While most enterprises have a business plan, few have a high-level strategy that describes where the business best needs to be in the next few years.
Strategy, based on solid and meaningful data, helps organisations set priorities that make the best use of their resources over the medium to long term.
“Strategy requires making explicit choices — to do some things and not others — and building a business around those choices. In short, strategy is choice,” say two of the most recognised authorities on strategy, A.G. Lafley and Roger L. Martin, in their co-authored book Playing to Win: How Strategy Really Works.
The two made names for themselves by creating a strategy that resulted in consumer goods giant Proctor and Gamble doubling its sales, quadrupling its profit and increasing its market value by more than $100 billion when Lafley was CEO from 2000 to 2009.
Some businesses think that in times of constant change in the external environment, there’s no point in having a strategy. Lafley and Martin argue that’s exactly when you need one, as strategy deals with uncertainty to seek significant value creation and competitive advantage.
Sound decisions are best informed by meaningful data that provides a solid picture of your customers, your competitors, your past performance and your operating environment.
Understand your customers
Having a firm understanding of the pain points and joys of consumers at touchpoints with your business gives you an all-important external view of your business and provides insights into how you can improve value to your customers.
Key questions include:
- How satisfied are consumers with your business?
- What do they think of you?
- What do they like/dislike about products offered by your business or your competitors?
Understand your business
You need data to identify your strengths, weaknesses, opportunities and threats. Key questions include:
- Why does your business exist?
- Where and why do you make money?
- What have you done well and what you could have done better?
- Which areas of the business need to be focused on or dropped?
You also need to audit your resources, skills, core competencies and productivity.
This will help you decide later how much capacity and capability you have to realistically meet new goals. It can also help you decide which areas of your business are unproductive and need to be dropped.
Understand your external environment
External factors can have a habit of coming up and biting your business when you least expect it, resulting in missed opportunities or slow failure. PESTLE (Political, Economic, Social, Technological, Legal and Environmental), Michael Porter’s Diamond and Porter’s Five Forces are good tools to help analyse your external environment.
Understand your competitors
Having a firm understanding your of competitors allows you to:
- see what’s working or failing for them
- identify gaps in their offerings that your business can capitalise on.
Be aware that many of the world’s innovative companies are proactive by placing more emphasis on understanding their customers than being reactive through primary focus on their competitors.
Develop a vision statement
The vision statement is created to motivate and give direction to employees. It describes purpose, values and the business’ aims in the medium to long future.
World renowned leadership expert Simon Sinek says purpose is a very important motivational factor for staff: “If you hire people to do a job, they’ll work for your money. If you hire people who believe in what you believe, they’ll work for you with blood, sweat and tears”.
Examples of vision statements include:
- Samsung: Inspire the world, create the future.
- Facebook: People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.
- Tesla: Create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.
Why you need a mission statement
This is a statement of the company’s purpose for the public and lies at the core of the brand tag line. It defines purpose and primary objectives that answer:
- What do we do?
- For whom do we do it?
- What value do we bring?
Sinek says that while many organisations know what they do and how they do it, very few know why? He says the ‘why’ doesn’t involve making a profit – that’s a result. The ‘why’ looks at why your organisation exists as well as your cause and belief.
Examples of mission statements are:
- Samsung: Inspire the world with our innovative technologies, products and design that enrich people’s lives and contribute to social prosperity by creating a new future.
- Facebook: To give people the power to build community and bring the world closer together.
- Tesla: To accelerate the world’s transition to sustainable energy.
Create strategic objectives
You need to look at your data and work out ways to maximise your opportunities, minimise your threats and consider if you can take advantage of external threats.
You can do this by brainstorming, reverse brainstorming (a good way to develop creative ideas among team members who are cynical about an idea) and starbusting (a systematic way of understanding the value of new ideas).
Lafley and Martin say making choices is hard work and urge CEOs not to crowd out what is really important with what is urgent to create effective strategy.
“When an organisational bias for action drives doing, often thinking falls by the wayside. These ineffective approaches are driven by a misconception of what strategy really is and a reluctance to make truly hard choices,” they say.
They also suggest against delaying tough decisions for as long as possible to keep your options open because “tough choices force your hand and confine you to a path. But they also free you to focus on what matters”.
Each objective should be accompanied by meaningful measurements through key performance indicators (KPIs). You need to consider not only what will be measured to make meaningful decisions about future direction but how the information will be captured. It’s worth considering digital automation to avoid making this process cumbersome and heavily reliant on resources.
Implement strategy
You want your strategic plan to be integral to the success of your business, rather than a forgotten document that collects dust. However, a 2017 survey of more than 500 senior executives by PricewaterhouseCoopers reported that nearly two thirds of the CEOs said executing a strategy is more difficult than developing it.
There are a number of things you need to consider to successfully implement your strategy:
- Clarify and communicate: Make sure your strategy can be easily understood by staff. Avoid jargon and “corporate speak”. Then ensure everyone in the organisation understands the new focus so they understand how it informs their own work. You can send them the information electronically but face-to-face will ensure people commit time and attention to the business’ new direction. It also gives staff the opportunity to ask questions.
- Apply, measure and manage: Work with managers on how the strategy can be practically applied to their areas of the business.
To keep everyone in the organisation focused on progressing the strategic goals, you need to track progress and make someone accountable for that progress. Measurement also helps your business to make quick, data-driven decisions – important when operating in an external environment that’s in constant flux.
To ensure strategy is at the heart of everything that everyone in an organisation does, a number of factors are required, according to the PwC report called Strategic performance measurement: Creating a common language to drive execution. These include:
- linking operational goals in each business area with strategic intentions
- making reporting easy
- developing a uniform approach to reporting and identifying meaningful metrics
- making performance transparent and ensuring accountability.
