It is that time of the year that many business leaders turn their attention to revisiting their business strategy. It is, therefore, an opportune time to reflect upon the ingredients in developing an effective business strategy. Business strategy is an art, not science, and no matter how much data you may gather, data will not deliver an effective strategy.
Active Knowledge Question:
What is the most important ingredient in a successful strategy?
Only The Ingredients
Crafting an effective business strategy is a lost art, but it is one of the most critical tools that a business leader has to muster the combined talent and effort of everyone working within and with their business. And the output of that ‘mustering’ is an element of any business’s core competitive strength. In other words, its competitive performance and resulting profit.
Here are two simple images that reflect what happens within businesses that don’t have an effective strategy and those that do:
In this article, I am addressing the ingredients that should be included in developing an effective strategy. I often refer to these ingredients as ‘agents’ or ‘elements’, as I believe each of them has a profound impact on strategy and therefore must be addressed in any strategy conversation.
I have built these agents into a model/methodology for crafting strategy that I call Strategy Play. It typically comprises 39 areas of consideration across seven key domains that allow the development of a strategy tailored to an individual business, which will enable it to deliver on its purpose, journey toward its vision and outcompete everyone else in its chosen marketplace.
Allow me to say a few words on the importance of play in crafting strategy. Most business leaders would consider the development of strategy as anything but play. Strategy is serious business and must be taken seriously by all those involved. But at the same time, strategy has to be innovative and challenging and allow for thinking outside the box. And this is where play becomes the perfect metaphor for the way in which you should seek to develop your strategy.
- Fully absorbing.
- Intrinsically motivated.
- Includes elements of uncertainty and surprise.
- Involves a sense of illusion and exaggeration.
Play is not frivolous and generally is quite purposeful, as it is:
- An intentional activity that seeks to engage the imagination.
- About exploration, experimentation and testing, it’s not about implementation.
- Usually based around a specific set of values or language.
Play is a perfectly natural way of adapting and developing new skills. It is a way of exploration that can prepare us for uncertainty and change and keeps us open to serendipity to new opportunities. It can also prepare us for ambiguity.
Given all these benefits, play is a perfect approach to crafting competitive strategies that take us out of the reach of competitors and into the arms of our customers. So, when you think strategy, don’t exclude play as the metaphor for the process dynamic you want to achieve. And we all know that play is often very serious.
The Ingredients of Effective Strategy
Strategy Play examines a range of relevant areas that influence and determine the competitive posture most appropriate to your business and the markets you have chosen to compete in. As you progress through each area of Strategy Play, a clear view of the optimum competitive posture for your business will begin to emerge.
The key to identifying the right competitive posture lies in asking the right questions, understanding the impact of the answers provided and ensuring that the right people are engaged in a manner that draws their most creative and imaginative minds to the process.
The outcome sought is to remain true to the purpose for which your business exists, to position your business to deliver greater customer value than anyone else, and to create a truly competitive organisation.
Strategy Play incorporates seven key domains, each of which represents a step in:
- Building your competitive posture.
- Crafting the Organisation to deliver on that strategy.
- Ensuring the financial returns are adequate and risks are recognised and mitigated.
- Developing a plan to ensure effective delivery.
The seven areas and the role they play in crafting your strategy are:
- History: a consideration of the history of the business and identification of any events that may impact its future ability to compete.
- Strategic Analysis:
- Marketplace: the boundaries of the market in which the business competes, the characteristics of that market, and factors that may impact it in the future.
- Competitive Landscape: Identification of competitors within relevant markets, the customer segments they target and market share, and the basis upon which they compete.
- Positioning: The strengths, weaknesses, opportunities, and threats (SWOT or similar) facing the business, identification of the resources and capabilities, and what the business is best at, leading to a consideration of how to compete.
- The Organisation: identification of the values and purpose that exist within the business and the role they play. An outlining of the organisational structure of the business that enables it to operate efficiently.
- The Future: a succinct description of how the business will compete effectively in the future, tested against various scenarios and establishing simple guiding principles.
- Financial Validation: a consideration of the financial returns expected to be gained under the competitive strategy and the adequacy of these returns.
- Risk Mitigation: identification of the risks associated with the strategy and steps that may be taken to mitigate these risks.
- Implementation: a consideration of the impact of the competitive strategy on the departments and processes within the business, and the establishment of an action program to achieve the necessary changes.
As you progress through each of these areas, the image of your competitive posture will emerge, be tested and validated. It’s not a linear process, and you may find your team revisiting earlier work as new insights emerge and are recognised. Fail to consider any one of these domains in crafting your strategy, and you may well discover flaws and weaknesses in your strategy as it is tested in the marketplace.
In previous articles, I have addressed a wide range of themes relevant to effective strategy, and I have listed five of these below for those who may be interested in these specific topics:
- Strategy – Is It About The What, How Or Why?
- A Board’s Role In Crafting Strategy
- How To Conduct Your Strategic Planning Workshop
- Facilitating A Strategy Workshop
- The Changing Role of The Chief Strategy Officer
Strategy is simply how you intend to compete, but there is nothing simple about competing effectively. Your goal should be to develop undefeatable strategies in building a great business, and nothing less should be acceptable.
An entirely new level of performance.
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All the best in the success of your business,