Strategy is a big word often being exclusively used by experts, military commanders, consultants and academics. More often than not, people tend to avoid "strategic" discussions or end up being confused. Or perhaps they would just simply nod in agreement with the hope that their lack of knowledge and understanding will not be exposed.
As a business owner, there are a couple of the questions that you might like to find answers for:"What is the relevance of strategy? How could strategy be easily understood and applied to your business?"
Let's begin by getting a simple definition from an expert.
Definition of Strategy
Michael Porter, an American academic known for his theories on economics, business strategy, and social causes has given a relatively simple explanation on how strategy could be defined.
Why is there a need for Strategic Planning?
For a start, strategic planning helps to increase operational efficiency, market share and profitability of your business. This is one of the most tangible benefits. In the long run, the exercise makes the business more sustainable as it has taken into account the potential opportunities, trends and threats that might affect it.
Now, let us now proceed to make "Strategy" easily understood by building on these 6 basic pointers.
1. Make a Clear Stand on Vision and Goals
For your strategy to be effective, business owners need to clearly define boundaries, as well as to make a stand on the destination and directions for your business. If you don’t know where you are heading to or what you would like to achieve, there is no basis or yardstick for making choices.
2. Decide on Areas of Emphasis
What are the areas that you cannot afford to compromise in your business and planning? For example, these areas could be values, ethics, code of conduct, service quality delivery etc. These markers would serve as a boundary to ensure that non-negotiable areas are not being breached.
3. Decide Where to Play
Apart from making a stand on keeping focused on your vision and goals, it is about making a decision on WHO you are going to serve and HOW you are going to serve those clients. Taking another step further, you will need to decide on WHERE (i.e. place, market or channel) to play.
4. Identify your Unique Value Proposition
Another key aspect of business strategy is to answer the question of: “What Is Your Competitive Advantage — Your Unique Value Proposition?” Think about the resources you have that would be hardest for competitors to copy, as well as any advantages that your position confers. What would keep another company from replicating your operating model?
The first 4 points will get you started in building a viable business strategy. The final couple of points will enable your strategy dynamic to remain impactful and relevant in the light of changes and trends.
5. Move and Adapt
Prepare to adjust your strategy when a course correction is required. Identifying big trends and movements in your industry can create opportunities and/or enable you to remain relevant in the midst of competition. Some of the ways where you could keep in touch with the market and trends is to conduct regular customer surveys, feedbacks, research and competitor analysis.
6. Utilise Scenario Planning
Scenario planning is making assumptions on what the future is going to be and how your business environment will change overtime in light of that future.
Tapping into the process of scenario planning may seem to be a daunting exercise. To keep this simple, have an overview about your best case and worst case scenarios. Think about how you can change or cope with these extreme scenarios. If you are prepared for such scenarios, you would be able to cope well most of the time since events or circumstances tend to fall in between extreme scenarios.
To sum it all up...
Creating a viable strategy requires business owners/management team to have a strong understanding of their internal direction and resources available. At the same time, they need to be cognisant about how future trends, external environment and competitors can affect the profitability and sustainability of their business.