5 Tips for Developing an Effective Business Strategy
"The essence of strategy is choosing what not to do." — Michael E. Porter, American economist and founder of strategic management
To develop an effective business strategy, you need a great deal of data and a comprehensive analysis of your industry and your competitors, but a well-thought-out and deliberate strategic plan will provide an enormous competitive advantage over your competitors who have no strategy in place.
A lot of companies grapple with developing a clear and concise strategy and frequently mistake it for goal setting. Way too often, leaders tend to prioritize taking action for its own sake, completely neglecting big picture thinking. They perceive tasks just in terms of urgency, not importance, which makes their decisions very short-sighted and limits their development.
Therefore, leaders who can create an effective business strategy and execute it accordingly have a big advantage over those who lack strong strategic thinking skills.
If you want to serve your clients better, compete successfully with your competition, and become a market leader, you need to understand how to write an effective strategy for your business.
This article will show you 5 foolproof steps on how to build a simple and straightforward strategy you can put to work today.
What is Strategy?
Lots of companies contends with not only defining what a strategy is but also developing a successful strategy and later executing it properly.
“Strategy is about making specific choices to win in the marketplace,” according to A.G. Lafley, former CEO of Procter & Gamble, and Roger Martin, dean of the Rotman School of Management who wrote “Playing to Win: How Strategy Really Works”.
Seasoned leaders realize that following a specified strategy means choosing only one way and excluding all other options. It is usually the most difficult, but they are aware that it makes them laser-focused and highly effective.
In fact, strategic thinking is all about making particular choices, at times irreversible or immensely hard to reverse, and building a company around them. By drawing up a thoughtful strategy with a unique and outstanding message, companies create a long-standing competitive advantage over their contenders.Back to top
Why Is Strategy Important?
All kinds of businesses, from global corporations to start-ups, need a clear and well-defined strategy as it stands as a backbone of the company and its whole corporate identity. In case of difficulties, it also helps leaders not to lose sight of the direction and stay on the right track.
Since strategy sets the direction for the whole business, it should be a short, concise and easy-to-understand statement serving as a consistent reference point in terms of all key decisions. Without a proper strategy, it’s impossible to make informed decisions since no company can serve all types of clients and operate in all marketplaces.
A company without a strategy, like a ship without a map, will always run around in circles and never reach its objectives. Having a clear strategy in place helps companies find their own voice, place and eventually the best clients in the market. The right strategy is the basis for creating and later strengthening the company’s brand and unique identity.
A good strategy is the framework underlying long-term company plans such as an annual business plan that sets a coherent direction for crucial areas and links them. Without a well-defined strategy, companies tend to lose sight of their direction when they come across temporary difficulties.
Natural tendency to keep options open increases the reluctance among some leaders to make hard choices intrinsic to creating a strategy. However, making hard choices and following up on them make companies laser-focused, helping them concentrate on things that really make a difference.
Cutting off other possibilities is something that some leaders are afraid of, but it is the only way to gain a competitive advantage and stand out as customers prefer experts specializing in particular topics and rarely choose jacks of all trades.Back to top
5 Guides to Write an Effective Business Strategy
1. Define your winning aspirations.
Leaders should always keep winning at the forefront of all their decisions and actions. However, winning is a very general term and it should be narrowed down to particular aspirations which will serve as guideposts setting the clear direction for the whole company.
Writing down clear and well-defined goals will help your team focus on the desired outcome in the future and create a roadmap to achieve them. To keep track of progress, it’s necessary to tie specific Key Performance Indicators (KPIs) to those goals. Choosing the right goals drives further choices and makes them much easier.
Goals can be revised, modified, and adjusted over time, but they should be devised with a long-term perspective in mind since all business activities follow them and are aligned with them.
2. Define your playing field.
When a company knows its aspirations, it’s time to define the particular actions to achieve them. According to the authors of “Playing to Win: How Strategy Really Works”, “no company can be all things to all people” so it’s essential to ask questions which will help you narrow the playing field in terms of product categories, markets, and many more.
- Which markets do you intend to target?
- What are your target customers?
- What business segments will you target?
- What geographies will you target?
- Which sales and marketing channels will you use?
- Which product categories will you offer?
The questions seem to be non-complicated and easy to answer, but in fact they are anything but simple. To answer them, leaders should be ready to make hard choices to curve one leading path, cutting off potential possibilities.
The answers to the above questions are of utmost importance as they will stand as pillars of your whole strategy so they should be intentional, deliberate, and very well-thought-out.
3. Define your value proposition.
A value proposition can make or break a business since it communicates what makes your company stand out from competitors, however, it should concentrate on benefits that you provide to your clients, not features of your product or service.
According to Steve Blank, an eight-time entrepreneur-turned-educator who is credited with launching the Lean Startup movement, your value proposition should be as simple as possible. You need to be able to easily explain why your company exists, namely, who and how you can help.
To develop an effective value proposition, Steve recommends following a format: “We help X do Y by doing Z”. For instance, “We help sales teams in Canada to sell more semiconductors by providing a customizable CRM system".
If you have any doubts, it is worth asking a few people (not necessarily your target customers) for feedback if they understand your statement and if it makes sense to them. If they don’t understand it, give them a more elaborate explanation and ask them to recap that back to you since other people may craft the gist of your business better than you. This method may result in a more succinct, concise, and first and foremost, more understandable value proposition.
If your value proposition truly benefits your customers and speaks to their challenges, your customers will perceive you as a valuable problem-solver which will be immensely driving your sales up.
4. Define necessary core capabilities.
To generate true and long-standing competitive advantage, leaders need to determine what competencies they need to support a chosen value proposition and selected playing fields.
The more employees a company has, the more diverse and broad internal capabilities it has at its disposal. Leaders can leverage existing capabilities or try to build new ones by creating networked alliances. Partnering with various business entities such as PR or advertising agencies, graphic designers, or influencers may help companies increase their pool of accessible competencies required to gain a long-lasting advantage over competitors.
The main leader’s role is to choose capabilities that intensify each other and are critical to the chosen playing fields and value proposition exerting a long-lasting impact on the company’s goals. A unique mix of fundamental competencies sourced from exceptional partners may be hard to copy by rivals generating an authentic competitive advantage.
5. Define management systems.
The final step is concentrated on management systems designed to support and measure the effectiveness of made choices, competencies, and the whole implemented strategy.
The systems control whether goals are communicated regularly to the whole company and measure how well employees take advantage of their capabilities to meet their personal aims. As systems measure not only the effectiveness of the selected choices but also general progress toward pre-defined company objectives, they are indispensable to the success of the whole strategy.
Management systems including brand-equity reviews, strategy dialogues, talent assessment development reviews, budget plan discussions, or innovation reviews should be interconnected and integrated as they are a key factor increasing the effectiveness of all other elements building the strategy.
The Bottom Line
Creating a strategy is a challenging process since all steps are equally important. If leaders don’t complete even one of them, the whole strategy may fail since all elements are interconnected and none of them may be neglected. To become a market leader, companies need to have a concerted process in place that will be responsible for creating, communicating, and reviewing all necessary steps designed to build a successful and hard-to-beat strategy.
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Author: Justine Ilone Siporski is Editor-in-Chief & CEO of BUSINESS POWERHOUSE, the founder and CEO of LANGUAGE EMPIRE, coach, trainer, investor and columnist dedicated to the advancement of entrepreneurs, investors and the C-suite (CMOs, CEOs, CFOs, CIOs). Her key mission is to support leaders, business professionals, and investors in achieving their highest potential, making the right business and investing decisions, and expanding their horizons.