Overview of Business Strategy
The Process of Strategy001
I have been in senior management (Director level) now for fifteen plus year and I have looked at numerous strategic tools that are designed to improve certain core areas of a business. I have always been an inquisitive type of person and tailoring to the fact I have never really spent a great deal of time within one organization, I have always asked questions within each operational function mainly towards strategy and wanting to understand the direction for continual improvement and how that aligns into the other functions. My background in Risk and Project Management has I believe made me want to understand strategy in more detail due to having to come up with mitigation plans when faced with the risk of failure on key deliverables. Management Systems, as an example ISO 9001/2015 has levels of strategy which prompts the business to ask the question, what is the plan to improve on what is already in place and what steps will be taken to reach those targets. So I decided to research strategy and really understand what makes a business successful. This article is about the key elements of strategy and how they are formed to achieve the desired outcome.
The key elements (overview)
Being able to understand the process flow from planning through into control for Business Strategy is the key to understanding the benefits, and what you gain in the long run. For me it’s not all about quick fixes to plug gaps in business, it’s about the long-term existence of the company going forward and creating stability, growth and a layer of professionalism. Realising how important certain tools are that can make a big difference to what you want to achieve has made me realise what I would do when entering a new business and assisting them to create change. I have used tools like SWOT previously within a project environment to aid in achieving deadlines. Lateral thinking and challenging situations which are the main core of this post so we will be looking also at the importance of pulling together in the same direction internally to achieve strategic goals.
The term collective strategy
Collective Strategy is the term used when people within an organisation or different organisations with similar concerns collaboratively work together to understand how they can approach certain issues. Risk Management has a similar term which can be applied to Collective Strategy called the Delphi method or depending what country you are in, the Delphi Technique which relies on a panel or group of subject matter experts to brainstorm questions and come up with answers that will give you the end result, that being either a strategy to make improvements, from either a gap analysis or previous audits. If you are a business with competitors, you would normally form a senior leadership meeting monthly where strategy would be one of the top bullet-points for discussion. I have run these meetings previously, determining if each department is performing to its maximum potential and what could be done to add further improvements, normally the documentation side would come from internal business plans or procedures working towards a desired future outcome to achieve certain goals or even a solution to a potential problem. To conclude, the internal team would be collectively looking to exploit opportunities and avoid exposure to identified risks.
Advantages and Limitations of Collective Strategy
The advantages of Collective Strategy is being able to gather a group of highly skilled individuals who are subject matter experts within the areas they control, who would have knowledge of a business function that will enable you to determine the right course of action. You are able to think strategically rather than a rigid stance collectively as a group, weighing up the advantages and disadvantages of a particular course of action. Referencing Edward de Bono’s Lateral Thinking which is about breaking away from the prison of old ideas, which requires a change in attitude, and most organisations have people that have been in the same post several years, then stagnation sets in and the idea of thinking outside of the box will not be evident. The implementation of lateral thinking and new ideas can sometimes be a struggle when you have a senior workforce who have a regimental approach to the role they play within the business and this would be the limitations of collective strategy. Making sure you don’t have conflict within a strategic workshop, and learning to listen to new ideas so team members are valued is the upmost importance when controlling the internal climate. Being mindful not to dominate the strategic group and gain a good understanding of what is being put across. One other limitation of Collective Strategy is time management, when people are bogged down with day to day firefighting and trying to handle daily business issues, then group strategy workshops are hard to formulate. But sitting with individuals before group sessions take place and helping them to understand the vision for the future and how they contribute which leads to one collective goal, in my mind, it’s imperative this happens. To summarise on this subject, I must add the quote; because it’s now embedded in my mind and I understand the importance of it; by Edward De Bono’s Lateral Thinking (strategy today means tackling the questions that will shape a tomorrow) is a powerful statement and tells us Collective Strategy within businesses is so important and should never be overlooked.
