A business strategy starts with a vision and ends with action.
Without a vision your strategy will be bereft of direction; without action your strategy has little hope of getting off the ground.
These seven components comprise a basic framework we find useful in shaping a robust business strategy.
1. Vision, mission and values
Having and sharing a collective mission and vision is an essential part of any successful business strategy. Organizations that communicate their purpose tend to perform better than those that don’t. They also understand the important aspects of their own business better.
A company conveys their mission and vision typically in the form of brief written statements. A company’s mission statement focuses on customers, employees, and investors and can include values such as respect, enthusiasm, or environmental awareness. Vision statements, on the other hand, are future-oriented and have to do with purpose and aspirations. While the first helps communicate ideals and values to stakeholders, the second lays out the company’s purpose.
A business strategy is, in consequence, seen as more closely linked to the vision – what the organization aims to achieve. Both statements, however, play a critical role in creating and maintaining a good business strategy. When the process intends to achieve the vision, it also satisfies the mission.
Mission and vision statements provide a high-level guide to achieve goals and objectives while informing a strategic plan. Mission and vision statements should not be thought of as never-changing iconic relics. They can change as the needs of an organization change in response to cultural and market shifts, also adjusting the strategies with them.
2. Long-term goals for your business strategy
Short-term thinking is vital for the success of a business. However, it’s long-term goals that can make a real difference to a company’s performance.
One of the most attractive aspects of short-term rewards is that they provide instant gratification. These immediate benefits, however, can create dangerous patterns that put an organization’s future at risk. To have long-term success, sometimes we have to overcome short-term pain.
I’ve seen several companies focus on BHAG, or “big, hairy, audacious goal-setting” strategies. The statements contained in them can be inspiring but are frequently removed from day-to-day duties and ultimately out of line with a company’s values. Other approaches such as OKR (“objectives and key results”), S.M.A.R.T. (“specific, measurable, achievable, relevant, and time-constrained”) goals, and MBO (“management by objective”) can be more adequate, depending on your industry and team structure. All of them offer valuable techniques. For example, the MBO framework involves individual voices and raises accountability, while S.M.A.R.T. goals are excellent for vetting goals.
Whatever business strategy you choose, remember that short-term goals are not necessarily the enemy of long-term ones. They can support your business’s mission and values and also provide milestone wins for teams to celebrate. In these changing times, the companies that will do better are the ones that can stay grounded in their long-term goals.
3. Financial objectives
Achieving long-term business goals is tied to setting clear goals for earnings, revenue, and market capitalisation. What is, exactly, financial clarity? In general, you want little fluctuation over time or reduced swings that can guarantee more steadiness. It would be best if you also aimed for increased economic profit and loyal investors.
A company’s financial goals are visible and tangible. They can, in consequence, symbolize opposing views in terms of business strategy and environment. It’s essential to keep in mind that maximum profit is usually never above all else. Financial priorities change as competitive and economic settings do. The companies that do better usually assign priorities to multiple financial goals – each of them represented by its own goal (for example, capital, human resources, or product).
Just because a business can potentially set any financial goal it desires, it doesn’t mean it should. When a company enters a segment, the competition will immediately impose limits and set conditions – making only specific goals realistically attainable. Financial goals are, too, relative, unstable, and changeable. It’s a sort of political compromise between managers’ conflicting priorities. A change in one goal might trigger a trade-off with another.
A lot of times, strategic decisions made in the past are what determine the financial goals. You cannot easily change the fact that a product is in a particular market, or that you are involved with specific institutions or have made certain contractual commitments. The environment will set financial conditions, making this reality surround most of your financial objectives.
4. Operational objectives for your business strategy
Although specific and short-term, operational objectives provide the type of guidance and direction that are crucial for long-term success. Operations management should cover the major areas (such as materials, facilities, equipment, labour, and processes) and give a competitive advantage.
Operational objectives tend to be specific and measurable, motivating employees to meet shared objectives and providing them with a sense of accomplishment when done. For example, they can help meet HR processes such as improving retention and labour costs or production processes like increasing output and quality while decreasing costs. They might also include working on new IT and social media capabilities.
