Simply put, business strategy is complex. As a result, some businesses believe they have one, but in fact they’ve confused their mission and vision statements with having a business strategy.
While the mission and vision focus on an organization’s purpose, values and goals, business strategy is the plan to accomplish those goals in an effective way.
Specifically, business strategy is an externally oriented view of how an organization is going to achieve its objectives. It helps all the employees at every level in an organization understand what they need to do in order to achieve the business objectives.
A robust business strategy takes into consideration the organizational structure, strengths, weaknesses, key differentiators, competitive landscape, the geographic location, as well as what customers they want to sell to.
For a business strategy to be considered actionable, there must be specific targets as well as the means to hit those targets.
When it’s actionable, employees will be able to see the connectivity of their own work with the strategy, have the right tools and resources to meet objectives, and be trained adequately on any new systems or platforms to be implemented.
Here are the five key questions to answer when developing a strategy:
- What are your core capabilities?
- How are you going to market?
- How are you differentiated, i.e. how will you win
- What are the steps you’re going to take to get there?
- What investments will you need to make?
When business leaders can effectively answer the above questions, a strategic plan can be formulated.
This plan can then be cascaded throughout the key functions in the company so they can translate it into actionable work flow, tailored to their roles.
To be successful, a good strategy requires good execution. Here are five red flags that either the strategy or its execution may not be effective:
- Revenue or profit margin erosion
- Departure of key people
- An inability to bring products to the market at the pace customers expect
- Losing market share
- New entrants to the market
To address these red flags, business leaders should look at their strategic plan as well as how they are executing the plan. Evaluating the current state of key differentiators, market conditions, the competitive landscape and customer needs will shed light on areas where the plan could be strengthened or where additional investment needs to be made. Creating and executing a successful business strategy isn’t easy. It requires focusing on what truly matters. However, done well, it is what separates the good companies from the great ones.