Business Strategy: What It Is & How to Build an Effective One
In the business world, professionals are obsessed with tactics because they can help them meet their short-term goals. But if all you do is focus on the short-term, you won’t spend enough time or energy figuring out how you can succeed in the long-term.
Fortunately, building a strategy can help you achieve both your short-term and long-term goals. Strategy focuses on principles, which help you think, instead of tactics, which help you execute, so it allows you to concentrate on why your business does certain activities, not just how you do them or what you do. Read on to learn exactly what a business strategy is and how you can build an effective one today.
Your business strategy should be based on your overall vision for the company. For some brands it will be global market expansion. For others it may be more important to double down investing in existing markets they are already successful in. Regardless of your end goals, creating an effective business strategy will require thorough research beforehand.
1. Identify your business’ aspirations and values.
In business, traditional goal setting lets you measure what you do, but it doesn’t lend itself to gauging how you do it or why. And if you only focus on the results, it can sometimes incentivize you to take a course of action that prioritizes your organization’s needs over your customers’ needs.
To help you focus more on your purpose and process instead of just your results, consider setting and anchoring to an aspiration, or your vision for your business in the future when building your business strategy — it’ll inspire you to do work that better serves your customers. Once you set an anchor to an aspiration, you can add your goal to the equation, which will help you simultaneously produce customer-centric work and hit your numbers.
2. Conduct a self-assessment.
Once you’ve figured out your business aspirations and values, it’s time to conduct a self assessment to help you evaluate the best avenues for business growth and success.
You can do this by conducting a SWOT analysis to identify strengths, weaknesses, opportunities and threats to your business. What do you do well and how can you capitalize on that? What can be improved and how?
3. Pinpoint which segments of your market you want to capture.
Your product or service most likely isn’t the best fit for your entire market, so it’s crucial to pinpoint the segment or segments of your market that benefit the most from your product or service.
Customers who genuinely need and want your product or service are also the customers who retain the longest and are least likely to churn, boosting your customer lifetime value and lowering your customer acquisition costs.
4. Determine how you’ll beat your competition.
Ricky Bobby’s legendary saying that “If you ain’t first, you’re last” doesn’t necessarily apply to the business world, but it does have some bearing on it. Your customers won’t buy two of the same products or services, so if you want to capture as much of your segment of the market as possible, you need to place first in the majority of your target customers’ minds.
Some of the best ways to stay top-of-mind are crafting a creatively refreshing brand, differentiating your product or service from the rest of the crowd, and pricing your product relative to its perceived value.
5. Set clear goals.
Now that you’ve completed your research and established a vision for your business, it’s time to set some goals.
Think about what you want to accomplish and work backward to figure out the steps to get there. Setting business goals will help inform your strategy and how each department collaborates to achieve your objective. To start, you can come up with:
- Business goals: These are high level objectives you’d like the organization as a whole to accomplish.
- Department or team goals: These are key objectives delegated at the department level to help the organization achieve their overall goals.
- Employee-specific goals: Using departmental goals, establish goals for individual employees to contribute to reaching business goals.
These cascading goals will make sure that all stakeholders involved in executing your business strategy are on the same page and properly aligned.
6. Make a plan.
With your business goals defined, it’s time to make a plan to accomplish them. This plan should include actionable tasks your team can take and should outline the steps needed to achieve your mission or objective.
This plan can be rolled out as either a short-term or long-term plan or a combination of the two. Additionally you’ll want to check in with your plan often to make sure everything is still on track, and make adjustments as the business requires them.
7. Figure out which competencies are needed to beat your competition and sustain your business’ success.
Unfortunately, passion isn’t enough to beat your competition and rocket to the top of your industry. Talent and skill are just as crucial. Depending on your aspirations, goals, and market, you need to figure out which types of teams and employees you need to develop and recruit to not only beat your competition, but to also sustain your success.
For example you may need to recruit more engineering staff or hire a data science team with experience in your niche to achieve your goals.
8. Decide which management systems are needed to hone these competencies.
If your business is a team, then your managers are the coaches. They’re responsible for developing, supporting, and inspiring your employees to do their best work possible.
Establish check-ins with your team to ensure both employees and managers have what they need to succeed. Invest in technology that enables your team to work together more efficiently and propels your business goals forward. Because no matter how much raw talent your employees have,they’ll never reach their potential and, in turn, help the business reach its potential if they don’t refine the skills and discipline necessary to compete and succeed.
9. Measure your results.
It’s not enough to simply set goals and hope things work out. You’ll need to actively monitor your progress if you want to achieve greatness. As mentioned previously, you should be checking your plan monthly to make sure things are running as they should.
Evaluate your metrics to ensure your team is meeting key performance indicators (KPIs). If they are not meeting them, find out why and come up with a solution to get things back on track.
10. Be flexible and willing to adapt.
Along with measuring your results, it’s also a good to examine where your strategy is falling short and make changes.
Are their changes in the industry or external factors that impact your current strategy? This may be an opportunity for you to adjust your approach. Your plan is your roadmap, but it should also be flexible enough to pivot along with your business.
11. Consider hiring a business strategy consultant.
If all of the steps above seem overwhelming and you have the resources, consider hiring outside help. Business consultants can provide guidance and training to help you achieve your business goals.
- Expertise: Consultants often have a narrow area of focus — meaning when you hire one, you’re getting an expert in your selected field. They can help you build a framework or structure that aligns with your goals. They can also add a different perspective to tackling issues your team has tried and failed to resolve on their own.
- Unbiased: Since a consultant is not an employee of your company, they are not hindered by existing viewpoints or tradition and can look at your company with fresh eyes. This makes it easier for them to hone in on your goals and the best strategy to achieve them.
- Expensive: Hiring a consultant is definitely an added expense and will most likely cost more than paying an existing employee.
- No guarantees: Although consultants are experts, they don’t come with guarantees of success. Their is no guarantee of reaching a certain performance metric or number of sales. However, you can always vet consultants by asking for recommendations, looking at references and examining their work history.
Hiring a business strategy consultant is a great option if your team has been struggling with the steps above without success. A third party may pick up on business insights you may have missed.
Principles Over Tactics
We live in a day and age where the internet is overloaded with advice. You have access to countless amounts of tips and tricks that could potentially help you build a successful business. But without the ability to think critically about whether these tips and tricks actually apply to your specific situation, you’ll never reach long-term success.
That’s why strategy is so important. It grounds your business in principles that can apply to almost any situation and, in turn, help your business achieve both its short-term and long-term goals.
This article was originally published in May 2019 and has been updated for comprehensiveness.