Effective business strategies create a point of view about your business and industry in which it operates. Strategies can help decision makers within businesses make three fundamental choices. These choices are:
- How will the business organise its internal resources in order to maximise value?
- How will the business generate new growth?
- How will the business differentiate itself in the eyes of the customer?
The business of strategy can be both satisfying and frustrating for business owners. Satisfying because you actually get to work ‘on-the-business’ and be able to confidently step towards the future with a clear direction. Frustrating because once you have a roadmap for your business, it can quickly become out of date simply with the entry of a new competitor in town.
Do you have an updated business strategy or business plan?
When you meet Miles Management Consulting for the first time, this is usually one of the first questions we ask. Why do we want to know? To us, your business plan should be the touch-stone in your business – not just for you but for everyone – your employees, leaders and professional advisors.
As a touch-stone, we believe that your business strategy should be the test for every decision made in the business. Let’s face it, when faced with multiple options and opportunities on a daily basis, how do stay on track? Great companies, like those outlined in Jim Collins book ‘Good to Great’, create a ‘hedgehog’ like approach to business. They know that the ‘Great’ organisations are more like hedgehogs – simple, dowdy creatures that know “one big thing” and stick to it. ‘Good’ organisations on the other hand are more like foxes – crafty, cunning creatures that know many things yet lack consistency.
The added benefit of defining your strategic direction is that it creates the necessary foundation of building a high performing workplace. A strategic plan enables business leaders to create a shared understanding of where the business is going and align resources appropriately.
Why is having a documented business strategy so important?
Business strategy is a long term plan of action designed to achieve a particular goal or set of objectives. It is a game plan for strengthening the performance of a team, department or business. Without a strategy, your team has no roadmap to guide them. The word strategy comes from the Greek word stratēgos, which is derived from two words: stratos (army) and ago (ancient Greek for leading). It could be said that a strategy is a leadership plan.
There are a number of benefits to taking a long-term view of your business such as continuing performance and growth. You are able to create shared understanding of the way you do business (vision, mission and values) and align decisions on how best to allocate resources. By constantly scanning your external environment, you are better positioned to take advantage of opportunities as they arise. Lastly, you are able to communicate the intentions of the leadership team to align all key stakeholders including your employees.
It is important to note that strategic planning cannot reliably predict the future nor forecast how markets will evolve. Therefore, we encourage leaders to think of this process as continuous; constantly reviewing your strategic assumptions against the ever-changing business climate. I have had an example of this recently with one client with a relatively large business that did not have a documented business plan or a financial forecast. In the chase for revenue growth, some of the assumptions that he based his business model became redundant. Whilst the revenue and cash decline felt like it happened overnight, there were early enough warning signs which could have been picked up if they had a systematic process to review business assumptions.
How do you go about developing your business strategy?
There are three key components in developing and executing your business strategy.
Strategic Thinking – Casting the Net Wide
Strategic thinking is a proactive, innovative and forward thinking process that results in an integrated perspective of your business. This is the time to reflect on your business with hindsight (what has happened in the past), foresight (what you think might happen in the future) and insight (how does all this apply to the present).
Imagine you could pick your business up with two hands, where you could look at your business from all its angles? What do you see from the top? What do you see from the sides or the bottom? We know that by looking at a picture close up or far away we can see different things.
The key to building strategic thinking as part of developing your business strategy is to ensure that you pick up your business model and look at it from every angle. Using Mintzeberg and Leidtka’s model, how many of the following perspectives do you bring to your business?
- The Systems Perspective – do you think about your business as a whole rather than just its parts? Do you know what your current business model is?
- Intent-Focused – do you look at each of your products, services and process through the lens of your strategic objectives? Does everything fit?
- Thinking in Time – when was the last time that you looked at your business from a scenario planning perspective? What if you achieved all of your objectives set out in your strategy? What else is possible? (This is my favourite type of thinking – the blue sky kind!).
- Hypothesis-Driven – taking a more scientific approach, you can create ‘what if…if then…’ scenarios. For example, what if you lost your biggest customer? If the government changed regulations that your business was based around, how would navigate that change? Have you mapped out what is known, what is unknown and what assumptions you have made in your strategy?
- Intelligent Opportunism – whilst this sounds impressive, it focuses on how you link into the ‘local’ intelligence of anyone within your business to generate new insights or ideas. This can be as simple as having an ideas whiteboard in which everyone can contribute and comment on.
Strategic Planning – Pull It All Together
Now that you have all of these insights from your strategic thinking sessions, how do you pull it all together? It is essential that you follow a logical order that continues to build on each step. For example, we always start with mission – why do we exist? For us, that creates the sandpit in which your business will play in. Without defining the boundaries of where your business will play (or not), how will you know which insights or ideas are more important. Similarly, make sure that you take in the different perspectives of business e.g. financial, customer, process and people. Figure one below outlines the high level process that we take our clients through.
Roughly half of business owners in Australia do not have a strategic business plan. It is my personal view that it is not really a strategy or plan if it lives within your head and no one else can see it or shape it. I have yet to meet a successful business owner who said that they did it all by themselves. The bigger your business, the more complexity and the more challenging the decisions you have to make. You realise that you need your staff to help make effective decisions. A plan is also the first step towards achieving accountability.
Strategic Management – Build Accountability into Your Business
Strategic management is any management action taken to realise a strategy. This is the last piece of the puzzle. It genuinely surprises me how many business owners will go through the process of strategic thinking and planning for their business only to put it in the draw and return to the daily fire fighting.
What process do you have to keep yourself accountable? Here is just a small sample of how our business owners have introduced the discipline of strategic management into their businesses:
- One page business plan stuck in the front of their diary
- Review detailed performance scorecard with the management team with clear milestones montly
- Develop 100 day action plan to identify the priorities for the quarter
- Track and monitor progress through an external advisory board to drive discipline into the business.
The Business of Strategy
Even I have been tempted to want to do our own business strategy workshops (I do this for a living) but even I have conceded the importance of having some else facilitate the process so that you, as the business owner, can contribute 100% to your ideas and insights.
Make sure you take the time to plan the growth in your business and don’t forget to take your people along on the journey. A recent study suggested that you need just 10% of your staff to become ‘true believers’ in your strategy to be able to convince the majority to get on board. Who are your 10%?