Why is Business Strategy Important
Article by: Sara Pantaleo
Businesses tell me that they have no time to work on business strategy. The reality is that businesses can feel rudderless without a business strategy. A business strategy is a great way to help an organisation achieve goals, and define its methods and tactics. A business strategy needs to include the whole team and become what you do every day and not something that gets done occasionally.
What is a business strategy?
A business strategy is a set of objectives that articulate the organisation’s business plans. A business strategy also defines what the organisation needs to do to achieve the goals and will guide the way. This helps for better decision-making and workforce planning, and resource allocation. A business strategy guides all the organisation’s departments in a clear set of critical responsible areas (KRAs) and working together to achieve the organisation’s goals.
It is essential to create a business strategy aligned to your organisation’s purpose, vision, mission and values to ensure that your strategic objectives align with your culture and meet your customers’ needs.
What are the key considerations for creating an effective business strategy?
When creating a business strategy, it is essential to have insight into your organisation, foresight into the environment around you, and opportunities for future planning. This will involve using tools such as SWOT to assess where your organisation is at a point in time and research your current and future sources of sustainable growth and innovations. Assess the external factors that may impact your organisation or industry, such as:
- Connected all the time – what does this mean to employee wellbeing and delivering to your customers
- The information age – are you aware of all the latest industry innovations
- Artificial Intelligence (AI) and robotics
- Codification of money
- Life Sciences
- Climate change
Getting the whole team together early in the process will ensure that you consider all the essential factors such as the strengths and weaknesses, create or review the vision and identify your top big hairy audacious goals (BHAG). In addition, the process will help you determine where you are now, the external factors to consider, where you want to go, and how to get there.
Basic Business Strategy Planning Process
- Planning Awareness
- Formulating goals
- Analysing the external environment
- Analysing the internal environment
- Identifying strategic opportunities and threats
- Performing gap analysis – create a strategy that leverages your strengths and identifies any gaps that need to be addressed.
- Developing alternative strategies – is essential also to building contingencies.
- Implementing strategies – creating a business action plan, including all stakeholders, is crucial to executing your strategy.
- Measuring and controlling the progress
Planning and awareness – A business strategy helps you identify the key steps to reach your business goals. Setting big goals is essential to stay focused on achieving your objectives.
Efficiency – A business strategy allows you to allocate resources effectively for your business activities, automatically making you more efficient. It also helps you plan for deadlines, assign job roles and stay on track for your project goals.
Control – Creating a business strategy gives you more control over choosing the activities that will directly help you reach your goals and allows you to quickly assess whether your actions are getting you close to your goals.
Competitive advantage – By identifying a clear plan for how you will reach your goals, you can focus on capitalising on your strengths, using them as a competitive advantage that makes your company unique in the marketplace.
Other Key Components of Creating Business Strategy
A business strategy is intended to help you reach your business objectives. With a vision for the direction of the business and clarity of purpose, you can create clear instructions in the business strategy for what needs to be done and who is responsible for completing each step.
A business strategy guides top-level executives and departments about what should and should not be done according to the organisation’s core values. It helps everyone stay on the same page and with the same goals.
Stands for strengths, weaknesses, opportunities and threats. This process helps an organisation assess where you are, identify and evaluate your organisation’s strengths and weaknesses, and identify untapped opportunities and threats that you need to mitigate.
Many business strategies articulate the operational details of how the work should be done to maximise efficiency. As a result, people responsible for tactics understand what needs to be done, saving time and effort.
Resource allocation plan
A business strategy includes where you will find the required resources to complete the plan, how the resources will be allocated and who is responsible for doing so. In this regard, you will see where you need to add more resources to complete your projects.
The business strategy also includes tracking the organisation’s output and evaluating how it is performing about the targets set before the strategy’s launch. This helps you stay on track with deadlines, goals, and budgetary concerns. This will ensure that you can do more of what is working and stop doing what is not working.
Pitfalls of Creating Business Strategy
- Not executing – strategy is a choice; execution is imperative
- Do-it-all – Failing to make choices and making everything a priority
- What can you execute now with the resources available
- Not customer-focused – what’s suitable for customers is good for business
- Not agile – Need to adapt and change to market conditions or customer needs and feedback and stay relevant
- Something-for-everyone – Attempting to capture all consumer or category segments simultaneously. Be clear and serve one market well
Simple examples of Strategic Goals
Cross-sell more products
Increasing the amount of product sold per customer can increase your average spend. However, even a slight increase can significantly impact profitability without spending money to acquire new customers.
Improve Customer Service
Having customers top of mind in your business can help to deliver quality customer service by building a solid reputation of having exceptional customer service with help more referrals and more sales. If you have a problem in a specific area of servicing your customers, having a goal focused on improving customer service will have objectives that centre around the customer.
You could launch an entire business strategy to increase your business’s sustainability. For example, focus on reducing energy costs, decreasing your organisation’s carbon footprint or becoming more circular. This may also include how you will be more community focus.
Start Creating your Business Strategy
Organisations may feel overwhelmed, time-poor, and unable to work on creating a business strategy. What are the consequences if you do not set a plan? So, start small. Get your whole team together, review your business honestly and assess where you are and where you want to go. Then set clear goals and actions aligned to your vision, purpose and values, including being customer-centric. Ensure you assign accountability for each activity. Make each goal realistic and part of what you do day-to-day and measure, review and act. Stop doing what is not working!