What is a business strategy?
A business strategy is a roadmap or plan that establishes your goals and the actions or steps needed to achieve the end goal. These guiding principles should be shared throughout the organization to help your company reach its objectives.
Developing a business strategy in 10 steps
It doesn’t have to be that way. Here are 10 steps you can take to build the best business strategies and execute them with precision:
1. Develop a true vision.
Vision is an abstract word that means different things to different people. Classically, a vision or vision statement is a snapshot into the future. It should include aspirations of what type of company you want to be, and, unlike a mission statement, articulates what success looks like in clear terms (customers, markets, volume, etc.).
2. Define competitive advantage.
At the essence, business development strategy is identifying how a company can deliver unique value to its customers. In many sectors of the economy, companies are stuck in a sea of sameness. A well-thought-out business strategy should consider how a company can create space from competition in its service offering, pricing model, delivery system and more.
3. Define your targets.
One of the most significant barriers to a strategic business plan is poor targeting. Absent of very specific targets, companies suffer from unclear messaging and thus misalignment between sales and marketing. Defining niches and specialties allows companies to focus resources (of course, some companies are generalists by design).
Clear target markets give a company the ability to create an integrated sales and marketing approach, where marketing enables sales productivity. Sales and marketing plans are executed more effectively when targets are tight.
4. Focus on systematic growth.
As one of our Vistage member clients says, “A thriving company is a growing company.” It is only through growth that companies can afford to invest in things like technology, the best people and new equipment. The strategic plan should identify in which segments a company will grow and in what proportion, so that the product mix yields a specific net margin result.
Only after coming to such conclusions could a company know how much it can afford in terms of capex, overhead expenses and so on.
5. Make fact-based decisions.
Strategy is a garbage in, garbage out exercise. Executives often complain about a lack of good data, but we consistently find information that is useful in the formation of business strategy.
We once worked with a Vistage member who was trying to quantify the value of various segments served. By accessing the public records of a nearby port, we were able to quantify actual shipments of merchandise by potential customers.
6. Long-term strategic business plan.
In the face of constant change, planning horizons are shorter than they used to be. However, only thinking quarter to quarter is a trap that may rob companies of their ability to see around the bend. Best-in-class companies create processes designed to treat strategy as an annual cycle rather than a one-time, static event.
7. Flexible strategy development.
Companies can think long term and still be flexible. For example, a critical component of business strategy development is an external forces analysis. Companies should be evaluating long-term external forces, and adapting based on new information (meeting regularly-perhaps quarterly) to pivot.
Jeff Bezos of Amazon holds a strategy meeting every Tuesday to keep it front and center with his management team.
8. Be strategically inclusive.
To be flexible, companies are including different people in their strategy than in the past. At a time when companies are hiring more millennial employees, there is greater transparency. While I am never one to advocate that companies open their books (as that is a personal decision for the entrepreneur), there is certainly movement toward more inclusion and transparency.
Deciding who to include in strategy formation is a critical selection. We recommend business owners include people they can trust and that can think strategically.
9. Invest time in pre-work.
If you want your managers to take strategy seriously, make them conduct research and prepare relevant information in advance of your strategy meetings.
10. Measure your results and execute excellently.
Every strategy should be actionable. Companies that are best-in-class: Have a strategic action plan that they track often (usually monthly).
- Promote common ownership of the plan across executives and departments.
- Utilize key performance indicators (KPIs) that are predictive and align directly with the strategic plan.
- Have cascading goals that reach every department and resonate with employees so they understand how their role contributes to the greater good.
- Set up their corporate calendar to promote productive meetings, and establish a performance management cycle that supports cascading goals and objectives to every employee.
- Rinse and repeat their strategy cycle every year.