Strategy is a word that is often misunderstood. Many experts (and nonexperts) have made fortunes trying to explain it with all kinds of scenarios and buzzwords, but they have only made matters worse.
We need to talk plainly about strategy. That will make it easier for you to contribute to the strategic development of your organization. An organization that has a clear strategy – and consistently applies it – generally achieves its goals.
How often have you heard an organization say its strategy is market domination? Actually, this is an objective, not a strategy. If an organization is planning to dominate a market, it must ask itself why it wants to do so (clear benefits must be foreseen) and how it is going to get there.
Strategy defined
Strategy is the art of deploying resources toward an adopted objective. It's looking at the big picture, asking a lot of "what ifs" and charting a course of action.
Strategy comes from the military; it's the "how" part of what you are trying to accomplish. If we return to our market domination scenario, your strategy will flow from asking how you are going to achieve that goal. Lowest price, first to market, large-scale availability, product uniqueness, patent protection and government legislation are all possible strategies.
Let's take a simple example. Consider a child who wants to buy a bike or video game system that is on promotion for $500. Here are some possible strategies:
Earn the money through new revenue sources, such as odd jobs, babysitting or a
paper route.
Save money from existing revenue sources such as allowances, birthday gifts or contributions from grandparents.
Pester parents until they buy it.
Find the money between the cushions of Aunt Mary's couch.
The ability to achieve the objective will depend not only on the choice of a strategy (or a combination thereof) but also on its execution.
Strategic issues
Strategic issues are ones that will have either a positive or negative impact on the way you do business. For example, making a decision to pursue the export market is strategic. If your organization is serious about its strategy, resources will have to be deployed and major changes will have to be made to your operations.
Governments are constantly faced with strategic issues. Since the US is the world's largest consumer of energy, it views its supply of oil as a strategic issue and has developed a number of tactics to address it.
Failing to think and act strategically can have extreme consequences. A local retailer who does not plan for competition from international megastores will face a strategic issue whether he likes it or not, and his business will be fundamentally changed whatever he does.
Nonstrategic activities often consume a great deal of time and divert resources from an organization's key areas of interest. We have seen this strategic thinking applied recently, with large organizations divesting themselves of certain interests that, while profitable, were deemed unstrategic.
Strategic choices
It is fun to sit around and strategize, because in essence all points of view are credible when you are dealing with hypothetical situations. In the end, the hard part is making a choice from all your options. To succeed, you need to understand your market, your competition, your clients and what impact your strategic choices are will have on your organization and your competitors.
At the same time, you are trying to gaze into the future and predict what trends will continue, which will die off and what new ones will arise. This requires a great deal of thought and work. Again, all points of view are credible at this stage. You might need an outsider to act as a facilitator, ensuring things stay on track and no animosity or hard feelings develop.
You need to test your alternatives using the market information you have accumulated. The result of your analysis, filtered through your intuition, will determine the most appropriate strategy. No matter what the numbers say, you need to be comfortable with your strategy, because the road to success might be long and hazardous.
Strategic confusion
Business plans or strategic plans are often referred to as the brick. They can be so complex and confusing that the average manager has trouble comprehending them.
Strategic plans include statements of the organization's mission. However, some planners will insist on including corporate values and philosophy. While these are important, strategy and objectives should remain front and centre.
Mission and vision are often used interchangeably, but they shouldn't be. Moreover, these statements are so generic that they carry little meaning for those who have to refer to them for guidance.
A mission is best described with a military example. A group of soldiers is given a mission, an objective. It is clear, precise and definite – e.g., capture the village. This might not be easy to accomplish and the strategy has yet to be defined, but at least everyone is aware of what is expected.
Organizations often find it difficult to state in their mission statements what is expected, and end up reverting to phrases like "world class," "leader in innovation," "anticipating customer needs" or "low-cost producer." While the intentions are admirable, it is difficult in these instances to quantify to what extent the mission was achieved.
Corporate values and philosophy are important issues as well, but these generally reflect the personalities of senior management and are usually communicated verbally, on an ongoing basis. As soon as you put them into a planning document, they become open to interpretation and the organization will be measured against them. An organization may decide to include a statement about being environmentally friendly; if this is the case, it should be prepared to act accordingly, to defend its record and to discuss various interpretations of what it means. In May, the London Daily Telegraph published an article on the recent Earth Summit, stating that the 60,000 environmental delegates will produce the same volume of greenhouse gases through travel and hotel pollution as one million ordinary Africans would produce in a year.