Application of Collective Strategy
Analysis of political, social, ethical and operational requirements needed for common strategies between organisations
Performing the due diligence before you enter new markets is a must for your strategic teams. Even outsourcing a product from another country carries its own risks, an example being when Nike faced consumer boycott in the 1990s as a report came in they had suppliers in the far east that abused workers.
When determining the operational requirements, you would start looking at processes that give the business stronger advantages within the marketplace, potentially looking at lean systems, six sigma, and the Five S approach to maximise efficiency and improve operational output.
Lean Systems being– reduce waste and improve efficiency
Six Sigma– a set of management techniques to improve businesses processes by reducing the probability that an error or defect will occur
Five S – business processes that is designed to improve efficiency known at the five pillars of a visual workplace.
it’s an overview of all areas within the business internal and external. You gain a bird’s eye view from many different angles.
Meanings and how they fit
Political:Government decisions like tax reform and trade tariffs
Economical: Inflation rates, interest rates and foreign exchange rates
Social: Cultural trends, demographics and population analytics
Technological: Innovation in technology that might affect the operations within specific industries.
Legal: these effects internal and external, with certain laws that effect your business environment and certain polices that effect the internal operation
Environmental: Including all those that influence or are determined by the surrounding environment, geographical global changes.
The purpose of this tool is to identify all the key factors that would have an effect on the business and you are able to departmentalise sections, brainstorm them and asses the risks that the identified factors pose. But this tool has its limitations also when considering you are relying only on the internal knowledge of the workforce. Using external consultants subject matter experts to feed into the PESTLE Analysis allows for more thorough environmental scanning that would less likely ignore key factors.
See below example of PESTEL Analysis
Political factors effecting business should be given the most focus because a large percentage of the risks fall outside the control of the company, government policy change for one that could change the entire strategy that is trying to be achieved and this is all based around falling withinside the legal system, as an example the corporate manslaughter bill 2015(United Kingdom), recently got released putting certain responsibilities onto directors that were not in place pre-the bill. Directors and managers must keep updated on legislation because of the detrimental effects on the movement of the business. Changes that carry a high severity rating have the power to change the business forever. A major political change could be tax where some companies according to how they operate carry a higher tax bracket, or a shift in interest rates which influences the trading pattern of the business. So, to summarise on this section, the political environment is the least predictable part of the business environment. One thing I will add within this book as I feel it should to be addressed is the fact some companies only survive and grow because of corporate bribes, and this has been a regular occurrence within the gulf region, witnessed first-hand when seeing how new contracts are awarded to maintain business growth. So, corruption falls within the political category, granted it’s not ethical but due to my experience in the gulf, most companies would fail unless they knew the right person with the end result being a financial reward. Below is a (bullet point) list if the political factors as a reference point.
- Employment Law
- Data Protection Law
- Environmental Law
- Health & Safety Law
- Intellectual Property Law
The Social aspect is what leaves business behind the technological curve when opening the discussion up around social media, these social networking sites like Facebook, twitter, and linked-in have become extremely popular with the younger generation so it’s a market you need to be aligned with. Times have changed and its proven the younger generation prefer to shop online and most of the time via a smart phone, but the older generation would tend to stick to traditional methods. These social and technological changes we are now faced with have taken its toll on businesses financially, with the need to continually develop and change to suit the compatibility of the market. Companies are now employing analysts to foresee and predict change. The strategy would be for the sector you and areas you are selling into, look at population growth and age factor. Market Strategy would help you analyse the data so you are able to gain some idea of the social and technological shifts required to align with the audience you are targeting. The media is a social factor, which effects attitudes and opinions, everyday social factors affect you as a person and impact decisions. An example of a recent social change through the media would be the fitness industry and the need to live a healthy lifestyle, so as a knock-on effect, more and more people are now joining gyms and investing in health products, and some are even paying for a lifestyle coach so it kind of falls along the lines of “if you see it enough times” the brain will tell you that you should go down that direction. Organisations are having to offer products or services that benefit people’s lifestyle. When looking at companies like Coca Cola, Mc Donald’s, KFC and Burger King, the brand appeals to the end consumer through clever manipulative marketing. It’s well know and proven that the products mentioned do not contribute to a healthy lifestyle but the strategy has been to market the product in such a way that the brain tells you that you must have it, then you see the same marketing campaign over and over again throughout the day, this then gets tightly embedded into the customers mind as something you must have. But what you won’t get to see is the negative analysis these top corporations produce, when looking at the effects of sugars and saturated fats. So, you could say we have analysed two strategies from opposite ends of the spectrum, and on one hand you have a healthy lifestyle campaign continuously being pushed out in the media then you also have the fast food industry doing the same. They both have unique strategies tailored towards certain audiences.
