As I mentioned in last week’s blog, the economy is shifting to focus more on projects. These projects typically move organizations in a given direction. Before one sees the light of day, a project proposal has to prove its alignment with organizational strategy. So who decides what that strategy will be? Read on to find out what business strategy is and is not, as well as how you can get it right.
Defining Business Strategy
I found this video from HBR very engaging. It features a Harvard Business School professor explaining the basics of a strategy. I think he breaks it down quite clearly. In essence, we’re talking about the way an organization intends to create value. Profit, here, is only a piece of the puzzle. Profit is value for the organization. You should also create value for customers, employees, and other key stakeholders.
To understand value, you’ll need to know a few key terms: willingness to pay and willingness to sell. Customers’ value comes from the difference between their willingness to pay for your offering and the price you offer. That’s simple. On the other hand, you have your employees. Their value depends on how much more you can compensate them than their willingness to sell, the least they expect for their labor. If you’re offering fair pay plus a variety of wellness perks, they’re winning. Finally, the organization’s value comes from the difference between the costs it must meet and the revenue it can generate. That’s pure and simple profit.
You can clearly create more value by shifting these goalposts appropriately. This is where a plan comes in. As this video cautions, though, a plan is not a strategy. A strategy requires some theory to justify it. It tries to position an organization for success in a competitive market and can’t predict exact costs. Although this can be scary, adaptive leaders will embrace the uncertainty to stay competitive. By contrast, a plan will outline tasks with predictable costs that an organization should work to accomplish. This is also essential in making a potential strategy reality.
Avoiding Common Pitfalls
If only everyone knew how to craft a winning strategy. Unfortunately, plenty of organizations fall into common traps. This Forbes article lists some cardinal sins of business strategy creation. A big one is working exclusively. Strategy shouldn’t be designed by the execs and handed down to be obeyed. Ignoring employees and customers with meaningful expertise and experience is a recipe for disaster.
In addition, rigidity can be your downfall. Successful companies often make the mistake of playing it too safe. What’s been working won’t necessarily keep working in a changing market. Failing to adapt can turn into just plain failing if the business strategy isn’t equipped to pivot. On that note, revisiting the strategy at fixed, distant intervals won’t cut it. I’m talking about annual reviews. Organizations that miss the opportunity to collect data on their success and make changes continuously will miss out.
Finally, this HBR article shares a word of caution for entrepreneurs. Finding a new way to create value can be shiny and exciting, but don’t forget to protect it. If you don’t lock down your unique edge in the market, competitors can get the best of you. Too many entrepreneurs pass up big success by being overly easy to imitate. Don’t let that be you.
How to Create Your Strategy
So what steps should you take to get it right? That same article on strategy mistakes offers ideas to escape those traps. Be sure to consider a few components together instead of looking at just one or the other. These are a way to create value, a competitive advantage to capture it, and the processes to stay adaptive. To create value, keep your eye out for new opportunities. This might mean revisiting software advancements or responding to changing demand. In this post on corporate social responsibility, I mentioned the racial reckoning of 2020. Successful organizations saw the opportunity to create new value for employees and consumers at this time.
A huge part of doing this well is staying customer-centric, as this Forbes article recommends. You’ll want to think carefully about the user experience of whatever product or service you offer. To learn more about it, engage in UX research. In doing so, you’ll obtain customer feedback. Incorporate this into new ideas for strategy. Also, remember that you’re not just interested in acquiring new customers. Consider the value with which you can delight your customers. This will keep existing customers engaged and generate referrals to new ones by word of mouth.
As you’re getting your strategy together, don’t miss any of the key components mentioned here. Namely, be sure you’ve got your mission, vision, purpose, and values clear. For instance, is a fun workplace central to your identity? At the same time, don’t get lost in big ideas. Make them concrete with clear outcomes and deliverables. It should be possible to measure your organization’s progress towards aligning with its strategy.
Keeping It Going
Once you’ve got your strategy clear, you’ll want to be sure you align all your efforts with it. This can be easier said than done, but it’s possible. First, the basics. This article emphasizes the importance of documenting your strategy. Don’t just file it away in the archives either. Instead, make this document accessible to all stakeholders and refer to it often. Keep everyone accountable to your intentions.
Then you’re ready to go further. This article on common strategy mistakes suggests pathways to redeeming them too. To do well, engage partners across your entire organization. Empower them to change their work rapidly to stay true to your strategy. (Consider whether Agile methodology might help you achieve this.) Encourage collaboration across different teams and departments, and communicate clearly. This isn’t just about speaking. It’s listening too. Be open to leadership from all parts of your organization if you want to win the strategy game.
In addition, do what it takes to make sure individual employees can give it their all. First and foremost, incorporate the strategy into your onboarding process. New employees should have the information they need to start moving the needle as soon as possible. In addition, you can offer incentives for high performance. Make sure this isn’t only about acting in predictable ways. Encouraging innovation is really important here too. You can track progress with various kinds of data, which will allow you to make real-time, data-driven decisions about what’s working.
To the Small Fish
Investing the time and human resources to develop a strategy may seem daunting for small businesses. However, it’s just as essential for them too. This article from Entrepreneur articulates the reasons why. Consider that organizations with limited resources really need to know how to focus them. A strategy done right for this size company can bring a host of benefits, like an increased valuation. You’ll garner positive attention from potential investors, employees, and customers too. To make sure your strategy makes sense for the times, take some tips from this playbook. This may seem like a game mostly made for big fish. Still, even a small business can make it big with successful strategy.