For small and medium-sized organizations, our advice is to stick to the basics, avoid distractions and concentrate on getting the job done – within the framework of your basic values.
Planning versus strategy
Strategy, then, is the art of deploying resources. It is the study of available options and the selection of the most appropriate one. As in chess, strategy is developed based on the anticipated results of certain actions.
Planning relates to the execution of the strategy. What resources are necessary? What is the time frame? Who is going to make sure it takes place and what happens if things do not go according to plan?
Through strategic thinking, we may realize we need to reduce the cost of operations by 15%. The person responsible for operations now has to come up with a plan to achieve this. Deciding on one machine over another is not strategic. It is tactical and is derived from the planning process.
If the operations person recommends a piece of equipment that reduces operating costs by 15% and thus provides the organization with greater operational flexibility, the decision is a good one – but not a strategic one.
Communicating strategy and mission
Many people think strategy is a complicated and secretive element of business. In fact, strategy and its underlying mission are the expression of what the company is about. They should be clearly communicated to all pertinent stakeholders. Many well-known businesses are masters in that field. Whether through their annual report or in the way they promote their products, they communicate a simple, consistent message. In that way, they provide focus for the organization.
As stated in the CICA course, "Strategic management and planning," the late British prime minister Benjamin Disraeli was quoted saying, "The secret to success is constancy of purpose."
If we refer to what we said about mission statements, we see the mission has to be not only clearly defined (military) but clearly communicated (the actions).
Every organization has an inherent strategy, even if it is unofficial. But as Disraeli implied, successful organizations are consistent in their approach. In such organizations, most members can easily explain their purpose.
Consistency of purpose is not always easy to achieve; nor is it easy to instill it in the minds of staff members. How often have individuals in the same organization given you different descriptions of what they do and why? Or think of cases where an organization's promotional efforts are not in sync with your personal experience (e.g., it takes you five minutes to be served in a fast food restaurant).
Many organizations go to great lengths to communicate their strategy internally and externally. Internally, regular staff meetings and progress reports are useful. For the external side, packaging, pricing, advertising and even the manner in which your phone is answered all reflect your strategy.
All of these decisions must be communicated to employees. How you do it is up to you, but we strongly suggest communication be led by the most senior person. Senior staff must be united and prepared to sell this strategy to the employees; after all, they will be executing it.
Execution of the strategy
Things do not happen overnight, so be prepared to move cautiously but with authority. Make sure to deliver on what you want to accomplish.
One of management's most important responsibilities is to ensure the strategy is executed and to take corrective action as required. Failure to do so will create doubt – members of the organization, its suppliers and customers will begin to lose confidence in what you stand for.
If the execution of your strategy implies major shifts in business practices and processes, be prepared to answer questions, because change is scary to most people and they have to be reassured. Explain the strategy to them and fix timetables to it; otherwise, they will start to fill in the blanks on their own. This is dangerous, because you will then be stuck dealing with their individual interpretations.
We recommend that someone be made responsible for the execution of the plan. It's essential to have a watchdog or a guardian who ensures key projects move forward, stay on track and on budget.
Strategy as filter
One of the key benefits of a clearly defined strategy is that it helps the organization keep its focus. It allows managers to concentrate on key issues. If the strategy is unclear, any project is good and will potentially trigger analysis or action. Team members will find something they like and run with it. But if you have positioned yourselves as a high-end supplier, anything that is not high-end is not strategic and should not even be considered a project. Clear strategy allows people to say no to distractions.
Changing strategies
Often the question of changing strategies is driven by a lack of results. Comments such as "the strategy isn't working" or "it doesn't make any sense" start to surface. We must remember a great deal of thought has gone into your strategic choice and at the time it was the best course of action. The critical question here is, what has changed?
You can change strategies but before doing so, you must know why your strategy is not working. The problem could be in your execution or in the commitment you have. Review the assumptions and market information that brought you to your decision. If this information is sound, there should be no reason to change your strategy.
Generally, the only justification for a strategic change is a change in the marketplace or in your assumptions. If your product category has been deemed a health hazard, the average price has decreased dramatically, a technological advantage or disadvantage has been introduced to the market, or you have found you do not have the required resources to continue, then you have no choice but to adjust.
