Strategy is about harnessing insight to make choices on the effective deployment of scarce resources with the aim of creating competitive advantage. Strategy is the key to convert our dreams into reality. Strategy is the basis - combined with execution excellence it will lead to great success.
To be useful, a strategy must produce a set of specific deliverable by answering four questions; it is not simply a process of open ended choice-making:
1. What are our key insights about the external environment?
2. In which arenas will we compete?
3. What will be our winning proposition and key priorities? - This is the central deliverable of strategy and not value proposition as value is a relative concept not absolute
4. How will we implement our strategy?
Strategy is about doing the right things, it is about insights, ideas and external perspective. Planning is about doing things right. It is about numbers and logistics and is internally focused.
We need a dynamic process of continuous learning and renewal - a way to refresh the answers to the four questions. A method to achieve this goal called Strategic learning devised by Willie Pietersen involves four steps mirroring the four deliverable - broadly divided into two viz:
Strategy creation and Strategy implementation - learn, focus, align, execute. Steps in Strategic Learning: The leadership process can be explanined as below; The sequence is crucial, elements do not work in isolation. Each step builds on the prior one and confers power on the next step:
Strategy Creation:
1) Learn : Conduct a situation Analysis to generate insight into the external environment and the company's internal realities. Situation analysis is the intelligence system that informs all the subsequent steps.
2) Focus: Translate these insights into your competitive focus, winning propositions and key priorities. It is the core of strategy. The winning proposition is the central animating idea that guides all an organisation's decisions and activities.
Strategy Implementation:
3) Align: The total organization and energize your people behind this strategic focus.
4) Execute: Implement your strategy and experiment with new ideas. Interpret the results and continue the cycle.
Strategic learning is not only a procedure. It is a way of thinking. "Strategy is not just about what we think, but how we have thought it"
Vital Strategy disciplines are outside in approach, need involvement, Simplicity and communication.
Three levels that firms commonly develop organisational strategies for are:
1) Corporate or Multi Business
2) Competitive or Business and
3) Functional/Within Business
In Today's competitive environment, organizational strategies must be dynamic. It is not determined by firm's initial move but by its anticipations and preparedness. Key elements of Strategic Planning are:
1) Environmental Analysis -
This involves evaluation of major interests and covers both internal environment to understand Strength and weakness and external environment to know opportunities and threats. SWOT analysis also known as Current state Analysis takes the strategic planning to the next level of focus with the help of TOWS Matrix in particular by identifying relationships and developing strategy to match strength with opportunities, overcome threat and reduce weakness and to use opportunities to reduce weaknesses.
A variety of external factors that make up an organisations business environment are:
- Legal and Regulatory Factors
- Market Forces, Industry, Trend and Competition (Michael Porter developed a model examining the 5 forces viz - Bargaining powers of suppliers and buyers, threat of New entrants and Substitute products and Rivalry among existing competition. Three generic strategies to gain competitive advantage are cost leadership strategy, differentiation strategy and focus strategy.
- Technology changes
- Stakeholder groups and their social concerns
- Globalization
An internal capability analysis helps to ensure that the organization has the resource, skills and processes to reach its strategic and tactical goals. Conceptually it has two phases
- Establish snapshot of the present state and identify gaps
- Make decisions about closing the critical gaps considering the cost of developing new capabilities against the potential payoffs.
2) Prepare Master Strategies - It involves preparation of long term Vision, Mission, goals and objectives.
Vision is a brief statement of what an organisation will do for future generations and how it wants to be perceived.
Mission answers why are we in the business. Expresses how the organization will continuously move towards its vision.
Goals both strategic and tactical summarize what the organization hoses to achieve in order to fulfill its mission and achieve vision. i.e. states desired end result
Objectives provide details or actions required to support goals.
3) Tactical Plans are developed which are of short range like operational plans, budgets.
Some common planning tools and techniques are situational analysis, PEST analysis, scenario planning, competitive analysis, contingency planning, and BCG Growth share Matrix. Created by Boston Consultancy Group, BCG growth share matrix is and effective analytical tool. An organisation ranks its business units (or products) on the basis of relative market shares and growth rates and places them into one of the following four quadrants naming them Stars, question marks, cash cows and dogs. A company should have portfolio of products with different growth rate and Market share and is a function of balance between cash flows. High growth products required cash flow to grow and low growth rate generates excess cash, both needed simultaneously.
Strategy thus plan to match an organisations strengths with the opportunities in the market place to accomplish its desired goals over the short and long term. It moves from creating a general big picture with the help of master strategies and then gets into the specific details with tactical plans.
The key is to translate the strategy into a compelling leadership message to win hearts and minds and repeat endlessly....
Strong Employee Engagement depends on a clearly articulated strategic vision. Two factors that drive employee engagement are: the opportunity to focus on the most important task and feeling connected to a higher purpose.
In case the above factors are not considered, organisation's strategy development process will be mired in a fog of complexity and confusion.
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