Strategy is the direction of the organisation. There needs to be a careful analysis of relevant data and then a decision of what the organisation will do and will not. Some ad strategic decisions have damaged organisations in the past. Organisations need to keep changing, upgrading products, launching new ones. Organisations may fail if changes are not made.
The origins of strategy are military and concern the art of war. Strategy generally consist of goals and objectives, policies and guidelines and programmes necessary to achieve those objectives. We answer questions, such as where we want to get to, what actions should we take to get there and how can we carry out these actions. Business needs to built a strong position to achieve those objectives, no matter the negative forces that may occur.
Effective strategies consist clear and decisive objectives, maintain the initiative, concentrate power at the right time and place, have flexibility, have committed leadership, make resources secure and prevent surprises from the opponents.
There are three levels of strategy:
Corporate level - concerned with the overall scope of the operation, its financial performance and allocation of resources of different divisions.
Competitive or business unit level - how to compete within particular market at the level of Strategic Business Unit.
Operational level - how the different functions of the organisation contribute to the overall strategy and often seen at the implementation stage of a strategy.
Mission, vision, values and objectives are all elements of business strategy. With those, we try to establish, where we are, where we want to be, how do we get there and what needs to be done to get there. From this, we can derive three elements of strategic management:
* Strategic analysis - what is the current position and where do we want to go? It is concerned with the strategic position of the organisation, what changes are going into the environment and how will these affect the organisation's activities? We form the key influences and define the future of the business. We review the expectations of the stakeholders and the organisational culture, its vision, mission and values. We also evaluate the environment and what effect it has on the organisation. We define the strengths and weaknesses of the business and define its main resources.
* Strategic choice - how can we get there?
* Strategic implementation - what do we have to do to implement the chosen strategy?
When analysing business strategy, we need to understand on how the business was successful to date, the current challenges the business is facing as well as the broader opportunities and threats arising from external environment. We need to understand what current people, processes and resources support the current strategy. We establish the direction to which the business may expand. Different problems may be evaluated, for example how should company compete, what growth options are there for the company, what would be the optimal methods to achieve growth or what are the key strategy questions?
Defining strategy
We can define a strategy as a long-term direction. Some researches define it as the determination of the long-run goals and objectives and the adoption of course of action and allocation of resources necessary to carry out these goals. Competitive strategy is about being different and deliberately choosing a different set of activities to deliver an unique set of value. Strategy can also be defined as the theory on how to gain a competitive advantage, a pattern of stream of decisions or a long term direction of the business.
Strategies are generally measures over years, sometimes decades. Businesses are made of the current core activities which need defending and extending. Business emerging activities should provide future profit with new markets and finally knowing that nothing is sure. There are risky R&D projects, new ventures and start-up pilots. We need to stop focusing on short-term issues and the existing activities and pushing business horizons further.
Long-term objectives are set to increase the wealth to the stakeholders and organisations involve many relationships both internal and external. It is important to look internally at the organisation and consider their views as well as externally on the views of suppliers, customers, regulators and investors.
The purpose of strategy
The core of the strategist's job is to defining and expressing a clear purpose for the organisation. We need to establish on how the organisation makes a difference and for whom the organisation makes the difference.
There are many ways in which organisations can define their purpose:
* A mission statement informs the employees and stakeholders of what the organisation is there to do and how the organisation makes a difference. Often organisations state on what they do and why they do it.
* A vision statement is concerned with the future the business wants to create in a long term. We ask ourselves the question, what the business is in 10-20 years?
* Statement of corporate values - with establishing 'core principles'
* Objectives are statements of specific outcomes that are to be achieved. These are often expressed in financial terms, such as profits, revenues and shares. They may focus on quality as well as competitive advantage. Triple bottom line is often a goal with economical, environmental and social improvements.
The vision, mission and values can offer a specific direction and motivation in achieving business objectives.
Strategy statements
Strategy statements should have three main themes: mission, vision, values, the scope of the organisation's activities and the particular advantages it can deliver.
