What do you think of when you hear someone emphasize the importance of business strategy? A Three to Five year Plan? A cunning way to outsmart the competition and secure a bigger foothold in your target market? Perhaps it is the sequence of steps a business needs to take to overcome a particular problem?
I suspect that this is actually not a universally well-understood term since when meeting business owners or leaders for the first time, I often ask if they have a Business Strategy defined to which the answer is usually no. However, when the answer is yes, I always ask if this is written down and shared with other members of staff and in just about every case, nothing is formally defined or shared in which case the Strategy does not really exist.
When the business strategy is only in the leader’s head, it is open to continual change depending upon current mood and circumstances; it only takes on a material form when committed to print.
So what is a business strategy and why is it important?
Up until around the mid-20th century, the word strategy was not used in a business context; it was a military term used to define how ‘limited resources’ would be used to achieve a particular outcome. It has become pervasive in business since the parallels are clear: how does a business achieve its ambitions using its limited resources, engage its staff (troops) so that they perform to the best of their ability and where it should it put its focus of attention?
For every business (as for every battle), there are countless options, the key question to be answered is: where to focus to achieve our aims using our limited resources? I love Morris Chang’s quote here:
“Without strategy execution is aimless. Without execution, strategy is useless”
or as Lewis Carroll observed:
“If you don’t know where you are going, any road will get you there”.
Don’t just take my word for it that direction is important, the Mercer Talent Trends, 2017 Global Study, “Empowerment in a disrupted world” (ref ) found that for Australian employees, the “number one thing that would make a positive impact to their work situation” is:
“Leaders who set clear direction”
The clearer the direction, the more likely you are to achieve it, but more is required to ensure ultimate success. As well as knowing where to go, it is important to have the right tools to determine that you are maintaining the correct path. If this sounds like a journey to you, then this is exactly the analogy I would like you to picture for who would set off on a trip without knowing the ultimate destination and without the necessary map, compass, directions or other means to determine how to get there?
In business, if the strategy is solid, the associated measures should become easy to define, track and report on, but it will require discipline and accountability from those involved to ensure that the required outcomes are achieved.
As noted above, individual understanding of what a business strategy varies and unfortunately some businesses have not been well served by some of the larger consulting organizations when it comes to defining one.
I recall meeting with a prospective SME client several years ago who, in preparation for our meeting brought with him a 30 page documented business strategy which had been prepared for him by a large and well-known consulting company and for which he had paid around $20,000. I was genuinely interested to know what he had got for what was a very significant outlay for him and so asked him. His response was: “I don’t really know; I get to page 6 and get bored reading it”.
This really epitomizes why I am a massive advocate of the ‘Single Page Strategy’ (SPS) which defines the following for a twelve-month period on a single sheet:
- What the business is ultimately trying to achieve
- The company’s purpose (what it is here to do)
- Company Values – those beliefs and ways of behaving that fundamentally describe what is important to the business and characterize its operation
- The key areas on which to focus
- Specific measurable Business Goals
- Structures and/or activities that are required to support the above
- The key or new systems and processes required to support the above
There is a bit of work required to develop this initially, but once done it is easy to reuse and hence quickly define the strategy for the new business year. A key way to enable this is to utilize what I term “the Six Foundations of Sustainable Business” shown below.
By considering current and future business performance with respect to these areas enables an overall business strategy to be effectively developed. Fifth Chrome along with its affiliate partners has done this with dozens of clients.
This article is only the tip of the iceberg when it comes to defining a business strategy. But this is critical for real business transformation. It provides the means to describe clearly the end result and measure progress. I wish you every success in realizing the importance of business strategy and defining yours.
References: “Empowerment in a disrupted world”, Mercer Talent Trends, 2017 Global Study
This article is written by Ian Ash, an affiliate business partner of Fifth Chrome