A few years ago I wrote an article about the four stages of business. Today, many of my clients actively review their progress through levels I defined, but we have discovered a sticky point that needs some additional clarification.

To review, here’s a summary of the progress of small businesses as I see it:

Beta – Proof of Concept

You have a great idea and your are in the right place at the right time. You do some business.

1.0 – Business Fundamentals

You have conquered financial statements. You have standardized pricing and a defined workflow. Your organization chart is up to date. You have basic marketing in place: logo, website, business cards. The business is a going concern.

2.0 – Intentional Outcomes

Budgeting, Planning, Strategy – oh my! You have a process for process change. You can manage your annual budget as you go. Sales are forecasted and expenses are adjusted accordingly. And you have an Intentional Business Strategy that is understood by the team.

3.0 – Institutional Success

You have control over your business trajectory. You can decide when and where to act next. Adding lines of business or making acquisitions are discussed in terms of the existing strategy.

Where Companies Get Stuck

Some of the folks I work with are solidly in the 1.0 world and working on 2.0 traits. They may have a few loose ends in 1.0, but let’s call them 1.7 – 1.8.

The majority of my clients are 2.0, 2.1, or maybe 2.4. This level is tough to conquer. Up until this point most entrepreneurs succeed by finding ways to say ‘yes’ to every opportunity. In 2.0, they suddenly need to learn how to say ‘no’.

In video games, we play levels and sometimes they culminate in a “Boss” level. 2.0’s boss level is Strategy, and it is a bit trickier than the other Bosses. I thought about just moving strategy to 3.0, but an Intentional Strategy is a pre-requisite to Institutional Success. I can’t see any way around it.

To conquer Strategy, you have to go back to the basics.

Take a look at your current Mission and Vision statements. Are they short concise calls to action or rambling marketing declarations about quality and partnering? Are you declaring what you would like to be, what you would like for others to think about you, or what you will do?

Strategy is what you will do and more importantly, what you won’t do.

I think one of the reasons that strategic thinking is so difficult is that in order to do it well you need to redefine the parameters of your existence as a company. For many entrepreneurs, it is very hard to separate themselves from the reason they started their companies, which often was not strategic at all.

Here is the key. Getting from 1.0 to 2.0 is mostly about applying a formula. Follow business best practices and you will get most of the way there. The focus is inward on process, products, and your people. Strategy – the last step before you can work on 3.0 – requires looking outwards and seeing the true face of the market, your customers, and your future.