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How to get more practical results from your business strategy

 

Strategic management, not strategy

 

Strategic management is a lot wider and more pragmatic than strategy, involving a range of additional steps to help make strategy turn into realityIt is the overall process for ensuring an organisation actually moves forward in a defined direction (goals and strategy) and, at the same time, stays in tune with and responds to changes in the environment.  It consists of several elements (principles), which are outlined below.  Some will likely sound familiar, others less so.

 

i) Information review.  

 

Strategic management starts with ensuring you have a decent range of up-to-date information about your external environment, your internal environment (i.e. how things are inside your business), your recent sales performance, and what your customers think of you.   

 

Your external environment refers to facts, trends, and developments concerning the sectors (markets) you serve (e.g. types of services/products, customers, suppliers, competitors), together with your general external environment (political, economic, social/demographic, technology, regulatory/legal, and so on).   You should consider which factors represent ‘opportunities’ or ‘threats’ for you over the next few years.

 

Your internal environment review means reviewing each function and aspect of your organisation and considering where are your key areas of strength and weakness compared to competitors.  Your sales performance profile is about finding out exactly where your sales, gross income and net income have been coming from over the last year or so (in terms of, for example, product, service, and type of customer).  Regarding your customers, you should find out what each of your main types of customer think of you, how satisfied they are, and what they expect in the future.

 

 ii) Strategic thinking. 

 

The second vital step in the strategic management process is to spend time actually ‘thinking about the key points and issues arising from your information system. Too many business people pass through this stage far too quickly, yet it is the most important stage.   

 

Thinking is not a singular type of action, but involves applying several different types of mental process to information obtained.  These include analysing selected data in depth to more fully specify or understand points;  looking holistically at data to spot connections, patterns and the bigger picture ;  making predictions or forecasts for the future by spotting trends in past data;  judging possible implications or developments for the future ;  and thinking creatively beyond data to imagine how the future might or could look or your firm’s potential role in it. 

 

iii) Medium-term strategic ‘framework’

 

Contrary to popular advice in many business planning books or courses, it is usually not a good idea to write a detailed strategic / business plan for anything more than one year ahead.   Apart from detailed planning needing a lot of time, the simple fact is that it makes no sense nowadays trying to plan too far ahead when the world changes so fast and the medium-term is so uncertain.

 

Instead, a much more pragmatic approach is each year to develop and write a broad ‘strategic framework’ for the next 2-3 years and use that as a context and connecting thread for (more detailed) annual operating plans/budgets.  Each year you should re-visit the framework and refine or update it, but typically – unless major changes have occurred in the interim in your environment or in your business – this can be quite quick and easy.   

 

What should go in this framework ?    The following type of information is suggested:

 

  1. A summary of the key findings and issues arising from your information review
  2. A statement of your overall aspirations (aims) over the next few years. 
  3. A ‘marketing & operating overview’ - which markets/customers you will be targeting, what products/services you will offering,what distinctive proposition/advantage(s) you will promote, and how your business will operate.   
  4. An overview of the key policies and initiatives for each area of your business over the next 2-3 year period  
  5. Budget and resource overview for the next few years, together with an indication of your approach for managing performance
  6. List of key assumptions and risks   

 

iii) Annual budget, operating and work plan

 

This is where you translate your medium-term direction into precise numbers, goals and work plans for your upcoming financial year.   This is the place for operating detail.  Key areas to put in such a plan include:

 

  1. Your specific goals for the business for the next 12 months – expressed as numerical targets as much as possible.       
  2. For each department or area of your business, a summary of all significant actions and policies.
  3. Mini project plans for any very large projects 
  4. Organisation/responsibilities summary  
  5. A summary showing the timings / progress milestones for all major events and initiatives
  6. Detailed budget financial statements – including profit & loss, (monthly) cashflow statements and balance sheet.
  7. List of half a dozen ‘risk areas’ for the year ahead and a sentence or two on contingency measures you would take for each

 

iv)  Performance management & communication

 

This is the most vital area for effective execution of strategy.   It involves doing two things.

 

Firstly, ensure every job holder in your business knows exactly what is expected of them over the coming year and that they feel motivated to perform well.  This is a big subject but some valuable tips are:   ensure you have the right staff in the right jobs;  brief all staff well at the start of the year on what is in the annual operating plan and help them see where their role ‘fits in the bigger picture’;  make sure everyone is clear about their job description and what the measures of success are;  and use a pay and rewards policy that is linked to both individual and team performance.   

 

Secondly, you need to track and measure ongoing performance at an organisational level.  At regular intervals, compare actual to budgeted/targeted performance and immediately investigate/intervene in areas where there is a substantial negative variance.   For maximum encouragement of high performance levels, share these performance reports openly and widely in your organisation and let staff contribute suggestions on how to improve results where needed.

 

vi)    Continual issue and opportunity scanning

 

Being strategic is as much about being alert to and responding appropriately to ad-hoc issues and opportunities that come up during the year as about doing an annual strategic assessment and plan.  Essentially, you need for the information review referred to in step i) above to operate all year as a continuous ‘eyes and ears’ intelligence system.  Such a system should use a wide range of information sources, ranging from internal records and reports and external news media to routine conversations with customers and formal meetings with other professionals in the local community.  

 

When an issue comes up that at face value could be an opportunity or threat for your business, you should have a quick but systematic way of looking further into the topic, analysing it possibly, thinking through the possible implications for your business, and then planning appropriate action to deal with the issue, if needed.  

 

vii) Flexible and learning organisation  

 

As part of keeping your business sensitive to new / ad-hoc changes in your operating environment, try to design your structure, staffing, systems, policies and operating methods to always keep an element of in-built flexibility and adaptability.  This will increase the speed and ease of how you can respond to external changes.     

 

Altogether, these seven elements form a strong process for helping you not only to  develop strategy in a systematic way but to turn strategy into actual delivered performance.