You can either grow a business or strategically grow a business.
Strategy is the art of designing an action plan to achieve a particular goal. This action plan moves you from your current state to a future desired state in the most optimal way possible.
What is Strategy Development in Business?
Every business requires strategies. Strategies can be formulated to achieve certain objectives or overcome specific challenges.
A software sales company is developing a strategy to expand from B2B to B2C.
A skincare company is developing a strategy to become more sustainable.
A fintech company is developing a strategy to gain a million customers in North America.
The act of strategy development is the process of researching and identifying options, producing a measurable and specific action plan intended to move the business to a future desired goal by determining resource allocation that minimizes risk and gets maximum impact.
It sets the tone and unites teams to work towards one common goal.
Without a strategy, businesses risk navigating blind, scattering effort, and missing out on growth opportunities.
Types of Strategy in a Business
Strategy can be developed at 4 levels in a business. This includes:
- Corporate Strategy: A high-level plan defining company-wide objectives and values. For example: Amazon’s mission is to be Earth’s most customer-centric company.
- Competitive Strategy: Tactics a business unit employs to outpace its market competitors. For example: Apple’s emphasis on product differentiation through design and user experience.
- Functional Strategy: Approach taken by a company’s functional division to achieve specific goals. For example: Nike’s marketing team enhancing brand visibility through influencer partnerships.
- Operating Strategy: Day-to-day methods and practices for departments to execute higher-level strategies. For example: Starbucks’ store-level strategy to maintain consistent product quality and customer service across locations.
6 Key Phases of Strategy Development
Phase 1: Establish Your Current State
Before plotting the finish line, we must have a meticulous understanding of the starting point. This first step entails an evaluation of the organization’s current status. There are various frameworks that facilitate this process:
- SWOT Analysis: An integral tool, the SWOT Analysis helps demarcate an organization’s Strengths, Weaknesses, Opportunities, and Threats, offering a 360-degree view of both internal and external dynamics. For example: An e-commerce platform might list its advanced search algorithm as a strength and the limited payment gateways as a weakness.
- Gap Analysis: By comparing the current performance with potential performance, this tool highlights “gaps” or areas that need improvement to reach an envisioned state. For example: A SaaS company might find a gap in user engagement rates between its envisioned targets and current metrics, pointing to areas in product or marketing that need enhancement.
- Capability Analysis: This helps you assess your organization’s inherent capabilities, ensuring that your strategic objective aligns with what the company can realistically achieve. For example: A manufacturing firm might recognize its capability in producing high-quality goods but realize a deficiency in rapid delivery mechanisms.
Phase 2: Clarify Your Goal
With a lucid understanding of where you are and where you can be, phase 2 involves setting your goal. Leveraging the SMART goal framework can be very helpful in this situation. SMART, is an acronym for Specific, Measurable, Achievable, Relevant, and Time-bound.
- Specific and Measurable: The clarity brought about by defining specific and measurable goals ensures that there’s no ambiguity in what needs to be achieved with the strategy. For instance, rather than having a vague goal like “increase sales,” a SMART goal would say “increase sales by 10% in the next quarter.”
- Achievable (Realistic): While ambition is indispensable, setting unreachable targets can demoralize teams. SMART goals ensure that objectives are grounded in reality, taking into account the company’s resources and market conditions.
- Relevant: This aspect ensures alignment with the broader vision of the company. It ensures that every goal set serves the overarching company mission and strategic direction. For example, for a company focusing on sustainability, a relevant strategic goal might be to “launch an eco-friendly product line by year-end.”
- Time-bound: By defining a clear timeframe for goals, SMART objectives instill a sense of urgency and purpose in the strategy being developed. It ensures that teams are not just working with purpose but also moving with momentum towards achieving those goals within a stipulated time.
For example, a SMART Goal for a B2B Accounting SAAS company could be:
“Increase our software sales by 25% over the next year.”
Note: SMART goals can be allowed some flexibility and agility until the strategy formulation process is complete. The research and analysis to come can bring about clarity in elements like sales percentages and timelines.
Phase 3: Collect Information and Analyze
With your goal clearly outlined, it’s time to delve into comprehensive research, gathering both internal and external insights. This foundational step ensures your strategy is not only goal-driven but also anchored in data-driven decisions.
It is best to collect and analyze information across two environments:
- External Analysis: This includes examining your desired market, competitors, operational landscape, and customer data.
- Internal Analysis: This includes assessing internal aspects like organizational framework and reward mechanisms.
You can use several strategic frameworks to analyze both internal and external environments.
For External Analysis:
- PESTEL Analysis: This helps analyze macro-environmental factors like Political, Economic, Social, Technological, Legal, and Environmental factors that are impacting your goal.
