Strategy is certainly not a new word to an entrepreneur. It won’t be even wrong to say that it is the most overused yet confused word in the business environment. While every business think they have a strategy, time and again it is proven that what differentiates between successful companies and rest is getting the strategy right!
Strategy is much more than is having an intent, goal, or a plan. It is a robust process of sensing business opportunities, identifying current capabilities and then developing options that are best suited in the context of your business. The strategy formulation process is an opportunity to conduct comprehensive study and analysis. Unfortunately, most companies don’t give enough importance to the strategy formulation process and end of up achieving mediocre performance.
We all know every business needs a strategy irrespective of its size and scale. A business need strategy when;
1) It is finding it difficult to sustain and need a turnaround
2) It is planning to grow revenues or expand across geographies
3) It is facing tough competition and need to transform its
offerings or business model
4) It also needs a strategy when it intends to sell off a business or divest from a business
However defining strategy is not as simple as it appears to be. Let’s take a simple example to understand the point. Assume that a company sets a goal of achieving 100% growth i.e. doubling the turnover in a short span. Most companies stop at defining the goals or objectives but don’t go through the rigorous process of answering various questions raised by the objectives. E.g. in this case those are;
1) Where will the additional growth come from?
a. Will it be achieved by selling the same products or services in same geographies or it would need new offerings? If new offerings what would be those? If new geographies then which and why?
b. Which of it’s offerings are having highest potential to grow? Which offerings generate highest revenues and highest margins? Should they focus on higher revenue offerings or higher margin offerings?
c. Which of its offerings are stale and need to be retired? Which of its offerings need some changes or enhancements to differentiate from the competition?
d. Do they have the design and production capability to come up with those changes or come up with new offerings in a short span?
2) Another set of questions that need answers are;
a. What will be the additional production capacity needed to support the growth?
b. How much additional manpower will be required? Will those be same skills or different?
c. How much additional capital investment it need? What will be the additional working capital requirement?
d. Where will the money to fund the growth will come from? Does it have enough reserves to invest? Does it have enough financial leverage to raise additional loans or equity?
e. What additional manpower, channels and budgets will be required to sell the increased volume to generated additional 100% revenue?
These are just sample set of questions. There are mush more in relation to external dimensions like Industry, Market, Economy, competition, customer and internal dimensions like processes, productivity, efficiency, cost management, tools and technologies and finally talent. Few questions to know the internal capabilities are;
1) What are our company’s core strengths?
2) Does our production, sales, finance, HR, marketing and other teams are organised & equipped to maximise the strengths?
3) Does our company culture enhance people efficiency & productivity?
4) Are our IT systems keeping pace with the needs of our people and demands of our processes?
5) How do we generate new ideas and innovations and how do we retire old processes and products?
Finding answers to these questions require good amount of internal, external data and insights. It is therefore essential to understand that unless a thorough analysis is undertaken just deciding some goals for the growth of the business will not be enough. In fact, it would be misleading and will create frustration at a later stage when the company and the people see that they are struggling to achieve the gaols.
A right strategy definition process broadly involves 10 steps viz;
1) External Environment Analysis
2) Internal capability Assessment
3) Current Portfolio & Market positioning Assessment
4) Identifying Strategic Priorities
5) Defining strategic objectives, Goals and Targets
6) Defining the changes in Business and Operating Model
7) Defining the functional strategies like Go-to-market, operational, financial, HR, Digital etc
8) Identifying new capability development and change initiatives
9) Identifying tools, technologies, people and training requirements
10)Defining implementation roadmap, Governance, Review, Measurements & Communication
As the industry and business is undergoing accelerating change, it is essential for every business owner and leader to get their strategy right. It is must for any business to survive & create competitive advantage to accelerate growth.
