves. Similar to Agero, at Plukka we said that our number one customers weren’t the end consumers… but the designers. This focus on, and ability to attract, fresh and innovative design gave us a point of differentiation; the media loved our story, and the customers loved the products, all because we’d taken a more strategic approach to understanding who our primary customers were from the beginning. We understood that unlocking the most value for our business came from attracting those designers and solving their problems first. In that way, everybody else gets served in turn.
We’ve already acknowledged that the diamond and jewelry industry faces multiple challenges. Can we explore some of those and consider areas where a more strategic approach could help businesses in the supply chain?
EH: Many of the challenges for our industry come because we’re so highly fragmented, there is no Google or Apple leading the way, attracting the best business leaders to our industry. Even having these bigger conversations about strategy and primary customer are normally much easier in industries that are more clearly defined in terms of the competitive landscape. However, we are now seeing younger generations taking over who have attended college and business school and have gained exposure to current data-backed business practices. That generation is now coming to Hill & Co. with an understanding of the value of thinking strategically and pivoting where they need to. We also know that our industry has always been built on relationships and ‘handshakes’ but as important as that is, it has also slowed the proliferation of information sharing. Before the pandemic, the whole industry just waited for the next trade show, and the pace of change was incredibly slow. Pre-Covid, many businesses still weren’t digital. In the UK, for example, 40% of jewelry retailers didn’t even have a website.
What we know now is that 80% of B2B and B2C buying decisions start online, so if you don’t know how to communicate your message to those people, then all the other strategic decisions you’ve made will be useless. That’s why we often have to fix the basics alongside all the strategy work.
DC: We also know that the diamond and jewelry industry has a real challenge around differentiation — the struggle to stand out using an element that makes you different from your competitors. Going back to our definition of strategy as the “smallest set of choices that guide all your other choices,” if we look at differentiation, our definition means that we should pick a few points of differentiation that matter and not allocate resources to those that don't. The margins in many businesses are squeezed because they’re not allocating resources to the strategic attributes that return value for the business. Two U.S. examples are Southwest Airlines and Commerce Bank. Both understood where they should allocate their resources to differentiate — low-cost, no amenities and high volume in Southwest’s case, and prioritizing late opening hours and convenience over savings rates in Commerce’s.
If you’re a business in the middle of the supply chain, a diamond manufacturer or cutter for example, you may feel like things are commoditized, because you’re only looking at the product itself. However, if you start to think about things from your customer’s perspective, you then begin to ask some interesting questions:
Why would a customer choose me versus another supplier?
What’s the element that’s most valuable to them?
Is it price or something else?
Is it speed? Is it my ability to be flexible?
Can I offer a better overall customer experience than my competition?
However, I understand how difficult this might seem for established businesses in the industry that are just working through their daily challenges and perhaps feel the weight of tradition or family-run businesses.
“It’s hard to take that first step, but you can practice what we call “exploration”. That means taking a break from the daily work and exploring new technologies or new customer segments. If you get into the habit of that, then you will become much more open to embracing a new strategic approach. ”
We hope our discussion with Elle Hill and Dennis Campbell has given you a new perspective on the critical role of strategy in navigating the changing complexities of the jewelry industry. The essence of strategy lies in its simplicity and focus—identifying and responding to the core questions that will drive all other decisions within a business.
There are several other key takeaways:
Strategy should be flexible: In a competitive and evolving market, the absence of a clear strategy can lead to missed opportunities and diminished returns. Strategy is not merely a business plan but a dynamic and flexible process that must adapt to changing market conditions and consumer behaviors.
Understanding the Customer: Strategy is underpinned by a deep and nuanced understanding of your customers and what they value. This knowledge not only drives product development and marketing but should also shape your overall business approach, ensuring that resources are allocated in a manner that maximizes value and differentiation.
Adaptability and Innovation: The ability to adapt and innovate is crucial. Whether it's through leveraging technology, exploring new market segments, or redefining the customer experience, an effective business strategy will help you maintain relevance and your competitive edge.
We know our industry is facing numerous challenges—from economic pressures to technological disruptions—but these headwinds also offer clear opportunities for those willing to think strategically.
For businesses across the supply chain, it’s clear that a considered, customer-centered strategy is more than just beneficial; it’s essential for survival and growth. The key is not just to create a strategy but to live it, breathe it, and evolve it as the market landscape changes.
