On Business Strategy and Strategic Planning

At what stage do I need a strategy?

Answer: Probably what you mean is at what stage should I ‘formalize’ my strategy or ‘formalize’ a strategic planning process in my organization? In our experience business owners who are successful often possess great natural strategic thinking ability. However, making the jump from ‘one man show’ to ‘a corporate process’ is not easy.

There is no easy or correct answer…in a way it is similar to asking ‘when do I need a complex expensive IT system’? The answer seems to be ‘when without it, you are not taking advantages of business opportunities that you should’ . Sometimes it is easy to identify – a company’s sales become static because it has become complacent or has saturated a market or perhaps the product or service is obsolete – however this is a rather ‘too late’ approach.

We believe that smaller companies can adopt a rigorous strategic planning process, coached and mediated by professionals, that balances the need for time to be spent explaining sometimes new concepts and methodologies to staff against pressure to achieve practical tangible results in the form of a ‘Business Plan’. Strategy is easy to talk about! But quite difficult to translate into day to day operations and often organizational change is needed before the new strategy can be rolled out.

Having a formal Strategic Planning process within an organization is not a magic remedy that causes management to make perfect decisions. However, a good process will ensure that all relevant issues are given due consideration and that management and the owner have as full information as possible to make decisions with. In this way, formal strategic planning can reduce the risk of companies making bad decisions.

Isn’t strategic planning a waste of time in developing markets?

Answer: Somebody somewhere once said ‘Not to plan, is to plan to fail’ ! We hear the above question a great deal and frankly we believe it to be reflective of an ‘Ostrich mentality’. It is an excuse not to think through the outcomes of various scenarios and to be lazy. The ‘Osprey mentality’ stresses the importance of forecasting and planning, particularly in an environment with formidable uncertainties. It is one reason why we also produce scenario based forecasts for our clients in this environment. Being prepared helps a company march ahead of its competitors should the unexpected happen. We also believe that strategy is not much use unless you can measure it with something. We use ‘Shareholder Value’ as the measuring stick – widely recognized as the best option.

At what levels in my organization is ‘Strategy’ relevant?

Answer: Strategies exist at a number of levels in an organisation. It is possible to distinguish at least three different levels of organisational strategy. Corporate-level strategy is concerned with the overall purpose and scope of an organisation and how value will be added to the different parts (business units) of the organisation. This can also be thought of as the ‘Holding Company’ level. This could include issues of geographical coverage, diversity of products/services or business units, and how resources are to be allocated between the different parts of the organisation. The corporate centre needs to play a crucial role in determining how the organisation should be structured, how resources should be allocated and how diligently target setting and performance reviews are conducted.

The second level can be thought of in terms of business-level strategy, which is about how to compete successfully in particular markets. The concerns are therefore about how advantage over competitors can be achieved; what new opportunities can be identified or created in markets; which products or services should be developed in which markets; and the extent to which these meet customer needs in such a way as to achieve the objectives of the organisation – perhaps long-term profitability or market share growth. So, whereas corporate-level strategy involves decisions about the organisation as a whole, strategic decisions here need to be related to a strategic business unit (SBU).

The third level of strategy is at the operating end of an organisation. Here there are operational strategies, which are concerned with how the component parts of an organisation deliver effectively the corporate- and business-level strategies in terms of resources, processes and people. Indeed, in most businesses, successful business strategies depend to a large extent on decisions that are taken, or activities that occur, at the operational level. The integration of operational decisions and strategy is therefore of great importance and can require a great deal of effort.

What is the difference between a Strategic Plan and a Business Plan?

Answer: It is a good and frequent question because the two terms are often mistakenly used interchangeably. A strategic plan is a blueprint showing what the objectives and direction of the organisation will be. A business plan is an operational document showing the implementation steps in realizing the strategy. Sometimes a Business Plan does have a section on Strategy.

Is Financial Strategy part of overall Strategy?

Answer: Yes, indeed. Financial strategy focuses on the liability side of the balance sheet and deals with long term financing issues of the company. The Chief Financial Officer (CFO) is primarily involved as the architect of the financial strategy in support of the overall corporate strategy of the firm.

There seem so many different approaches and theories on strategy, how do I know what I am doing is the best way for my organization?

Answer: There seem so many different approaches and theories on strategy, how do I know what I am doing is the best way for my organization? A: An experienced practitioner and/or Strategy consultants have their own methodologies which usually draw heavily upon accepted and recognized theories and methods of approaching corporate strategy. They should also adapt those strategies to the type of business (manufacturing or services), early stage or mature, owner involvement, as well as resources, both present and realistically achievable. However a business owner can himself get acquainted with the basic Strategic Planning universe and we can recommend some excellent practical text books.