This is a delicate maneuver, as you are essentially being forced to change your mind. This can create doubt and undermine your credibility. But you can gain respect by announcing adjustments in order to improve results. Do not fool yourself: your employees have realized the problem long before you talk to them and are essentially concerned with the work that will be coming through the doors; any communication to them should be focused on that.
What should you do?
To test how clear your strategy is, simply ask employees to describe it in their own words. Ask what business they are in and what they are trying to accomplish. Who are their most important customers and why do they buy from you and not from the competition?
The results of this informal survey may be surprising for two reasons. First, the answers may be quite different from your thoughts and those of senior management. Second, and more important, there may be very little consistency in the answers you receive.
If you get divergent responses from your employees, imagine what your customers think.
A few years ago, we dealt with a consumer packaged goods company, where no one in the marketing department identified the consumer or the end user as the key to the success of the company. All five marketers stopped their strategic thinking at the retail chains and failed to recognize that the ultimate goal was to move the product off the shelves, not onto them.
In another case, we worked with an organization whose president found it difficult to explain what his organization did. At a golf game that summer, an older gentleman joined our threesome and asked the president what business he was in. Instead of going through his long explanation, he said they drove buses. Imagine if he had been a potential customer. We guided this organization through a planning session, and the outcome was a simple, clear and concise statement describing what the company did and why people did business with it. This statement became the organization's mantra and helped rally people around a common goal.
Stick to the basics
If you have done this kind of thinking already, your process should be continuous. Stay on the lookout for changes in the market and in your business. Challenge employees to look at the big picture and to search for ways to exploit business opportunities within your sphere of reference.
If you feel your organization's direction is unclear, perhaps it is time to initiate this type of thinking and to clarify your purpose.
Strategy is a road map, a direction you have chosen. It does not have to be complicated or revolutionary, but it requires forethought and commitment.
As a philosopher once said, "If you don't know where you are going, any road will get you there."
So stick to the basics, be thorough in your research and analysis, use logic and commit yourselves.
--------------------------------------------------------------------------------
David Kane, BCom, BA, and Josée Santoni, MBA, CA, are associates at SMCS Inc., a Montreal-based organization dedicated to business development and organizational effectiveness.They can be reached at dk.smcs@videotron.ca and js.smcs@videotron.ca
We need to talk plainly about strategy. That will make it easier for you to contribute to the strategic development of your organization. An organization that has a clear strategy – and consistently applies it – generally achieves its goals.
How often have you heard an organization say its strategy is market domination? Actually, this is an objective, not a strategy. If an organization is planning to dominate a market, it must ask itself why it wants to do so (clear benefits must be foreseen) and how it is going to get there.
Strategy defined
Strategy is the art of deploying resources toward an adopted objective. It's looking at the big picture, asking a lot of "what ifs" and charting a course of action.
Strategy comes from the military; it's the "how" part of what you are trying to accomplish. If we return to our market domination scenario, your strategy will flow from asking how you are going to achieve that goal. Lowest price, first to market, large-scale availability, product uniqueness, patent protection and government legislation are all possible strategies.
Let's take a simple example. Consider a child who wants to buy a bike or video game system that is on promotion for $500. Here are some possible strategies:
Earn the money through new revenue sources, such as odd jobs, babysitting or a
paper route.
Save money from existing revenue sources such as allowances, birthday gifts or contributions from grandparents.
Pester parents until they buy it.
Find the money between the cushions of Aunt Mary's couch.
The ability to achieve the objective will depend not only on the choice of a strategy (or a combination thereof) but also on its execution.
Strategic issues
Strategic issues are ones that will have either a positive or negative impact on the way you do business. For example, making a decision to pursue the export market is strategic. If your organization is serious about its strategy, resources will have to be deployed and major changes will have to be made to your operations.
Governments are constantly faced with strategic issues. Since the US is the world's largest consumer of energy, it views its supply of oil as a strategic issue and has developed a number of tactics to address it.
Failing to think and act strategically can have extreme consequences. A local retailer who does not plan for competition from international megastores will face a strategic issue whether he likes it or not, and his business will be fundamentally changed whatever he does.
Nonstrategic activities often consume a great deal of time and divert resources from an organization's key areas of interest. We have seen this strategic thinking applied recently, with large organizations divesting themselves of certain interests that, while profitable, were deemed unstrategic.
