Business Strategy: the plans and actions you have identified that will enable you to achieve your business goals and objectives.
Typically, you will have these at a company-wide level and then broken down further for each department / product / set and / or market in which you are competing. You might also define them in terms of both long-term and shorter-term activities, depending on the business.
And they all tie back to your BHAG and fit with your OKR framework.
It is not your business model – this is simply a definition of how your business operates.
Your business strategy describes how you will gain and retain your competitive advantage to achieve your goals, taking into account your company’s strengths, weaknesses, the opportunities and threats that you have identified in your market(s) and the short- and long-term objectives for the business.
And, as I have written about before, competitive advantage is the central point for any successful business strategy.
It is not a one-time thing: developed and then filed somewhere so you know it’s done. Your strategic plan needs to be adapted to changing circumstances all the time – changing market conditions, changing competitors and competitive forces, changes in your own business and circumstances and legislative changes, too.
Every board meeting should have time allocated for a discussion on the business strategy to determine whether changes are necessary – and in these very dynamic times a monthly board meeting is almost essential.
So, what are the elements that make a strategy plan great?
Simplicity.
As Lawrence Bossidy said, “If you can’t describe your strategy in twenty minutes, simply and in plain language, you haven’t got a plan. ‘But,’ people may say, ‘I’ve got a complex strategy. It can’t be reduced to a page.’ That’s nonsense. That’s not a complex strategy. It’s a complex thought about the strategy.”
Where you have a complex business with many products / divisions / markets to address, this might sound difficult to achieve. But then break it down – have an overarching strategic plan for the business, and then lower-level ones for each component of the business which all feed into, and are consistent with, the overarching one, keeping each simple and easy to describe.
Clarity of vision
To build a strategy plan that is simple to describe and will work, you need to ensure there is clarity of the vision for the company across the team. If different people have different views of the overall company objectives and goals, there will be complexity and confusion when undertaking the strategic planning and plans will echo this.
But it’s not just the longer-term vision that needs to be clear. Where the company is at present is at least as important, and what you’re looking to achieve – for example, you might be looking for accelerated growth, for expansion into new markets (geographic or product), to defend your current position against new entrants, or cutting back in a tough economy. These will all need a very different type of plan.
And in the context of the vision and current conditions, be clear on the level and type(s) of risk you’re prepared to take, too.
Clarity means ensuring that everyone has a clear and consistent view of the company’s future and current situation and that of their own areas of responsibility within these.
Information
You need information from many sources. It should be part of your company culture for the team to be constantly talking with stakeholders at all levels and understanding what they like, dislike and would like to see in addition to your current offering and/or systems.
You should be taking time to think about trends, possible new entrants, changing conditions locally and globally and trying to understand how these might affect you (for example, the global chip shortage which affects some 170 industries around the world, or the spin-off effects of the grain exports from Ukraine and Russia being halted).
And, of course, your internal information. Ideally, some sort of dashboard system that throws up anomalies and areas of concern: from company-wide (such as inventory problems, whether high or low), to transaction level (a sale at an unusual margin, for example – again, too high or too low), and all areas in between that need monitoring.
But, it’s important to guard against “analysis paralysis” where you won’t take action without having every conceivable piece of information to hand. With a culture on ongoing information gathering, your regular strategic plan reviews should be easy to do.
Priorities
Not all elements of your strategy will carry the same weight. Some will be more immediate; others will have great impact over a longer period. Considerations will include:
- your company’s current (and past) strategic focus and recognised competitive advantage – this could be price, service, reliability, range of offerings, and so on. Although circumstances might dictate a move in this, bear in mind that such a change will generally take time, especially if the move is up the value chain and the company has been well established in its market.
- a clear understanding of the gross and net margins, and volumes, of each product line / division. Too often, businesses look at gross margins only at this level. You need to be clear on where the cash flow and net profit is being generated now and what the likely trends will do to these.
- the lifecycle stage of various products and/or parts of your business – a particular area might be highly profitable now but is almost certain to decline sharply over the next 2-5 years for example (perhaps diesel-engine cars if you’re in the motor business).
- who your customers are, what their experiences with your business are (good and bad) and how likely they are to move to competitors under various circumstances, along with the costs to serve the different types of customer. As with products, it’s important to differentiate and understand where cash is being generated in the business and where it is not.
- new competitors in the market – whether competing directly with your existing products and services or disrupting things with a new approach.
- profitability trends – product margins tend to reduce as more competitors enter the market and overall volumes increase. How do you reduce your costs to serve with these products to maintain profitability, assuming you want to continue with them? Conversely, if you have niche products and a dominant market share with competitors dropping out, how do you continue to capitalise on this?
- legislative changes – changes to legislation, both nationally and internationally, can have a significant impact on strategy. Fortunately, governments tend to give ample warning so you can plan. Consider the changes of the past decade to taxation, privacy, import / export and other areas for example – they can have a massive impact on the business and so need to be planned for.
- multinational operations – remember that different cultures have very different approaches to business, products, marketing, and so on. If you’re operating across multiple countries, these will need to be taken into account – you can’t just use your own market as a model to be successful. An interesting book on this is “Fish Can’t See Water” by Kai Hammerich and Richard Lewis.
By considering these issues and having a clear understanding of where the business is today and what the goals (short-term and long-term) are, you will be able to set the correct priorities for implementing the plan(s) successfully.
And effective implementation is the key to success, for drawing up strategy plans without action is doing little more than dreaming.
But if you have no plans in the first place, and you’re not keeping them updated and relevant, you won’t be able to take action and will constantly be trying to just react to events – never a good place for a business to be.
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I work with successful owner-led businesses to enhance their growth, profitability and business value.
If you’d like to have a conversation about your business objectives and concerns, book a free 30-minute call with me here. I’d be delighted to talk with you.
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If you’d like to learn more, these related posts might help:
- Does Your Business Strategy Match Your Company Culture? The Risks of a Mismatch.
- “What business strategy is all about – what distinguishes it from all other kinds of business planning – is, in a word, competitive advantage.” – Kenichi Ohmae
- 4 Ways Your Strategy Plans Could Be Derailed
- Is Your Strategy Fit for Purpose?
- “Plans are useless, but planning is indispensable.” – Dwight Eisenhower
- 1 Thing That Great Leaders Do
- OKR – Measuring What Matters
- You’re Driving, But Does Everyone Know The Destination?
- “The best way to predict your future is to create it.” – Abraham Lincoln
- Is This the Most Important Leadership Skill for Success?
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