A Method for a successful strategy to be implemented, then for it to evolve would follow these points
- Analysing individual capabilities and strengths they bring to the leadership team
- Setting up and designing a Collective Leadership team
- Gain full understanding of the analysis tools that would be used for the strategic output.
- List and understand business objectives
- Control and manage risk / implement KRIs
- Build and design the KPIs for monitoring purposes
- Perform impact analysis as change takes place
The reason why we analyse key factors (i.e. Political Social Ethical Operational) in the first place is so we are able to spot trends before other companies, therefore providing you with a competitive advantage.We have key factors
So let’s say to begin with, we didn’t analysis these key factors for the business and ask ourselves what would happen.
Political – You could have external forces like government changes that would affect your operation and unless you are aware of what they are, you non-compliant or operating illegally
Social –Keeping updated on demographic changes, trends in the way people (staff) live.
Ethical – As a business carries forward its upward trajectory it must have integrity and trust within, conducting business affairs with honesty and commitment.
Operational –Not understanding the operational needs of a business-like do you require expansion or new machinery to achieve certain potential orders
Being able to analyse what is going on gives you an understanding of the wider business environment plus can enable the organisation to anticipate future business threats and you are more likely to succeed in the future.
This would be the point where you use PEST(ELI) analysis and slot each one into its own box for analysis purposes then over time trends will evolve.
We know businesses have changed over time, with new smarter, quicker thinking computer systems and the fast pace we now live in with customer demands increasing, requiring orders quicker and at a lower cost. So processes have had to develop along the way. Example being, I have been in management now for nearly 22 years PEST and SWOT analysis tools were not pushed into business like they are today. The way I see it is simple, the population has grown, twice as many businesses are around now and staying ahead of the competition has become a lot more difficult. You must be able to act on your environment now, diversify and change to stay ahead of the curve. Basic fish bone diagrams were being used in the 1990s for identifying external and internal forces allowing risks to be formed. Now we have more complete, advanced systems for monitoring, like Monte-Carlo analysis that can analyse a thousand bits of data a second. Businesses are more complex now and run by advanced computer systems from the order going in and then through to dispatch so you are able to form KPIs on any part of the system. We now know collaborative thinking is the way forward with the sharing of information to form collective strategies, but 20 years ago plus everything was departmentalised making it difficult to think strategically. With the use of advanced computer system now you are able to analyse data, make decisions and take action within a short timeframe, keeping you ahead of the competition.
It’s now proven that implementing a business strategy has significant benefits, so if you look at SWOT as an example and focus on the strengths and weaknesses section, you are able to list what you do well and what requires improving. So let’s say you fix the weakness within the organisation, the effects could end up being increased output or even increased net profit. This is only a small example, so if the management team within a company understand the opportunities they have in front of them to make these changes with the ripple effect going out to the end customer, then strategic tools like SWOT will help keep the business afloat. So now you are at the stage where you have a strategy in place but now you need internal and external forces to feed in so as to give you data to make decisions. Throughout this book we have looked at external, internal forces that have an effect on business. With valuable data, you are able to develop the strategy to enhance the impact on the organisation, giving assurance to key stakeholders the business is in a position to be competitive. Being embedded myself within large organisations previously, one of the major opportunities I have seen for the development of collective strategy is internal knowledge and communication. Being able to gather that knowledge into one centralised team can be a powerful tool that changes the shape of the business.
