What is an essential part of the the success of a company? Strategy. Companies that fail to have a clear strategy are more inclined to fail when executing their plans. Not having a strategy can bring issues within the decision making process, wastes time and sets projects back. This Harvard Business Review article gave some great insights when it comes to deciding where your business should go.
So what makes a good business strategy?
The three elements that make up a strategy statement are the objective, scope and advantage that should be made crystal clear.
The objective should have an end point and schedule. This is going to be a single goal that is to be achieved within an agreed upon amount of time. Think of the objective as the single goal you want to achieve in say the next five years. For example, setting annual growth points to increase sales and market presence is a great goal! Do not confuse the objective with a mission, a company’s mission and values could be similar to another’s in the same industry. If a company’s objective is similar to other businesses then you probably don’t have a very good one. Defining an objective is going to be difficult and you will likely butt heads with your team but this will eventually instill healthy alignment in your business.
The scope has three dimensions which are the customer of offering, geographic location and vertical integration. These dimensions must have defined boundaries so managers know where and where not to venture off to. The scope encourages experimentation and taking initiative. We will look at Edward Jones from the article as an example. Jones decided to keep online trading out of their scope even though it was very popular for brokerages, they saved time and money on building and how to price their services, they are also not vertically integrated to not take advantage of their customers’ trust. Defining their scope saved managers from working longer hours on things that would not be approved by executives and lets them understand where the clear boundaries are.
Finally the advantage that may be the most important part of the statement has two components: why customers should buy your product and what unique activities deliver that value for them. If you cannot say why people should buy your product or service, you are going to fail. After you figure out your selling point you have to find the vehicle that will present your product/service in a unique way. It can be through your great customer service, fast shopping or your internal programs that make running everything more efficiently. When you’re looking for a unique activity be very precise with the description so it will not get misinterpreted.
Creating the strategy is a very crucial part of forming the foundation of a company. The strategy should understand customer needs and developing unique ways of creating customer value. Having a strategy allows everyone in the organization have a clear goal and make them have individual choices to reinforce one another.