- Porter’s Five Forces: This analyzes an industry’s competitive environment by examining the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products, and the intensity of competitive rivalry.
- Ansoff’s Matrix: Also called the product/market expansion grid, Ansoff’s Matrix is useful for visualizing the risk and attractiveness of growth strategies for product portfolios in new and existing markets.
- Market Segmentation: This can help you break down the broader market into smaller segments to better understand customer preferences, behaviours, and needs.
- Value Curve Analysis (Blue Ocean Strategy): Use this to map out features that the market values in products/services. It can help you identify areas where the company can innovate or differentiate from competitors.
For Internal Analysis:
- Value Chain Analysis: This helps break down the company’s operations into distinct activities to identify where value is added in the process and where improvements or efficiencies can be realized.
For example: The B2B Accounting SaaS company aiming for a 25% sales boost in 1 year, can use many of these frameworks to guide and bring forth strategy options:
A PESTEL Analysis can illuminate external factors like tech trends or regulatory shifts that can help them increase sales. With Value Curve Analysis, they can discern areas of value innovation, offering a unique value proposition in the SaaS landscape, while Ansoff’s Matrix, can help explore avenues like market penetration, product development, market development, or diversification to determine the most effective strategy for their sales growth aspiration.
Internally, a SWOT Analysis can highlight the company’s core strengths and areas of improvement to support sales, and a Value Chain Analysis can spotlight operational segments that, if optimized, can bolster customer attraction and retention.
These frameworks can help bring clear patterns to light leading to the success of increasing sales. It can look like this:
- Expand from B2B to B2C
- Innovate existing popular features
- Diversify into a new product
- And More
Phase 4: Finalize your Strategic Plan
At this stage, you may have multiple strategies on the table. It is considered an excellent practice to involve key stakeholders to synthesize before finalizing your plans. Engaging your department heads, advisors, and board members can offer important perspectives, ensuring the strategy is both holistic and grounded.
You can use strategic frameworks like:
- Scenario Planning Matrix: To enhance your ability to envision and predict the future impact of various strategies.
- Forecasting: A tool that offers a data-driven projection into future scenarios. By anticipating market trends and customer behaviours collected during the research phase, forecasting enables companies to compare future dynamics expected, ensuring they’re proactive rather than reactive.
- Risk Assessments: Crucial for identifying, evaluating, and prioritizing potential challenges or pitfalls. This tool helps check whether strategies are robust and resilient, allowing companies to mitigate risks while capitalizing on opportunities.
Once a consensus is reached and the strategy is clearly defined, it’s time to formalize it.
Phase 5: Formalize your Strategic Plan
Now it’s time to cement your strategy into a detailed strategic document that delineates the approach, actions, responsibilities, timelines, and benchmarks for assessment. This becomes the company’s compass, directing all endeavours toward the achievement of its goals.
Although a strategic plan doesn’t necessarily follow a standardized format, a high-quality strategic plan does tend to carry certain hallmarks that elevate it from being merely adequate to truly exemplary.
A high-quality strategic plan should have 3 characteristics:
- It identifies the goal clearly
- It outlines action
- It specifies metrics to track progress
Here are some templates that can help you get started:
Phase 6: Execute Your Plan
While devising a strategy is an intellectual feat, its execution is where the rubber meets the road. Successful strategy execution hinges on several core principles:
- Clear communication: The way you communicate your strategy can make or break its execution. When communicating the strategy, every team member, from top-tier management to ground-level employees, should be able to fully grasp the rationale behind the strategy, their roles and responsibilities in the broader context, and direct benefits to them if the strategy is successful. Make it practice to regularly reinforce the strategy through updates, reviews, or company-wide material to encourage a better buy-in.
- Enabling execution: Once a strategy is ready to go, it is the responsibility of the founder / senior leadership to ensure company tools, funds, resources, and manpower are aligned and available for smooth execution.
- Monitoring and feedback mechanisms: Key Performance Indicators (KPIs), as defined in your formal strategy, should be put in place and tracked regularly by the assigned team members. This allows for real-time learning and adjustments if needed, to keep the execution on track. Don’t forget to celebrate milestones to boost morale and reaffirm the value of the strategic direction.
- Fostering a culture of adaptability: Cultivate a culture of adaptability in the company. As external market conditions change, the ability to adapt can help your business anticipate changes and make you more responsive.
In an ever-evolving business landscape, a well-developed strategy development process can become your compass guiding you through uncertainties, ensuring agility, alignment, and purpose. Remember, it’s not just about reaching the destination, but navigating the journey with clarity and cohesion. Embrace each phase and watch your strategic visions transform into tangible success.
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