Analysis and Evaluate the factors that influence Collective Strategy
Collective strategy formation is what I would call a business within a business, meaning you have a team which could effectively be your board of directors and you have clear objectives to achieve. You start by building the team then mapping the objectives and understanding what tools will be used to collect data (e.g. SWOT Audit, PEST analysis), how will this be monitored (using KPIs) and what is the time constraints if highlighted as a risk.
Your internal policy and defined strategy will have reference to defined objectives which influence the collective strategy approach.As explained in the first section, you have many factors that influence the outcome of your strategy, examples being:
- Religion – understanding the culture before you embark on business
- Political– when laws and changed that effect the business strategy so it’s imperative you monitor news within the environment you operate then identify potential risks within a SWOT analysis.
This is just an example but the reality is, key factors have a daily impact on the business strategy and objectives of the business. Out of all the risk factors I would consider culturalto be among the highest from previous experience and seeing first-hand the damage it can do to a business trying to operate within different countries when you don’t fully understand the environment. This is why PESTEL analysis is used within business to separate the areas, identify risks and issues so solutions can be developed
Application of Collective Strategy
In order to gain some data or information for discussion, it’s advisable to use a SWOT Analysis then you have the categories separated. The SWOT layout is showing in the diagram below
I consider SWOT Analysis to be a powerful tool as it helps you uncover opportunities for exploitation and at the same time you are able to uncover weaknesses within your business and also eliminate threats. Then by looking at your business and your competitors using the SWOT Methodology, you are able to define a strategy that separates you from potential competitors. An important thing to remember is it’s not just about creating analytical tools and then miraculously predicting a strategic future, you first of all need to develop the mind-set of the team. Pulling together in support of the vision of the business, but this takes time and doesn’t happen overnight, that’s why it’s imperative the right team is developed that will form a collective strategic mind. It’s not about having highly intelligent people in one room together, but more so the ability to pull together to achieve one goal.
I would consider most of the information I have provided and discussed above is primarily focused around internal strategy and being able to make significant improvements within certain business functions then applying the techniques from the information that has been extracted through analysis tools. Applying Strategic thinking to the external environment, I would be looking to use Porters Five Forces for:
- Analysing the competitors
- Supplier evaluation
- Buying power
- The threat of substitute buyers
- The threat of potential entrants (completion)
The model below gives you an idea of the layout as a discussion point for Porters Five Forces
You have other areas to consider that are just as important and shouldn’t be over looked
Knowing the marketplace and being aware of having a stronger foothold in numerous areas to capture a wider audience.
- Technological Advancement
Understanding technology and moving with the times with platforms like Facebook Marketing and applications that will spread your brand worldwide, it’s imperative you are ahead of the technologic curve.
Continually gaining knowledge to keep you ahead
- The Organisation as a Collection of Stakeholders
Involving customers and suppliers in the business strategy not just internal employees
- The Reliance on Innovation for Success
Being mindful of the environment changing continuously and if you are doing the same thing over and over again, you are going to fail.
As explained within the Porters 5 Forces diagram, you have areas that influence collective strategy
- Threat of new entrants
- Bargaining power of customers
- Threat of substitute products or services
- Bargaining power of suppliers
Being able to delve down into each area and ask questions like what determines the bargaining power of supplier. You will be able to highlight the high-level strengths and weaknesses of the company, but the highest influential forces determine the profitability of the company. When you think about it, every single area effects the business and then determines the output. The policy being the over-arching driving factor of the business listing the key objectives. Being aware of the environment and the external forces is one of the key influences of business strategy.
The company strategy is influenced by a number of factors which have to be analysed so at this point we will split them up into a PESTEL Analysis so they all have a feed into one central hub.
As an example, and from a professional level I have seen how not managing these influences can have major disruptions to the business.
It’s important to take into account factors that affect the organisation and be onto of them daily. Let’s say tension arises within a country you are currently doing business then a strategy could have been put in place to understand the challenges ahead.
