Every other business decision will be seamless if one understands how to set strategy. A lot has been said about strategy in business and management arena that the term strategy has become so many things to so many people. A football analyst for example will say something about the strategy of a team.
Even bookies and online stock traders will advice that people have a sort of betting or trading strategy. Even authors of strategy books have different definition of strategy.
The idea behind this post is not to join the already numerous resources on what is strategy but to provide a concise reference point for people that are involved in strategic decision making.
A strategy in the words of Johnson, Scholes and Whittington (JSW) is ‘the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectation’
A strategy helps an organization take advantage of changing environment by configuring key resources, operations and competencies in such a way that advantage of things are taken. Simply put, strategy is the totality of how organizations attempt to achieve their objectives.
Strategy operates at three different levels which are:
a. Corporate level strategy
b. Business level strategy
c. Operational level strategy
How to Set Strategy That Actually Works
This article will take the modern adoption of traditional approach to setting a strategy. How to set a strategy will be looked at in three different phases as follows: Just be aware that as Johnson, Scholes and Whittington (JSW) pointed out that strategy can begin at any stage as new discovery might shed light to what decision has already been made about.
So, do not assume that there is any hard and fast order in the strategy setting process.
1. Strategic Analysis phase-establishing out strategic position
Strategic analysis basically is all about scanning the environment, analysing a company’s’ ability and identifying stakeholders and their powers and interests. The steps below make the whole process of setting strategy a bit easier.
• Identify key stakeholders and their expectations
• Develop long term objectives to satisfy these stakeholders expectations
• Calculate financial and non financial ratios to show position of organization
• Identify core resources and competencies within organisation
• Identify key external factors which can affect how businesses is done
• Use SWOT analysis to develop strategic position
2. Gap closing phase- making strategic choices
Here, the focus shifts to weighing options in the light of available information. All energy and focus is on generating as many options as possible. Strategic Management Tools like Ansoff Matrix can be of a great help here.
For example, a company may consider either growing organically, growing by acquisition, growing by diversification or to concentrate – consolidate current position. Also at this stage, options are evaluated and choice made. The following steps below will be of great help.
• Find out how easy it is to leave the industry (exit strategy)
• Are there diversification opportunities?
• What can we do to take advantage in areas where we have been underperforming- business turnaround strategy
• Looking for ways to increase our competitive advantage
• Consider entering new markets
• How about developing new products
• How easy is it to develop new competitive advantage
3. Strategic Implementation phase – putting strategy into action
Action! Action!! Action!!! Every other thing that we have been discussing in this article will be just waste of time if action is not taken. This third phase in the journey of how to set strategy is all about implementation of chosen strategic choice. Managing change at this stage is very critical as not doing so will lead to complications.
• Evaluate identified options and chose what course of action to follow
• Implement any required organizational change to allow smooth operation of chosen strategy
The use of business Integration models is very important as it helps to bring it all together.