Strategic choices
It is fun to sit around and strategize, because in essence all points of view are credible when you are dealing with hypothetical situations. In the end, the hard part is making a choice from all your options. To succeed, you need to understand your market, your competition, your clients and what impact your strategic choices are will have on your organization and your competitors.
At the same time, you are trying to gaze into the future and predict what trends will continue, which will die off and what new ones will arise. This requires a great deal of thought and work. Again, all points of view are credible at this stage. You might need an outsider to act as a facilitator, ensuring things stay on track and no animosity or hard feelings develop.
You need to test your alternatives using the market information you have accumulated. The result of your analysis, filtered through your intuition, will determine the most appropriate strategy. No matter what the numbers say, you need to be comfortable with your strategy, because the road to success might be long and hazardous.
Strategic confusion
Business plans or strategic plans are often referred to as the brick. They can be so complex and confusing that the average manager has trouble comprehending them.
Strategic plans include statements of the organization's mission. However, some planners will insist on including corporate values and philosophy. While these are important, strategy and objectives should remain front and centre.
Mission and vision are often used interchangeably, but they shouldn't be. Moreover, these statements are so generic that they carry little meaning for those who have to refer to them for guidance.
A mission is best described with a military example. A group of soldiers is given a mission, an objective. It is clear, precise and definite – e.g., capture the village. This might not be easy to accomplish and the strategy has yet to be defined, but at least everyone is aware of what is expected.
Organizations often find it difficult to state in their mission statements what is expected, and end up reverting to phrases like "world class," "leader in innovation," "anticipating customer needs" or "low-cost producer." While the intentions are admirable, it is difficult in these instances to quantify to what extent the mission was achieved.
Corporate values and philosophy are important issues as well, but these generally reflect the personalities of senior management and are usually communicated verbally, on an ongoing basis. As soon as you put them into a planning document, they become open to interpretation and the organization will be measured against them. An organization may decide to include a statement about being environmentally friendly; if this is the case, it should be prepared to act accordingly, to defend its record and to discuss various interpretations of what it means. In May, the London Daily Telegraph published an article on the recent Earth Summit, stating that the 60,000 environmental delegates will produce the same volume of greenhouse gases through travel and hotel pollution as one million ordinary Africans would produce in a year.
For small and medium-sized organizations, our advice is to stick to the basics, avoid distractions and concentrate on getting the job done – within the framework of your basic values.
Planning versus strategy
Strategy, then, is the art of deploying resources. It is the study of available options and the selection of the most appropriate one. As in chess, strategy is developed based on the anticipated results of certain actions.
Planning relates to the execution of the strategy. What resources are necessary? What is the time frame? Who is going to make sure it takes place and what happens if things do not go according to plan?
Through strategic thinking, we may realize we need to reduce the cost of operations by 15%. The person responsible for operations now has to come up with a plan to achieve this. Deciding on one machine over another is not strategic. It is tactical and is derived from the planning process.
If the operations person recommends a piece of equipment that reduces operating costs by 15% and thus provides the organization with greater operational flexibility, the decision is a good one – but not a strategic one.
Communicating strategy and mission
Many people think strategy is a complicated and secretive element of business. In fact, strategy and its underlying mission are the expression of what the company is about. They should be clearly communicated to all pertinent stakeholders. Many well-known businesses are masters in that field. Whether through their annual report or in the way they promote their products, they communicate a simple, consistent message. In that way, they provide focus for the organization.
As stated in the CICA course, "Strategic management and planning," the late British prime minister Benjamin Disraeli was quoted saying, "The secret to success is constancy of purpose."
If we refer to what we said about mission statements, we see the mission has to be not only clearly defined (military) but clearly communicated (the actions).
Every organization has an inherent strategy, even if it is unofficial. But as Disraeli implied, successful organizations are consistent in their approach. In such organizations, most members can easily explain their purpose.
Consistency of purpose is not always easy to achieve; nor is it easy to instill it in the minds of staff members. How often have individuals in the same organization given you different descriptions of what they do and why? Or think of cases where an organization's promotional efforts are not in sync with your personal experience (e.g., it takes you five minutes to be served in a fast food restaurant).
Many organizations go to great lengths to communicate their strategy internally and externally. Internally, regular staff meetings and progress reports are useful. For the external side, packaging, pricing, advertising and even the manner in which your phone is answered all reflect your strategy.
All of these decisions must be communicated to employees. How you do it is up to you, but we strongly suggest communication be led by the most senior person. Senior staff must be united and prepared to sell this strategy to the employees; after all, they will be executing it.