Development and Formulating a Strategy
The business function has to be aligned to the corporate objectives set by the top-level tier then tracked through KPIs which we will go into more detail later. Over the last ten year I have been involved with high level projects with key objectives, from what I have observed most businesses seem to be top heavy on marketing objectives with limited focus on the operational side of the business. The risks are clear, when you don’t have a solid operational structure in place you become vulnerable to attack from competitors who are heavily focused on the internal operational side of the business. A strategy must be set in order to achieve set goals for continual improvement and prevention of the business imploding.
Defining the Operational Strategy from the understanding of it being:
- Customer Driven
- Development of Core Competencies
- Product and Service Driven
- Product Driven
- Process Orientated
First of all, let’s look into how we monitor our objectives to understand if we are on course to achieve the desired outcome. The main tool you would be using is Key Performance Indicators (KPIs) to analysis daily or weekly if targets are going to be achieved. As an example, let us say you would like to increase your current customer portfolio from 100 to 500 so to identify this KPI you can give it the name “customer base” and your strategic objective would be to have a specific number of new customers within a set time, the KPI will then be aligned to the individual objective. So, the next question would be where do we get our information in order the feed into the KPI to produce the data. In the table below I have listed a couple of examples to get the train of thought on the right path.
||Source of Information (KPI)
||Figures from financial department aligned to individuals (performance related).
|Improve customer satisfaction
|Improve operational output
|Reduce accident rate
|Reduce defect rate
||Quality control records
|Reduce employee turnover rate
||HR – Exit interview / internal feedback forms
|Reduce customer churn rate
||Data that indicates the percentage of customers that do not make repeat purchases or terminate their service.
Key Performance Indicators are a measurable value to demonstrate how effectively a company is achieving its objectives. Within the collective strategic team, strategic objectives will be set so at this stage I would be looking at aligning the KPI at the identification stage. The alignment of KPIs and the information it gives will allow you to make change within the business and measure success effectively. Making change is never straight forward and you will require (acceptance) buy in from the executive team, sharing the vision and helping employees understand why you are moving down a desired route and what the benefits will be.
Process of developing and formulating
The first question I would be asking myself is with the current business model in existence, why do we require change or a new strategy, from my experience over the last 20 years it’s all about the mind-set, understanding what’s currently in existence and how you will portray an image (vision) of a strategy for the business.
Edward de Bono’s lateral thinking describes breaking out of the concept prisons of old ideas which leads to a change in attitude. Adopting cultural change, brainstorming new ideas is the objectives of each strategy meeting. Having a clear direction where everyone is aligned to the end goal is imperative and the commitment by everyone involved so they take responsibility for assigned actions providing regular updates.
Strategic formation can be identified in the works of Ansoff (1965). The main concern of Strategic Management is the identification of the business objectives, Strategic Actions and being able to implement those actions. Within the central formation after developing the Collective Strategy, you will have Strengths, Weaknesses, Opportunities and Threats identified continuously. Strategic management is a mixture of decisions and actions that determine the long-term performance of the business.
Snow and Hambrick (1980) Quoted that Strategic Management is the progression from Strategic Formation to Strategic Implementation. When you look at it logically its only about following a process and using a set of tool (e.g. SWOT / PEST analysis) to give you the information so you have a clear direction forward with set objectives to guide you.
The development of a strategy will fall into three boxes see below.
It’s important to keep a collective vision of the future so the team is aligned and shares the same goals. The visionary aspect is all about creating ideas, collecting information and then formulating a Strategic Plan within the organisation
Making statements like our aim is to increase sales by 20% is an objective but you need to have a Strategic Plan in order to achieve that objective, that’s where planning is required with a detailed understanding of how you are going to get from A to B with specific timelines, almost similar to a project (matrix) plan.
