Companies of any significant size are complex organisms, potentially with many departments and a myriad of teams and personalities all working autonomously. How can we ensure that everybody works in an aligned way to achieve our business goals? By creating a business strategy of course! But how does one go about creating (and executing) such a plan?
WHAT IS A STRATEGY ANYWAY?
As humans we’re good at dealing with problems and concerns in the short term, but to see the bigger picture of where we’re going longer term we need to take a step back and to consider some kind of a strategy. A good strategy is something more long term (6 months to several years) which takes us to some destination we can imagine (our What) given the current environment we are in (the Context), whilst adhering to some guiding ideas and principles which we deem important (How).
A well formed and clearly communicated strategy will help all departments, teams and individuals make smart decisions that take the company towards your objectives instead of everybody running at full speed in a variety of non-aligned directions.
Larger companies are likely to need multiple strategies. Which ones depend on the size and nature of your company. Here are some examples of strategies which may exist in a corporate environment.
- Business Strategy
- Product Strategy
- Brand or Marketing Strategy
- IT-Strategy
- Investment Strategy
For the same of simplicity, we sill consider only a sub-set of these, although you can adapt the ideas in this article to best fit your own business and situation.
CONSIDER STARTING WITH A MISSION STATEMENT
While not strictly necessary many companies choose to define some kind of a mission statement, a vision, a catch-phrase, slogan or motto, which will help to inspire our employees or customers. This can be a great way to kick-start the strategic planning process. Are you able to define such a mission statement? Do all your directors agree? This is going to be too simplistic to use as a strategy, but it can serve as a good starting point or to re-center discussions when they get complex or people struggle to agree.
Facebook/Meta’s mission is: “to give people the power to build community and bring the world closer together”
Google’s mission is: “to organize the world’s information and make it universally accessible and useful”, although it has had an informal motto to “Don’t be evil” in the past.
Berkshire Hathaway’s Mission Statement is: “We will achieve our vision by utilizing our world-class team of professionals and systems to guide people in making great real estate and financial decisions.”
A HIERARCHY OF STRATEGIES
Depending on the size of your company you may need to have multiple strategies. Which ones you need will depend on the size and type of business that you have. For example, you may want to have separate Product Strategies, an Investment Strategy, an IT-Strategy or Marketing Strategy. All of your strategies should form a hierarchy and your overall Business Strategy must come first. All other strategies will be derived from this over-all strategy.
You cannot completely define your IT-Strategy, Marketing or Product Strategy until you know where your whole company is going.
All company strategies are subordinate to your overall Business Strategy, but that is not to say that great ideas from your Marketing, Product or IT teams cannot propagate up into the top level strategy.
It is possible that your product teams invent a new killer-feature which enables you to enter a new market segment you have previously not considered. Marketing teams equally may identify new markets for existing products. Your internal IT department may realise one of it’s own internally built tools could be opened up to external customers.
NOTE: If you are a small start-up or a company with a single product your product strategy and your business strategy many be one and the same, but this will probably not be the case for larger organisations.
CONSIDER USING A STRATEGY FRAMEWORK
It may be that you are defining a strategy with other stakeholders; potentially spread across different departments with different schedules and viewpoints. It may be that the strategy is defined over a period of time partly asynchronously. In order to ensure that all participants have the same understanding of what needs to be done and that no important components of the strategy are missed, consider using a strategic framework.
There are books, for example, such as Good Strategy, Bad Strategy by Richard Rumelt and other helpful resources such as this eBook and framework from Jibility which could be used as a basis for strategic planning discussions.
This article will cover some areas which I believe are important for a strategy, but be aware that there are many other approaches and it’s worth evaluating some of these and cherry picking the ideas that resonate with your business.
DEFINING A STRATEGY
A good way to structure your strategy is to consider 3 aspects:
- Context – Where do you stand right now? What is the environment in which you are operating? How are you positioned? What are you good at? What do you struggle with?
- What – What specifically do you want to achieve? This includes your vision for the future and your goals and objectives.
- How – What rules and best practices should we follow when perusing our objectives and executing our strategy?
If you have multiple strategies, you can also define them according to these three areas, but they will have different interpretations.
CONTEXT
Not everybody will be starting in the same place. A small disrupting start-up will have a very different context to a large incumbent. In order to establish meaningful goals and objectives you need to understand your starting point.
For a business strategy this will include things like:
- Which market segments you are currently participating in.
- Your competitor analysis.
- Micro and macro market trends.
- SWOT analysis of your organisation.
- Review of your business capabilities. What needs to be enhanced, and which capabilities need to be added?
WHAT
Given the current situation (Context), where do we want to go?
This can start by brainstorming a future some time in the future and what that might mean to the company. Your company mission could be a helpful guide here.
Sometimes companies fail to actually define goals and objectives and instead rely purely on the How (see below) to define a strategy. While it is perhaps possible to keep the goals flexible (and unspecified) and allow future goals simply to be decided on the fly (as long as they abide by the principles) it does still mean that employees are not aligned on any particular outcomes.
It is very helpful for a company to specify concretely what the company is going to do and for everybody have this shared goal. Doing so does not mean it cannot be changed later if the market conditions shift or for any other reason and the benefits surely outweigh the costs.
