With the rise of entrepreneurial ventures and the expansion of established businesses, strategy plays a crucial role in making, breaking and maintaining a brand.
The eight-letter word not only means a plan of action designed to achieve an objective but also provides extensive insight into the thought process of a business. Delivering a strategic plan is one of the most important things any organisation, regardless of size, can undertake.
A well-formulated strategy establishes the foundations against which the organisation can create, monitor and measure success. And yet many people find strategy and its purpose difficult to articulate.
Firstly, it helps organisations understand their core capabilities, identify and address weaknesses and mitigate risks. It can help organisations better design themselves so that they are focusing on the things most likely to deliver the best performance, productivity and profit.
Secondly it allows for growth in today’s changing economy. Understanding the changes taking place in the external environment is important to preparing a strategy that will ensure long-term growth.
Lastly, you create a direction and vision for the whole organisation. Providing an organisation with a common purpose, and a set of actions, ensures that everyone is working towards the same goal — the firm’s success.
Without a strategy, an existing business can drift away from its customers and become uncompetitive within its own environment. This eventually leads to a pause in profit and an occurrence referred to as a “strategic drift”.
The drift has four phases and usually happens when organisations are unable to keep pace with the changes in their immediate environment, which in turn leads to their slow and gradual demise.
Phase 1 — Incremental change
In this phase there is little significant change in the external environment. A series of small, incremental changes to strategy enable the business to remain in touch with the external environment.
Phase 2 — Strategic drift
Now things are starting to drift apart. The rate of change in the external environment is accelerating and small, incremental changes in strategy are not enough on their own to remain in touch. The business will start to lose its competitive advantage.
Phase 3 — Flux
This phase is characterised by management indecision. There is now a significant gap between what the market expects and what a business is delivering. Management may have recognised this gap and begun to alter strategy.
However there is no decisive improvement. There may be disagreement between senior management team about how to address what is now a significant strategic drift.
Phase 4 — Transformational change or death
The moment of truth. Either managements recognise the need for a transformational change in strategic direction, or the business fails. It often takes new, external leadership for this recognition to be made and the relevant strategic change implemented. For some businesses, this phase comes too late.
The aim behind having a strategy plan is to get from point A to point B effectively. Having a good strategy dictates how a business will achieve the plan, and effective execution makes sure that you are checking in along the way.
Strategy requires many choices based on valued customer segment to serve (who?), the attributes and level of attributes to offer in the value proposition (what?), and furthermore, which configuration of activities will comprise the firm’s value network (how?).
Businesses then need to determine how ready the organisation is by asking whether conditions and timings are appropriate to initiate a planning process.
Developing teams and schedules, collecting current data which includes a vision, mission and value statement, drafting a marketing plan and collating financial records for past years is necessary to creating a sound overall business strategy.
Additional information — such as SWOT analysis, sales figures and projections — will prove to be beneficial during the development stage as well. This analysis helps you see how you stand out in the marketplace; how you can grow as a business; and where you are vulnerable.
The process takes into account both internal and external factors that your company must navigate.
Whether a business is readying itself for take-off or has already built a reputable stance in the market, there are the five questions to ask in order to develop and revise a sound business strategy:
What are the goals of the organisation and the concrete objectives that you can measure progress against?
Across the potential field available, where will you choose to play and not play?
Once decided, how will you then choose to compete against the competitors out there?
What is then needed in the form of abilities, expertise, and capability — wise to build and maintain in order to outgrow competitors?
What management systems are needed to operate, build and maintain the business?
Answering the above questions will help to determine whether a business strategy plan is adaptive enough to survive changing and unanticipated conditions so that corrective action can be taken quickly and with efficiency.
While strategy can be difficult for many organisations to commence, its benefits are far-reaching and many. From creating new business opportunities, to streamlining the operations and engaging staff, a well-formulated strategy will enable increased growth, productivity and profit, both now and into the future.
— The writer is CEO of Metis Management Consultancy.