Execution of the strategy
Things do not happen overnight, so be prepared to move cautiously but with authority. Make sure to deliver on what you want to accomplish.
One of management's most important responsibilities is to ensure the strategy is executed and to take corrective action as required. Failure to do so will create doubt – members of the organization, its suppliers and customers will begin to lose confidence in what you stand for.
If the execution of your strategy implies major shifts in business practices and processes, be prepared to answer questions, because change is scary to most people and they have to be reassured. Explain the strategy to them and fix timetables to it; otherwise, they will start to fill in the blanks on their own. This is dangerous, because you will then be stuck dealing with their individual interpretations.
We recommend that someone be made responsible for the execution of the plan. It's essential to have a watchdog or a guardian who ensures key projects move forward, stay on track and on budget.
Strategy as filter
One of the key benefits of a clearly defined strategy is that it helps the organization keep its focus. It allows managers to concentrate on key issues. If the strategy is unclear, any project is good and will potentially trigger analysis or action. Team members will find something they like and run with it. But if you have positioned yourselves as a high-end supplier, anything that is not high-end is not strategic and should not even be considered a project. Clear strategy allows people to say no to distractions.
Changing strategies
Often the question of changing strategies is driven by a lack of results. Comments such as "the strategy isn't working" or "it doesn't make any sense" start to surface. We must remember a great deal of thought has gone into your strategic choice and at the time it was the best course of action. The critical question here is, what has changed?
You can change strategies but before doing so, you must know why your strategy is not working. The problem could be in your execution or in the commitment you have. Review the assumptions and market information that brought you to your decision. If this information is sound, there should be no reason to change your strategy.
Generally, the only justification for a strategic change is a change in the marketplace or in your assumptions. If your product category has been deemed a health hazard, the average price has decreased dramatically, a technological advantage or disadvantage has been introduced to the market, or you have found you do not have the required resources to continue, then you have no choice but to adjust.
This is a delicate maneuver, as you are essentially being forced to change your mind. This can create doubt and undermine your credibility. But you can gain respect by announcing adjustments in order to improve results. Do not fool yourself: your employees have realized the problem long before you talk to them and are essentially concerned with the work that will be coming through the doors; any communication to them should be focused on that.
What should you do?
To test how clear your strategy is, simply ask employees to describe it in their own words. Ask what business they are in and what they are trying to accomplish. Who are their most important customers and why do they buy from you and not from the competition?
The results of this informal survey may be surprising for two reasons. First, the answers may be quite different from your thoughts and those of senior management. Second, and more important, there may be very little consistency in the answers you receive.
If you get divergent responses from your employees, imagine what your customers think.
A few years ago, we dealt with a consumer packaged goods company, where no one in the marketing department identified the consumer or the end user as the key to the success of the company. All five marketers stopped their strategic thinking at the retail chains and failed to recognize that the ultimate goal was to move the product off the shelves, not onto them.
In another case, we worked with an organization whose president found it difficult to explain what his organization did. At a golf game that summer, an older gentleman joined our threesome and asked the president what business he was in. Instead of going through his long explanation, he said they drove buses. Imagine if he had been a potential customer. We guided this organization through a planning session, and the outcome was a simple, clear and concise statement describing what the company did and why people did business with it. This statement became the organization's mantra and helped rally people around a common goal.
Stick to the basics
If you have done this kind of thinking already, your process should be continuous. Stay on the lookout for changes in the market and in your business. Challenge employees to look at the big picture and to search for ways to exploit business opportunities within your sphere of reference.
If you feel your organization's direction is unclear, perhaps it is time to initiate this type of thinking and to clarify your purpose.
Strategy is a road map, a direction you have chosen. It does not have to be complicated or revolutionary, but it requires forethought and commitment.
As a philosopher once said, "If you don't know where you are going, any road will get you there."
So stick to the basics, be thorough in your research and analysis, use logic and commit yourselves.
--------------------------------------------------------------------------------
David Kane, BCom, BA, and Josée Santoni, MBA, CA, are associates at SMCS Inc., a Montreal-based organization dedicated to business development and organizational effectiveness.They can be reached at dk.smcs@videotron.ca and js.smcs@videotron.ca
Comments
Post a Comment
Thanks for leaving comments. You are making this discussion richer and more beneficial to everyone. Do not hold back.