Businesses could be of various sizes and various functionalities. To stay afloat and to remain on top of the game, businesses of all sizes need to have a well-planned business strategy in place. This will provide the roadmap for a business to reach its goals and targets, says astro strategist Hirav Shah
Businesses come in different forms and sizes. The scale of business could be small, medium or big, each business has its goals and definitions of success. Also, businesses take different routes to reach their destination. And it is these routes that constitute the business strategies of an organisation or a start-up.
A little further, we will understand the meaning of business strategy. However, prior to that, it is particularly important to understand that while it is easy to define business strategy, it is not simple to form and execute a successful one.
Business strategy in short, is the combination of all the decisions and actions taken by a business to reach its business goals and to get a firm foothold in the vertical. It is the basis of any business and the roadmap that leads to goals. And like in any action, minute faults can derail a business from the route to success or it could get lost amidst stiff competition.
Achieving your objectives without a strategy is akin to dreaming and it is no less than a gamble to enter a market without a well-planned strategy. Once a business reaches a level where it faces the heat from competitors, the need and importance of business strategy becomes apparent. It is at this stage, that the businesses adopt or adapt various business strategies to suit their requirements.
Before understanding business strategy, one has to have a fair idea of a business plan. It’s the business plan that sets the goals and objectives and it’s the strategy that helps one fulfil those goals.
Let’s check out the elements of business strategy
Clearly defined goals and results
A good business strategy will be complete when you have the right goals and expected outcomes. And when one talks of goals, it is equally important to have goals that are well-defined and realistic. For example, if you are a fledgling business, then you cannot expect to be a market leader in just six months or even a year. So, a better strategy would be to set your eyes on a percentage of the market during the first year. A good strategy will help others take you seriously.
For starters, it is vital to have an action which the business will complete such as expansion or selling. Here, you must understand that it is important to get into little details of action involved. You could think of expanding your footprint locally or decide on the number of units you intend to sell. Likewise, metrics also need to be considered, such as working towards a set figure. Similarly, you must also include actions such as expanding to new markets or selling to business customers. Finally, it is ideal to put a deadline on all your goals and outcomes. A business strategy that does not have a deadline is bound to fall flat as you will not have anything to work toward.
Spell out accountability
While creating a business strategy, some often forget to include accountability. But if there is no accountability, you will not know who is meant to be working on what goals and outcomes. A lack of accountability will mar all chances of executing a successful business strategy.
So, while strategy planning, include those responsible for creation of the strategy, else you will end up setting unrealistic outcomes and goals. Let’s say you have a target in mind for the sales department. If you do not mention that in your strategy plan and make the sales department accountable, you will never know if it is achievable or not. Alternately, when you identify the accountable department, they can be held responsible for any hiccups.
Identify your Key Performance Indicators (KPIs)
At the outset, make sure to set your Key Performance Indicators or KPIs. They will help you track your progress and determine if the business strategy is efficient or working. Keep in mind that metrics are different from KPIs. While metrics help you determine the amount you want to make at the end of the day, KPIs will have measurements of how to get to the metric. So, never be lax on setting KPIs.
However, KPIs need not be confirmed by money alone. You can set KPIs for generic values of your company too. Let’s take the most common KPI these days – reducing environmental pollution. Then it is sensible to set a KPI to reduce your carbon footprint to zero. You can also set KPIs to turn carbon neutral in the near future.
Look at the 5 steps to prepare business strategy for action
1) First and foremost, define your goals, mission, values and vision.
2) Formulate sound business hypothesis and strategy.
3) Get on to strategy development on a strategy map.
4) Ensure strategy alignment.
5) Finally, begin strategy execution.
Five reasons why strategy is a prerequisite for your business
As we had mentioned earlier, business strategy is part of a business plan. While the business plan sets goals and objectives, strategy gives a way or roadmap to fulfil those goals. It’s a plan to reach where you intend to.
Strengths & weaknesses
Many a time, while formulating a strategy, you get to know your strengths and weaknesses. This is rather crucial as you can capitalise on your strengths and work on your weaknesses or completely eliminate them along the way.
Efficiency & effectiveness
Once the elements of the strategic management process are in place and business level strategy analysis is done, each step becomes planned and every resource is allocated appropriately. All those involved in the process know what needs to be done due to which the business activities become efficient and effective automatically.
A good business strategy or business plan focuses on capitalising on the strengths of the business and leveraging it as a competitive advantage to position the brand in a particular niche. This not only gives an identity to the business, it also makes it unique in the eyes of the customer. Here, we can talk of various strategies businesses adopt to stay on top of the game. They could create a new market, buy the competition, get into product differentiation or take the route of cost leadership.
Business strategy decides the path to be followed and interim goals that need to be reached. This makes it easy to control various operations and activities to see if they are going as per plan.
Figure out the variation between business strategy, business plan and business model:
To put it briefly, business strategy is part of the business plan which is part of the bigger conceptual structure called business model. The model explains how the organisation operates, makes money and how it intends to achieve its goals. The plan defines these goals and business strategy throws up a roadmap of how to achieve these goals.
That brings us to the key components of a business strategy
As said before, the business plan sets the objective and strategy answers all the whats, whys, wheres, whens and hows of fulfilling that objective.
1) Mission, vision & business objectives
The main thrust of a business strategy is to fulfil the business objective. It gives clear instructions of what needs to be done, the vision and direction along with how it needs to be done and who is accountable for executing it.
2) Core values
Every business has some core values. There are a set of do’s and don’ts, musts and must-nots, which clarify how the business needs to progress. It clears doubts and gives a clear-cut direction to top level, units as well as departments.
SWOT (strengths, weaknesses, opportunities and threats) analysis is a complete rundown of an organisation or business’ present situation. It is a necessary component as it highlights the current strengths and opportunities which the company can leverage on and also brings forth the organisation’s weaknesses and threats, which the organisation needs to address.
4) Operational tactics
Each unit and department of the organisation or business needs to deep dive into how work needs to be done in order to be most efficient and effective. Once there is enough clarity, it will save a lot of time and effort as each individual or department knows what needs to be done, when and how.
5) Resource procurement & allocation plan
A good and well-planned business strategy answers as to where and how one will procure the required resources, how they will be allocated and who will be responsible for handling them.
Last, but highly important is to measure the success rate of a business strategy. When there are no proper control measures in place, a business strategy cannot be assessed correctly. A good business strategy will always have ways to track the organisation’s output and performance vis-a-vis the set targets.