All businesses need a strategy. Here’s how to write a great one.
The word ‘strategy’ is much used and abused. It has its origins in ancient Greek military terminology, which provides clues about its true meaning – leading and guiding. In a business context, it can be taken to mean how best a business can fulfil its purpose, and achieve its vision and objectives.
Strategy is about determining a destination and how best to get to there. It’s also about being able to switch course because of changing economic, competitive or other circumstances. Strategy is about the long term, how you may or may not effect changes, and your appetite for risk. It’s not about day-to-day operational tasks, although they may be driven, sometimes unconsciously, by your strategy.
“Developing a strategy involves stepping back from day-to-day operations to answer some big picture questions.”
Well-performing small businesses have a clear sense of purpose. They put the focus on their customers and are often first to market with new offers and services. These are good indicators of a strong strategy.
Increasingly, small businesses are being required to commit their strategy to paper, for a variety of purposes, such as raising finance or securing a grant. That’s a good move as it gives a busy entrepreneur the incentive to create a long-term game plan.
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It’s important to realise that there are different types of strategies and different processes for strategy development which are adopted by different types of businesses, large and small. Renowned academic and strategy guru Henry Mintzberg is credited with coming up with these six broad definitions:
- Planned: strategies that are formulated centrally (usually by ‘head office’)
- Imposed: strategies either dictated by a parent company, or by economic or other circumstances
- Opportunistic: deliberate strategies to respond to opportunities as they arise
- Entrepreneurial: strategies that are driven by an entrepreneur which may not be written down, but may be understood by those around them.
- Emergent: strategies that evolve in an unplanned and sometimes unintentional way
- Realised: strategies which are the outcome of combining planned and emergent strategies
Strategy formulation is an inexact science. Everyone is on a continuous learning curve. “No organisation, not even the ones commanded by those ancient Greek generals, knows enough to work everything out in advance, to ignore learning en route,” Mintzberg wrote in this essay on crafting strategy published in the Harvard Business Review.
The terminology used in developing a strategy can often be perceived as “navel gazing”, and far removed from the day-to-day realities of owning and managing a small business. This is not necessarily true, as an understanding of the terms and their relevance to small businesses is hugely beneficial.
The process of developing a strategy involves stepping back from day-to-day operations to answer some big picture questions about what a business stands for, as well as its purpose. You should define the following terms:
- Vision: What is the future direction of the business?
- Mission: What business are you in? How does the business create value for customers, shareholders, staff and other audiences?
- Values: What does your business believe in and stand for?
Marketing, often seen as ‘fluffy’, is at the core of the development of a business strategy, and how businesses create their long-term value.
Strategic analysis is necessary to get to understand where the business is, where it is going and how it can make forecasts. That analysis may be based on reviewing and interpreting both internal and external data, and market trends.
Such analysis is an essential part of the next stage of the process, which is about defining the strategic direction of the company. This includes:
- Agreeing on a broad direction for the business
- Setting objectives, which should be aligned to the business’s vision
- Reviewing various options and making decisions
This is the process whereby the strategy gets turned into an operational plan or a series of plans with clear objectives and actions to be pursued by a business. A clear vision should make sense to everybody. It should allow for objectives and Key Performance Indicators (KPIs) to be set. A mission statement needs to grab the attention and interest of your employees and customers.
Don’t underestimate values. They set the tone for how people behave and how your business is perceived, both internally and externally. Values underpin many successful businesses and dictate how a range of activities are pursued, from dealing with customers, to entering new markets and even recruitment.
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