Wednesday, November 6

Why Strategy is Important – Stella Olivia Kikoyo

Strategy!  What is this and does your organisation have one in place?   This is a term that is often used loosely.  Everyone seems to have their own understanding of it albeit most business leaders will agree that they need a strategy.  All businesses need a strategy not only to survive but also to thrive, and definitely this need is greater today than it has ever been before due to increased competition. Yet according to Michael Porter – a professor at Harvard Business School, many organisations or leaders do not strategise.

Stella Olivia Kikoyo

Whilst there are many definitions (or descriptions) of strategy, I will engage with only a few, which hopefully will provoke your assessment whether you have one.

Definition of Strategy

  1. Strategy is a plan of action designed to help achieve the desired long-term goal of the business.
  2. According to Michael Porter, strategy defines and communicates an organisation’s unique position. It determines how an organisation should utilise its resources to create a competitive advantage.

What Strategy isn’t

  1. Strategy isn’t the same as a goal or a plan?

Whilst some people use the word strategy to mean goal, or a plan these are not strategy. Strategy is specific and focuses on how the goal will be achieved. If the goal is about being the best in market, the strategy will be to develop a unique position that allows to get to that goal.  It gives direction of where and how and with what assets.

2. Strategy isn’t necessarily attending to competition

Strategy and attending to competition are sometimes mixed up as well.  Strategy helps to deliver a unique value proposition and it is not about being the best.  Competition in business isn’t like a sport where there’s only one winner. Business is more like an art such as music where it is all about serving particular set of customers with a unique proposition for great value to them and the provider. For example, Ferrari and Ford are targeting different needs

3.Strategy isn’t just operational excellence.

Strategy involves making choices in the value chain such as the tools for marketing, technology, finance, human resources and operations to produce a unique offering to the target customers.  It is thus not operational excellence.   It is about doing all things that need to be done well but better than your competition.

Strategy is not just for survival, it is for the business to thrive in the market place. Strategy is holistic in nature.  For example, it involves making decisions on who the business will be serving, how they will be serving them and then deploying the resources required to set the business apart to win consistently  for a long term. It is about choices to be made across the value chain including  marketing, technology, operations, logistics, sales and procurement etc.

To elaborate on strategy, when one mentions Apple, what comes to your mind? Whatever comes to your mind has been formulated and communicated by the strategic approach.  For example, Apple does not compete on price, it focuses on offering value for its target customers and that is orchestrated from all aspects of the value chain which value is status and experience.

Levels of Strategy

Corporations may have several strategic levels including corporate strategy, business unit strategy and operational or team strategy.

  • The corporate strategy supports the vision and mission of the organisation. 
  • The business unit strategy implements the corporate strategy at the business unit level. 
  • The team level or operational level strategy represents those activities that need to be performed on a day-to-day basis to achieve the organisational level objectives.

TWO COMPETITVE STRATEGIC OPTIONS

  1. DIFFERENTION STRATEGY

This involves working to create unique value through differentiating your offering and getting higher value for the service or product.

2. LOWEST COST STRATEGY

Cheaper and low cost – this is involves structurally developing a systems that allows for efficiency at the lowest cost possible and going out to offer the service or product at the lowest possible price.

CONCLUSION – THE FIVE BENEFITS OF STRATEGY

  • Sense of direction

A business strategy will help to create a clear picture of what the future will look like and in turn may inform why the organisation has to invest in a particular product or service, or to divest in another.

  • Avoiding competitive convergence

Without strategy a business will be more reactive to competitor practices. By having a strategy the business is able to focus on what makes it stand out and produce desirable results in a long run. Focusing on the unique value your organisation brings to the market place is key for success. 

  • Monitoring and measuring success

Without a business strategy, how can an organisation be able to monitor its activities and measure success?  By having a clear strategy in place then the organisation is able to monitor for any diversions from its intended position and offering then redirect the effort and resources.

  • Informed decisions

With a clear strategy, an organisation is able to assess who to work with and which resources to deploy to ensure that the value proposition is consistent. This may involve making decisions with who to partner with to meet customer needs. If for example the organisation is strategically positioning itself as one on sustainability agenda, it will be very careful on its strategic decisions that could affect this strategic action.

  • Increase satisfaction

With a clear business strategy, businesses are able to focus the employees and allow for employee buy-in.  A clear business strategy will not only set the organisation apart but will also attract the right employees and will also ensure growth and retention of those employees, whose satisfaction may result into increased customer satisfaction.

TO SUMMARISE – SOME BASIC QUESTIONS FOR YOUR ORGANISATION

Do you have a strategy for your organisation?

On what principles is the strategy based?

Is the strategy sustainable? Can it be maintained over time?

Who are you trying to serve?

Which needs of your customers are you trying to serve?

How can you create unique value to the customers you choose to serve?

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