Below demonstrates the route to executing a strategy
|Developing the Strategic Team
||Identifying keys strengths within the organisation with departmental knowledge that would an asset to the strategic team.
|Establishing the Objectives
||Objectives should be identified for the short term and long term they specify the expected results
|Planning / Formulation of Plans
||Planning premises are internal and external – External being technological and competitors, internal being policies procedures and resources.
|Identifying Sequence of Activities
||Sequence of activities are put into place so plans can be actioned. Decisions are made, and budgets can be prepared to give plans a more meaningful foundation for implementation.
We now live in a world where business is worldwide and you are having to deal with different cultures due to supplier who possibly could be in another country and customer who also could be half way round the world. A common mistake is when we tend to interpret other behaviours through the lens of our own culture. Learning cultural behaviour is important so you don’t encounter misinterpretation. If you have a situation where both parties have stopped communication then mediation is advisable, braking down sections of the dispute in order to formulate a strategy to resolve and repair customer relationships
By gaining knowledge in certain areas you are gathering intelligence and this is something used in the military consistently to form a strategy in order to formulate the next move. Some of the key areas I have used to gather intelligence is listed below
- Compliance Monitoring
- Security Threat Analysis
- Risk Intelligence
By gathering information over a certain time frame helps form a picture for a specific area and the knowledge gained will help in the direction of the business.
The process will be:
- data collection
- gathering data
- evaluating data for reliability purposes
Some years ago, I was consulting for the US Military in Kuwait (Camp Arifjan) and every Monday I was part of the commanding officers brief and three areas were discussed on the screen, Tactical Intelligence, Operational Intelligence and Strategic Intelligence now this can be applied to business in general by gathering information on other businesses and how they operate who are in the similar field to you. While thinking about this more in-depth, Strategic Intelligence is used in all areas of business in order for you to analyse data to make tactical decisions. You would almost consider this a full-time role within a company as intelligence gathering can be time consuming and requires continual monitoring with regular feedback. This would feed into my Strategic Management team and allow me to have real time information on competitors so I would consider this area extremely valuable.
When considering the aim of the individual organisational structure, you first have to look at how you handle change within a business, due to the fact not all employees can handle a business going through change so you would have to put in place a personal development program with business change part of the structure. A business cannot be allowed to stagnate so the aim within the business should be individual personal development in line with how it fits into organisational strategy. This is all about personal development so you have an org structure that fits in line with the business objectives.
Strategy is team orientated and made up of key sections of the business in order to develop a central hub that has the knowledge to drive the business forward.
I don’t believe you can concentrate on forming a strategy until you have an org structure in place where everyone is aligned and communications lines exist. The difference between the two is clearly, one is team orientated (collective strategy) the other is personal or individual development within the business.
Every business has a different strategic analysis methodology but when you look at it they all follow flow pattern. Forming the team, defining the objectives, them measuring the output through to holding a lesson learned session. I have found that in order to understand strategy and objectives within companies, you need to analyse what they produce and what the competition level is within the industry. If you are able to analyse the competition you are able to determine the change management process.
I continuously ask these questions:
- How could I improve what is currently in the marketplace?
- What is the competitions lead time
- Could the quality stranded be improved
- What is the cost to produce that product
We now live in a time where information is readily available via a search engine so competition analysis can be viewed at any given time. Data is accessible now for businesses to use for the change management process.
Why implement a Strategy
As stated by Henry Sauermann (strategy in the new strategic context) you gain a competitive advantage on rival business by implementing a strategy framework to achieve objectives set. Businesses now need to embrace change, come up with plans that give you advantages over rivals and learn to think outside of the box rather than old stagnated ways. Leadership teams must adopt Collective Strategy to improve the effectiveness of individuals, teams and organisations. It’s been proven from past data that focusing only on individual leaders fail to produce the desired outcome for a business, so embracing a collective approach, pull together in support of organisational goals. A collective leadership culture takes time to develop and has to be seen as a continual work in progress for change to take effect. Collective Strategy is the central hub of the business, guiding it forward, managing risk and allowing you to achieve desired objectives. From my own experience, I would now say companies would fail unless they have a strategy in place to drive the business forward.
Hope you enjoyed my post
By Robert Burrus
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