Strategy statements covering goals, scope and advantage should be no more then 35 words long. We focus on the essentials and make them easy to remember and communicate. The ability to give a clear strategy is a good test for managerial competence in the organisation. Strategy statement can attract investors, motivate employees and bring new customers.
Levels of strategy
Inside the organisation the strategy can also exist on different levels:
Corporate - how value is added by the organisation as a whole. It relates to the diversity of the products, geographical location, acquisition of new businesses and how resources are allocated within the different levels of the organisation.
Business level strategy on how the individual businesses should compete in their individual markets, often called as 'competitive strategy'. It relates to different business units and considers, for example, innovation, appropriate scale and response to the competitors moves. Its about how the units should provide the best value services.
Functional strategies are concerned with how the components of an organisation deliver effectively the corporate and business-level strategies in terms of resources, processes and people. The highly depend on the decisions that are taken or activities that occur at the functional level.
The Strategy Framework
Strategy Framework incorporates understanding of the business position, assessing strategic choices and managing strategy in action.
Although it sounds like a reasonable sequence, in practice, the 3 steps are not being followed in linear way. Sometimes we have to make choices before a position is fully understood. Sometimes we are building an understanding of the strategic position form experience. Strategy rarely occurs in a tidy way and sometimes is better not to expect it.
Strategy position
The strategic position is concerned with the impact on strategy of macro-environment, the industry environment, the organisation's strategic capability (resources and competence), the organisation's stakeholders and the organisational culture.
Organisations exist in macro-environments and are influenced by political, social, environmental, technological, economic and legal environments. We need to identify the opportunities and threats to the organisation within those factors.
The industry environment, competitors, suppliers and customers also present challenges to the organisation. We need to ask ourselves on how we can manage those different forces.
Each organisation also has its own strategic capabilities made up of resources and competences. We need to understand our strengths and weaknesses, advantages and disadvantages.
There are also many actors who take the 'stake' in the future of the organisation - stakeholders. The organisation needs to align within the common purpose and the stakeholders should define the purpose. Managers need to stick to the purpose.
Organisational culture can also influence strategy. Cultures are generally the product of the business history and culture can change strategically. Culture needs to fit to the required strategy.
Strategic choices
Strategic choice involves the options for strategy in terms of direction and methods. We may want to diverse into new products, enter new markets, or transform current products or market through innovation.
Generally strategic choices relate to business strategy model, corporate strategy, diversification, international strategy, innovation, merges, acquisitions and alliances.
Strategy in action
Managing strategy in action is about how strategies are formed and implemented. Managers have to decide on whether existing performance is satisfactory and choose between options to improve it. The choices need to be suitable to address opportunities and threats, acceptable for stakeholders and feasible considering the business capabilities.
Once strategy is developed, the organisation needs to organise its implementation. There are structures and systems required for the strategy. Strategy also involves change and managing change involves leadership. Change is a lot of hard and detailed work.
Working with strategy
Managers of the business need to understand business strategy and align their teams with it to achieve greater performance. Strategy needs to be flexible and managers at all levels aligned with it for it to be successful. All managers need to see the 'whole picture' through involving them into strategy making. Delivering recommendations is only a beginning of the strategy implementation, we need to get the but-in from all the stakeholders, people need to understand it to deliver it.
Studying strategy
To understand a full picture of strategic issues we need to study the economic, financial, social and psychological environment. We need to be open and draw a rigorous research about those issues. Studying strategy involves skills and insights from a range of academic disciplines.
Strategic issues are complex and best explored from a number of points of view. The strategy will depend on the context and perspective. Exploring strategy means looking at many different things from different lenses and angles. This is to generate additional insights. Different perspectives will will help to criticise current approaches and raise new issues or solutions.
We need to be systematic, logical and practical, remove biases and rules of thumb. Strategy arises both from within and around the organisation and we need to shape the business objectives clearly communicating to all relevant stakeholders.
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