A few years ago, I worked with the management group of a member who was thinking about the company’s growth plan. The majority of the sales team believed the strategy should focus on expansion into new geographic markets based solely on instinct.
We demonstrated that the company would be much better off investing in its current markets after working with the CFO to create a financial model, albeit with a slightly different offering and message. In this case, complexity, market research, and strategic thinking won out over simplicity.
Many businesses make hasty and poor decisions that have a negative impact on their enterprise value because they lack planning and research. Our appetite for simplicity shouldn’t override precedence over the need for thoroughness, especially when a company’s future is at stake.
Many CEOs have fallen in love with simple strategic templates that produce a quick-and-dirty business strategy in a world where they are overcaffeinated, stressed, and time-starved. Downloading a template, however, frequently encourages naive thinking and poorly executed tactics. Frequently, the outcome resembles a short-term operational plan more than a true strategy.
It takes more than a few hours to come up with a casual idea for strategic planning or even visioning. Strategic planning is frequently linked to carrying out a SWOT analysis. After attending an all-day meeting, participants leave with a list of opportunities and vague tactics like “expand internationally.” Their list is void of any market research, business intelligence, or market analysis. They attribute the strategy’s failure to their poorly thought out tactics.
10 steps to creating a business strategy
It’s not necessary to be that way. The following 10 steps will help you create the best business strategies and carry them out precisely:
- Create a genuine vision.
The word “vision” is abstract and has different things to different people. A vision or vision statement is typically a look into the future. In contrast to a mission statement, it should include aspirations for the kind of company you want to run and describe success in precise terms (customers, markets, volume, etc.).
- Describe the term competitive advantage.
The core of strategy is figuring out how a company can offer its customers something special. Companies are mired in an ocean of sameness in many economic sectors. A well-planned business strategy should create into account various factors, such as how a company can set itself apart from the competition in terms of service offerings, pricing, and delivery methods.
- Establish your targets.
Poor targeting is one of the main obstacles to growth. Companies suffer from unclear messaging and a consequent misalignment between sales and marketing in the absence of very specific targets. Establishing niches and specialties enables companies to focus resources (of course, some companies are generalists by design).
A company’s ability to create an integrated sales and marketing approach, where marketing facilitates sales productivity, depends on having clear target markets. Plans for sales and marketing are carried out more successfully when targets are short.
- focus on orderly growth
A thriving company is a growing company, as one of our Vistage member clients put it. Companies can only afford to invest in things like technology, the best people, and new machinery as a result of growth. A company should specify in its strategic plan which market segments it will expand into and in what proportion, in order for the product mix to produce a particular net margin outcome.
A company wouldn’t know how much it could afford in terms of capex, overhead costs, and other costs until after reaching such conclusions.
- Base your decisions on the truth
Strategy is a case of “garbage in, garbage out.” Executives frequently lament the lack of high-quality data, but we frequently discover data that is helpful in formulating strategy.
We once worked with a member of Vistage who was attempting to estimate the worth of the various market segments served. We were able to determine the precise number of actual shipments of goods made by potential customers by gaining access to the public records of a nearby port.
- Take a long view
Planning horizons are now shorter due to the constant change that exists. However, companies risk losing their ability to see around the corner if they only think quarterly. Best-in-class companies create procedures that treat strategy as an annual cycle as opposed to a singular, static event.
- But be quick.
Companies are still able to think quickly and strategically. An analysis of external forces, for instance, is a crucial part of strategy. Companies should assess long-term external forces and pivot as necessary (by meeting frequently, perhaps quarterly).
Every Tuesday, Jeff Bezos of Amazon holds a strategy meeting to keep it top of mind with his management team.
- Be welcoming.
Companies are involving different people in their strategy than in the past in order to be flexible. There is more openness at a time when companies are hiring more millennial workers. There is definitely a trend toward greater inclusion and transparency, even though I am never one to recommend that companies open their books (as that is a personal decision for the entrepreneur).
The choice of who to involve in the creation of the strategy is crucial. We advise business owners to employ people they can rely on and who possess strategic thinking.
- Dedicate time to prework.
Make your managers conduct research and gather pertinent data in advance of your strategy meetings if you want them to take strategy seriously.
- Track your progress and perform well.
Every strategy should be implementable. Top-tier companies include:
- A strategic action plan that they regularly monitor (usually monthly).
- Encourage shared responsibility for the plan among executives and departments.
- Make use of predictive key performance indicators (KPIs) that are in line with the strategic plan.
- Make sure your goals cascade down to every department and are meaningful to your staff so they can see how their work affects the greater good.
- Set up a performance management cycle that supports cascading goals and objectives to every employee and a corporate calendar that encourages fruitful meetings.
- Every year, they go through the same cycle of strategy.
- Senior executives are responsible for promoting procedures that keep a team focused on the goal because strategic planning execution requires discipline.