What is business strategy development and execution, and why is it important for a company?
A business strategy provides a blueprint of what a business needs to do to succeed in a changing and uncertain future.
Introduction
The world around us is continually changing and evolving. In order to remain successful (or to become even more successful), organisations must continually change and evolve with it.
A well-crafted strategy is a blueprint describing exactly how an organisation intends to do that.
In this article, we delve into the core of business strategy development and execution and present 6 summary business strategy examples to demystify the art of crafting an effective one.
What is Business Strategy Development and Execution?
Business strategy development and execution is the process of conceiving and executing a new strategy or adapting an existing one to meet an organisation's evolving objectives.
The strategy itself is a game plan designed to steer the company toward its desired destination. It often acts as the compass, setting the direction for key decisions and actions, like expanding into new markets or developing new products, services or capabilities. It provides a framework within which all other decisions should be made.
Whilst some people still look at development and execution as two separate processes, one preceding the other, the truth is that they co-exist simultaneously in time. As an organisation executes its existing strategy, the world continues to change, so the organisation must continually review and, whenever necessary, develop adjustments to its strategy. (See diagram to the right.)
Strategy is often perceived to be long-term in nature. This is because significant changes take time to execute and because it takes time to earn back on significant investments made. However, strategy is just as much about the decisions needed today as it is about the long term.
Why is Business Strategy Development and Execution Essential?
A well-crafted business strategy plays a pivotal role in a company's journey towards success. It is indispensable because:
- Clear Direction: A specific strategy offers employees a distinct purpose, ensuring their decisions align with the company's objectives. It enables greater collaboration and faster decision making.
- Resource Allocation: It assists in deciding how to allocate resources among various projects and ventures to maximize efficiency and results. This involves selection, prioritisation and sequencing of efforts.
Factors to Consider When Developing a Business Strategy
Developing a business strategy is no random endeavour; it involves careful consideration of several factors:
- Clarity and Conciseness: A successful strategy should be clear, concise, and supported by measurable and specific targets, instilling belief in its achievability. It should describe what should not be done as much as what should be done.
- Competitiveness: It must be viable in the market and capable of thriving amid competition, focusing on market dynamics and competition. Remember that whatever strategies you plan, your competitors may be planning their own strategies to neutralise and/or defeat them.
- Opportunities: Identifying untapped or underserved market opportunities is crucial, as is assessing how these opportunities might evolve over time.
- Challenges: The challenges an organisation faces can be just as important to its strategy as the opportunities presented to it.
- Time to Market: When developing new products or services, time-to-market is paramount to prevent irrelevance due to changing consumer preferences.
- Stakeholder Impact: A strategy affects all stakeholders - management, employees, partners, and shareholders. Evaluating its impact on each stakeholder is vital.
- Value Creation: No business and no business strategy succeeds unless it creates value for its customers, its owners/shareholders and its other stakeholders. Value is created when the (perceived) value delivered customer (or other stakeholder) is greater than the price they must pay for it.
- Risk: Business and strategy are inherently risky. There are no guarantees. A good strategy will take those risks into account and take steps to mitigate and detect problems early.
- Regular Reviews and Updates: Periodic reviews and updates keep the strategy in sync with the company's evolving goals and objectives.
How to Develop and Execute a Business Strategy
To create a business strategy that truly aligns with your company's vision, follow these steps:
- Develop an objective analysis: Before trying to decide on a strategy, it is important to develop a shared and objective understanding of the challenges and opportunities an organisation faces.
- Set a strategic direction: Start by defining the company's long-term goal(s), considering financial and operational capabilities, market conditions including changing customer needs and expectations, and competitors and other market participants. Be realistic and focus on achievable goals. These can be summarised in a mission statement, and/or a vision statement. They should also be broken down into nearer-term (and SMART) objectives with key performance indicators (KPIs) and targets.
- Create a plan: Develop a comprehensive plan that outlines who will do what and by when to achieve the overall goal(s). Include cost and benefit assumptions. This plan establishes roles, responsibilities and expectations, and guides employees' decision-making.
- Track progress and update: As you execute the strategy, it is important to monitor progress and share this with stakeholders. If circumstances change, or the strategy does not perform as expected, it is important to adjust and update the strategy.
6 Business Strategy Examples
There is an infinite variety of business strategies, and people are coming up with new times. Therefore, despite, several attempts to develop one, there is not a definitive list of business strategies. Each business should develop strategies which are unique to its particular circumstance and goals.
The following list, therefore, should be treated as illustrative examples only:
- Growing Market Share in a New Market: Expanding market presence by opening new stores/channels or investing in advertising in new markets.
- Product Differentiation: Distinguishing products from competitors to build customer loyalty and gain market share.
- Developing Innovative Products: Creating a strategy around developing innovative products to meet consumer needs and increase market dominance.
- Improving Customer Acquisition and Retention: Focusing on acquiring new customers through incentives and retaining them with excellent customer service and loyalty programs.
- Attaining a Technological Advantage: Investing in research and development to gain a technological edge, leading to cost efficiencies and profitability.
- Mergers, acquisitions, disposals and carveouts: Organisations can grow, shrink or change shape and capabilities by buying other organisations or selling part of themselves.
A single organisation can pursue a number of strategies at the same time, where these are mutually reinforcing. However, organisations should resist the temptation to pursue too many strategies at the same time as this leads to a loss of focus.
Levels of business strategies
More complex business may set strategy at numerous levels. For example:
- Corporate strategy: This is the highest level strategy and focuses on which businesses the organisation want to be in. This may result in decisions about how much to invest in various businesses, as well as which business to acquire or dispose of.
- Business strategy: This is the business strategy (as defined throughout this article) for an individual business within the corporate group.
- Functional strategy: This is a strategy for a functional unit with a business or corporate entity. Examples include IT strategy, marketing strategy, etc. It is important to remember that these are not independent strategies in the true sense of the word, but simply map out a blueprint for what the function needs to do to support the business or corporate strategy it serves.
Remember that organisation can be almost infinitely varied, and these levels are provided for general guidance purposes only.
The differences between a business strategy, a business plan and a business model
These three terms are very closely related.
A business plan is an extrapolation or forecast of a business's performance as its strategy is executed. Business plans are often financially focused and show how and when the organisation expects to invest and spend money and earn revenue. More sophisticated business plans may include sensitivities or scenarios to reflect the risk and uncertainty inherent in the strategy.
A business model describes how a company creates, delivers, and captures value. It includes the company’s value proposition (what it offers to customers), revenue model (how it makes money), cost structure (how it spends money), and key processes and resources. A business model is a snapshot in time. A strategy may entail moving the business from its current business model to its desired future model.
Conclusion
In the dynamic realm of business, crafting a strategic plan is the cornerstone of success. A robust business strategy, with clear direction and calculated actions, ensures an organization's journey remains aligned with its goals and aspirations. Whether it's seizing market opportunities, innovating products, or gaining a technological edge, the choice of strategy is unique to each company's path to success. In essence, business strategy development is not just a roadmap; it's the key to reaching the destination of sustainable growth and prosperity.
StratNavApp.com contains all the tools, frameworks and supporting processes that you need to develop and execute a business strategy.
