For decades, businesses have adapted to a continually changing landscape to remain competitive. From retaining the flexibility to respond to market changes to continuous benchmarking, companies have to work hard to stay ahead of the competition. Around them, markets have become more global as barriers to entry in various industries continue to ease. Additionally, many companies have invested significantly in tools and technologies to become lean and agile.
Combined, the quest to produce faster (speed), more (productivity) and better (quality) has led to the development of numerous management tools and techniques. Granted, these have led to dramatic improvements in operational efficiency. However, many companies have been unable to translate these gains into sustainable profitability, often deviating from the strategy in favour of improving efficiency.
Certainly, operational effectiveness is integral to enabling a company to produce at a high level, which is what any enterprise wants to accomplish. However, there’s a difference between this and strategy. Where operational effectiveness means a company can perform an activity similar to its competition in a better way, employing strategy as a way of positioning the company means performing different activities from competitors or doing similar things in different ways.
This fundamental difference is quite important when defining what strategy is and isn’t. In the corporate world, the term strategy is often misapplied to various indicators, including growth projections or a company’s mission statement. Additionally, the strategy doesn’t have to be something that’s never been done before; it’s not always about innovation.
What Strategy Is
Nilesh Waghela, a retired independent business advisor, knows that a good strategy captures an organisation’s core values, having taken into consideration the priorities of every department within it to craft a desired collective end goal. The strategy forms the foundation of all the company’s activities, and its creation guides how decisions are made.
When broken down, a well-crafted strategy describes how a company will establish a tangible difference compared to its rivals. It also defines how the business will find and retain customers while also providing a blueprint for how it will remain competitive within the market. A clear strategy is an asset to the company and helps guide what type of goals to set or the investments to consider.
At its core, a good strategy will capture the following components:
- Diagnosis: The team that defines the corporate strategy will assess the current market situation and describe expected future conditions.
- A Guiding Approach: Similar to how a medical doctor provides a treatment approach after diagnosing a patient, the strategy defines an approach that helps the company become competitive within its target market.
- Clear Actions: From a corporate perspective, the strategy defines specific and coordinated actions that guide the implementation of the stated approach. These actions form the basis of strategy execution.
Why Companies Lack Strategies
A few reasons explain why some companies lack strategies, or why some have let their strategies decay. First, the opportunity to achieve operational effectiveness can be too good to pass up, mostly because this is actionable and provides concrete results. With many business managers under pressure to deliver measurable improvement, implementing programs that promise operational effectiveness seems like the best way to do so. With business publications and consultants preaching the importance of these tools and best practices, managers tend to get caught up and fail to understand the need for a strategy.
Second, and perhaps very importantly, the challenge of coming up with a clear strategy is dependent on an organisation’s leadership. In many companies, the leadership role is one that has been simplified into overseeing operational improvements and seeking business deals. However, at the core of the leader’s role is a strategy, which includes defining and communicating the business’s unique position, identifying the trade-offs that must happen, and finding the best fit within the market. The leader must have the discipline to decide which customer needs to meet while avoiding distractions and maintaining the company’s uniqueness. While the pressure to compromise or copy what rivals do will always be there, the leader’s job is to reinforce the strategic vision and say no.
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