Later you can manage your strategic initiatives based on these goals and objectives as part of your portfolio management process. Clearly specifying your goals will help you to correctly prioritise your projects and initiatives in a meaningful way and will enable you to “prune” those projects which do not take you in the right direction (or perhaps take you in a wrong direction).
HOW
It is important that we strive to achieve our objectives, but not at any cost! Your company has values and principles it considers important. Which of these are considered sacred and which ones are flexible will determine how employees will go about making compromises while working towards your goals.
Every company is different, so it is up to you, but it should be made explicit what your principles are and communicated clearly to everyone.
If your company is based on excellent customer experience, cutting corners when it comes to customer support for example would be an incongruent way to increase your revenues.
Equally, if your company is very forward looking and strives to maintain a healthy R&D investment, this should not be cannibalised to achieve some short term wins. This year’s wins will simply be stealing from next year’s wins.
Be honest, thoughtful and pragmatic when defining principles! Every principle constrains future decisions (especially must-have principles), so make sure you don’t put all your employees into a straight-jacket with their decision making. Keep it simple, precise and true to your values.
EXECUTION PLAN
Simply creating a strategy, unfortunately, is not enough. We have to actually turn this into a reality. An excellent strategy that is badly executed is of little value, and a mediocre strategy which is excellently executed can probably outperform it.
First, you must consider who will be the executors of your strategy. Your executives, each department, each team; In other words, everybody! Everybody should be a participating in your strategy, even if they are not directly involved in a particular strategic goal, every decision from every person should ideally be influenced by the strategy. In order for this to happen they need to be told what the strategy is.
COMMUNICATION
Clear communication of your strategy is fundamental to success. Ideally every single person in the whole company need to have the strategy explained to them and they need to have understood it.
You cannot over-communicate your strategy.
Communication can be done verbally, but words are quickly forgotten and memories are unreliable. Consider creating something visual which explains the main ideas of the strategy in a concise way. Hang it on the wall, front and center, so everybody understands what the big picture is. The message must be repeated again and again as the trials and tribulations of daily work will quickly overwhelm the message. As one of my Netlight colleagues says “You cannot over-communicate your strategy”.
ACCEPTANCE
It is quite possible that not everybody will be on-board with the strategy. A strategy will frequently involve changing the organisation somehow, which invariably causes some unhappiness with those affected. Human beings love stability and changing organisational structures and priorities is certain to create some discontent in any non-trivial company.
Firstly, for more senior executives and or directors it would be sensible to avoid this situation by including them in the strategic planning process early on. The earlier people are involved, their ideas taken into consideration and their voices heard, the more likely they are to be in alignment with the process (and the results).
In other cases, ensuring that the reasoning (the why) behind the strategy is part of the communication package is going to help. Arbitrary goals which aren’t justified in any way (except by decree) will be harder for people to accept. Perhaps they don’t align with their own understanding of the company. This is where having a vision or mission statement can come in handy as well as the clearly defined principles and values. If everyone can agree on those and if the strategy is strongly anchored into this it will be difficult to argue against. If somebody doesn’t agree with the mission or the values then they probably are working at the wrong company.
Providing a clear reasoning can be very powerful. Indeed, I have seen extremely challenging business decisions involving cutting of many jobs being accepted by those same employees. People weren’t happy, but they could understand why it was happening, which meant that it could be accepted.
TRACKING AND MEASURING PROGRESS
How do you know if you are actually succeeding in your strategy? Happy thoughts and wishful thinking are nice, but we also need results!
There are several formal techniques for measuring and tracking progress such as OKRs and KPIs. The specific technique you choose depends on many factors, but measure and track you must, but make sure you measure the right things. In the words of Peter Drucker “What gets measured gets managed”.
What gets measured gets managed
Peter Drucker
Ensure regular check-ins with department heads and team leads to ensure that progress is being made. Try not to create an atmosphere of blame and fear of missing targets as this can encourage obfuscation (either intentionally or unintentionally). It is vitally essential that progress is transparent and that problems, setbacks, bottlenecks are identified, raised and resolved quickly.
Waving your hand and saying “it’s going well”, or “it’s about 90% finished” isn’t a good metric. Insist on real, meaningful measurements (preferably numeric) from your teams that don’t involve gut feelings or vague, back-of-envelope, assessments.
BE OPEN TO CHANGE, BUT CONSIDER THE COST
As is often the case with TODO lists, eventually the list itself becomes the objective and the system breaks down. The same can happen with a strategy!
Market conditions can change, new opportunities can present themselves, promising ideas can fail to deliver on our expectations. In such cases we mustn’t stick to a rigid strategy. The strategy exists to ensure our success, so if it no longer serves this purpose, it must be changed.
Having said that, a large company cannot simply turn on a dime and large scale organisation, like a large oil tanker, take time to change course. Regularly changing priorities, switching in and out objectives will cause fatigue in team members. This is not simply a case of context switching, many people will have invested mental, physical and emotional energy into real deliverables only to have the underlying reason for those investments evaporate from one day to another. This essentially means they have wasted a lot of time and energy. This is not only exhausting, it is demotivating and will lead to resignations if it occurs frequently.
Clearly we cannot keep projects and initiatives going if they provide no value, indeed most employees wouldn’t want that either, but we need to ensure that we don’t change course too frequently or too radically if we can avoid it. If we do need to, we need to fall back again to our principles and our mission to ensure that employees can at least understand and accept the course correction.