Your business is facing great prospects for growth. You need to build a long-term business strategy. But everything seems too difficult, you do not know where to start and how to do it.
A good strategy will help managers and staff identify the direction of action and bring success to the business. On the contrary, an organization without a strategy is like a ship without a rudder and can lead to a huge waste of time and resources.
If you think of strategy formulation as building a bridge across a river, here are ten key issues to consider in turning that idea into reality.
1. Don't wait until it rains to fix your roof.
Many companies have the misconception that if business is going well or too well, there is no need to develop a growth strategy. However, we cannot wait until it rains to fix the roof, we must do this before it happens.
The problem is that without management and strategy in business, things get old and bad very quickly. You should understand that there will come a time when processes naturally age and revenue will decrease, costs will increase, people will get tired, services will freeze and profits will plummet.
Strategies typically lose their effectiveness after 9-15 months of implementation, and an organization that wants to change its strategy will need 12-24 months to come up with a new idea. So it is dangerous to wait until a problem occurs before making changes. The process of building a strategy is like maintaining health and exercising: there is never enough, the results are not immediately visible, but it is a priority, it cannot wait until tomorrow. Because if you wait until tomorrow, it may be too late.
2. Beware of “incrementalism”
The usual starting point for strategy formulation for many companies is simply to put financial numbers on the wall and direct business units to plan and execute against those numbers. The strategy might be: “Become a $1 billion company in three years” or “grow 10%/year”…
However, goals that are equated with strategy like this can easily make you lose sight of where you are and where you need to go. This can be called “incremental myopia”, because there is no direction to take, so they can only be considered growth goals based on numbers.
If the company only focuses on immediate growth goals, at most the results it achieves will be like pushing a boat along the river. Whether it can go far and reach the sea is another matter.
3. Strategy is the connection of moving parts
A business is made up of many parts and can only be considered a high-quality complete machine when all the parts operate in harmony and balance. Many companies develop a narrow strategy, focusing on certain areas (such as financial advice, separate business units, sales and marketing, information technology investments, human resource management programs, or organizational effectiveness) without taking a holistic strategic view.
Recent research by David Norton, founder and president of the IT consulting firm Balanced Scorecard, and Harvard professor Robert Kaplan found that 67% human resource management programs and IT strategies are not implemented in conjunction with business units or overall strategies, demonstrating that this single-strategy approach is still prevalent in many companies.
To be effective, a strategy needs to be built in a coherent way, meaning it must link and balance all of a company's major business activities so that they fit together.
4. Analyze the situation clearly before making a strategy
Companies often skip important steps when implementing their strategies, such as honestly and frankly analyzing their internal situation, or lacking a deep understanding of their market and business environment.
To ensure success, your strategy must be built on your company's strengths. You must identify your key competencies. These may include organizational strengths; unique skills; a large pool of talented managers; superior technology; a well-known brand; strong capital; and a large market share in key markets. At the same time, you must identify your company's weaknesses. These may include an inefficient distribution network; poor labor relations; a lack of internationally experienced managers; or products that are out of date compared to competitors.
Without honest internal analysis and assessments and using them as a basis to inform those tasked with strategy formulation, failure is a sure thing.
Likewise, it is impossible to develop a good strategy without a clear vision of the future direction of the market and the business environment. This is important because it is these factors that determine the direction of your business. For example, a company that specializes in providing services before shifting to a product-buying and reselling business must consider how this change will affect profit margins.
5. Success lies in the questions asked.
Too often, companies take shortcuts in the strategy-making process by using the same old methods: asking the same old questions, and getting the same old answers. A successful strategy is not about the answers, but about the questions.
Many companies make the mistake of only asking questions they already know how to answer, or worse, only asking problems they know they can do well. And it’s even more dangerous if past successes or failures have ingrained certain questions about the state of affairs into the leadership team’s subconscious.
Many strategy consultants find that their clients profoundly change their views about themselves, their markets, their business practices, and their goals simply by looking at different issues or even asking questions in different ways.
6. Tools are not strategies
There are many analytical methods and tools that are valuable for strategy formulation. However, they are simply suggestions for a particular part of the strategic thinking process. They should not be confused with strategies. Furthermore, analytical tools and methods have strengths and weaknesses and are applicable in specific situations. Therefore, they can be dangerous if used incorrectly, in the wrong place, and outside the context of the overall strategy formulation process.
For example, the Growth – Share matrix considers two factors, which are the growth of the market and the market share of the business in the corresponding market. The Boston Consulting Group developed this matrix to help businesses orient their business strategies. For businesses, this matrix is used to determine the position of the product in the market and thereby make appropriate strategic decisions. Meanwhile, the Porter's Five Forces model, also known as "Competitive Forces", is considered a useful and effective tool to understand the source of profit. More importantly, this model provides competitive strategies for businesses to maintain or increase profits.
7. Strategic ideas and strategic execution are meaningless without alignment.
A strategy is more than an idea. The success of a strategy lies in its execution. And executing a strategy means making the strategy a reality. The only way to do this is for a company to set a direction and use the right tools to execute that direction. Otherwise, if a company does not have a strategic idea and executes it, it is like running headlong into a rock.
An old proverb can be quoted to summarize the problem raised here: ideas without execution are like daydreams, but execution without ideas is like nightmares.
8. The strategy must be widely publicized.
Too often, leaders make the mistake of assuming that everyone understands what the company is trying to achieve. A survey conducted by Kaplan & Norton also found that an average of 95% employees are not informed or understand their company’s development strategy. This practice results in a failure to connect the total strength of the team.
Clearly and directly communicating your company's strategy is a prerequisite for success.
9. The strategy must set out specific goals and implementation tactics and have a control mechanism.
The most important factor in turning an idea into reality is the specification of the strategy into objectives. Strategic objectives (the main goals that the business wants to achieve through the implementation of a series of specific actions) must be measurable, feasible and have a clear implementation deadline. Tactics are often established in the direction of specifying the details of the implementation of objectives in each stage. The strategic control mechanism is a management and organizational mechanism to control the steps in the strategy implementation process to ensure that the process follows the direction of strategic objectives.
However, these issues are currently of little concern to companies in the process of building and implementing strategies.
10. The role of the leader determines the success of the strategy
The main driving force of the development strategy is to promote the human factor, put people in the center, consider the enterprise as a means for people to develop their creative talents. Business leadership is the decisive factor in the development direction of the enterprise and therefore, it determines the success or failure of the enterprise development strategy. Leaders need to have a vision of economic development trends, predict changes in resources, market demand, etc., in order to establish a suitable strategy, helping the enterprise to be able to take advantage of the opportunities and challenges ahead. Strategic vision needs to be creative, ahead of competitors and act as a compass for building the enterprise's annual business plans.
Often people make strategy successful more than strategy makes people successful.
BWP translated from CEO refresher