Often, an organization’s mission and vision appear to be relatively vague. If you can break down a strategy into workable tasks or micro-goals, the results become more tangible. For example, to achieve the desired increase in sales, a business might require completing the operational objective to execute a new advertising strategy. When the focus is narrower, the results are more easily measurable.
If it wants to be successful, a company needs to effectively translate a strategic objective into workable operational goals – frequently measured in daily, weekly, or monthly benchmarks. At the same time, the smaller operational objectives depend on a cohesive mission and larger business strategy to be fruitful. Good strategic objectives unify everyone’s activities with one specific, longer-term goal in mind. When a company meets the strategic objectives, they also fulfil the vision.
5. Market objectives (creating customer value)
Strategic market objectives can help a company support and improve its market position. They do this by creating customer value by providing better quality, lower costs, or broader distribution. One thing is essential: If your business wants to develop values-based strategies, you need to discover what your customers value. Mission and vision statements are excellent vehicles to articulate customer-centric goals and objectives.
The ultimate aim should be to provide your business with a long-term competitive position. The majority of strategic objectives are competitor-focused, and there are several paths to achieve dominance. Some organizations will focus their attention on boosting their reputation, engaging customers to create long-term brand loyalty. Others will try to expand their products or operations to international markets, seizing every opportunity for growth. A business can become a leader in their industry by creating innovative new products, o, equally crucial, by offering superior customer service (and, in consequence, higher levels of customer satisfaction).
Regardless of how your company chooses to differentiate itself, your focus should be on how your products or services can offer more value than your competitors. Equally important is to make sure you can sustain a strategy in the long run. Giving customers more value to then revoke it can cause significantly more harm than good.
6. SWOT Analysis
Effective management requires planning, organising, motivating, and controlling different business factors. SWOT analysis has proven itself useful when applied to various situations – but is a particularly good framework for businesses.
Over the years, SWOT analysis has proven successful in understanding both internal and external factors that might affect a business. Strengths and weaknesses are generally considered internal, while opportunities and threats are seen more as external events not easily controlled by an organisation. Strength analysis focuses on internal capabilities such as skills or potentials, usually translated into competitive advantages. Knowing your weaknesses or unfavourable characteristics can help you avoid harm to a business strategy. Opportunities can be used to an organisation’s benefit, while threats might bring failure to it.
You can apply SWOT not just to an entire venture but also to a particular situation, project, market segment, or even an individual. This framework helps management make decisions for both specific issues and long-term strategic plans.
It’s essential to look at the results of a SWOT analysis objectively – preferably not from a single point of view but a group of people (in many cases, a management team). When done correctly, this framework can provide precious information about where a company is today and help develop a strategy for the future.
7. Business strategy action plans
An advantage of action plans is including steps that follow a traditional marketing or sales plan—for example, aftersales customer support and service, collections, or employee hiring and management. We can classify these issues into three groups – each with its own type of action plan.
Operational plans will look different depending on the type of business you run. A plan might include the fabrication of supplies, storage, and distribution. The product might be digital, in which case you might have to account for hardware and software integration, documentation, and support. It’s helpful to see an operational plan as a linear process that starts with raw material and ends in delivering to a satisfied customer.
Management plans usually include the different activities that help a business work, such as administrative duties, employee care, and project management. It will also cover a timetable or milestones for deadlines, events, etc. An excellent way to draw such a plan is to think in terms of key activities people have to perform to keep a business operating.
Contingency plans or assumptions based on what happens if things don’t go as expected. Even if these assumptions are not accurate, they should be realistic and supported by previous experience. Combining SWOT analysis with action plans can be an excellent way to anticipate possible disruptions by correctly identifying internal and external factors.
Action plans can help companies determine how to best operate and manage a business. When grouped as mentioned, they are a powerful tool to turn your vision into a reality.
RK (Rahul Kumar) is the Founder & CEO of Resonate.