Strategy Demystified – Fancy or Valid?

I realized that the word “Strategy” is one of the most loosely used word in recent times – rightly or wrongly. Everyone is talking about strategy and in some cases mistaking it for tactics or set of activities or just a plan. Well, Strategy is a lot more than that and I will be sharing my thoughts around what Strategy really is and most importantly how an organization can benefit from having a clearly defined strategy. Finally, I will share my thoughts on how Corporate Strategy Departments/Units/Teams can approach their role as custodians of their institution’s corporate strategy.

Where it all Begins…

Before we define Strategy and what it entails, its expedient we understand where it all begins. Strategy for any organization begins with its “Aspirations”. There must be a clear sense of direction with respect to what must be achieved and what success looks like. The outcomes of this aspiration must be clear for the organization. It could be market share, wallet share, profitability, revenues, impact etc. However, arriving at such aspirations that is both realistic yet challenging is not an easy feat (Hopefully, I will discuss this in future article). These set of aspirations sets the tone for the company’s strategy. Until this has been determined, strategy is non-existent.

What is Strategy?

There are so many definitions of Strategy out there. Many of these definitions could be regarded as definitive, however the most resonating definition of strategy is “Strategy is the creation of a unique and valuable position, involving a different set of activities”. In other words, Strategy is about competitive position; places emphasis on differentiation – choosing to do a unique set of activities to deliver unique value.

A key point to note is that much more than a plan, strategy is about positioning. Every organization must ask themselves “where do we play so that we can win?” This requires involving a different set of activities. Replicating the approach of a competitor and perhaps improving on it, is not a winning strategy. As an organization, you must decide where you want to play that will present unique opportunities to differentiate in the market and ultimately win. These set of unique opportunities that presents itself by virtue of your positioning must be supported by your company’s business and operating model.

A company without a strategy is headed for failure. Failure in this case could mean loss of market share, wallet share, revenues or falling out of total relevant in industry of play. These undesirable outcomes cannot be wished away; as they say, “Hope is not a Strategy”. Hence, it takes a deliberate and concerted effort to define a winning strategy. Now, you may ask what does strategy entail and what should Corporate Strategist do in their role?

Phases of Corporate Strategy and Role of Corporate Strategy Team (CST)

Recently, a mutual friend just got the role of Strategy Manager in a foremost Oil and Gas firm and when she engaged me on tips to succeed on the role, she made a stricken admission that I see as common practice in most organization. She said, the Corporate Strategy Unit has become a dumping ground for all the activities that other department and stakeholders do not want. This should not be the case as is the case. The role of Corporate Strategy is any organization is crystal clear and for avoidance of doubt I will attempt to summarize along the phases of Corporate Strategy.

1.    Strategy Development: The first step for any organization to take in achieving their aspirations is to develop a winning strategy. Typically, we see organizations cede this activity to consultants to do and understandably so. However, this is an activity that should involve the institution because no consultant can determine your strategy. Their role is to guide you through the process to arrive at the strategic answers to your strategic questions. Below depicts clearly the Strategy Development Cycle (SDC) that incorporates all the elements of strategy development.

a.   Corporate Aspirations – Your organization need to agree where they want to be in the next 3 to 5 years, which is the typical strategic cycle. It involves bold declarations of your organization’s intentions in the industry. i.e. “To be industry leader in Market Share and Profitability by 2025”.

b.   Outcomes & Measurements – Indeed, what doesn’t get measured, doesn’t get done. Hence, it is important to have clearly defined measures tied to your company’s aspirations. The OKR (Objectives and Key Results) approach or the KPI (Key Performance Indicator’s) approach could be used. I will discuss the difference with each approach in future article. Most people are familiar with KPIs so for the benefit of the majority I will stick to the KPI approach. So, at this stage, its important to agree the set of KPIs for measurement i.e. Revenues, PBT, Market share, Cost Efficiency, ROI etc.

c.   Strategic Targets – Its time to put some numbers to the measurement metrics. What amount of revenues/profitability must your organization achieve that will make it the market leader? This requires some analysis around competition and industry historical growth trajectory. Same applies for the defined KPIs.

d.   Business Model Definition – Here your organization must be able to clearly determine the following:

· Customer & Market focus – Where to focus on that will differentiate your organization’s play in the market and win. What segment and demography of customers to target?

· Products, Services and Propositions – What services, products and propositions must be offered to the identified target customer segment/market to ensure mindshare and wallet share?

· Channels & Engagement: How should products and services be deployed to effectively reach these target market segments?

· Regional Focus: Where are these customers located and how should the organization rollout its reach (physical or virtual)?

e.   Operating Model Definition - Here your organization must be able to clearly determine the following:

· Organisation Structure: What org. structure best supports the business operations? Should the organization have a market-based structure? Geographical based structure? Hybrid?

· Operations & Processes: What are the operations and processes needed to drive the market penetration efforts? What tweaks must be made to the processes to drive productivity?

· People & Skills: What kind of people do your organization require to drive the business? What values should they exhibit? What skills are required?

· Technology: What kind of technology will support the business? How much automation can be deployed?

· Partnerships & Alliances: Key questions to be answered include what partnerships are required to thrive in the industry? What are the propositions to engage the partners?

f.     Strategic Initiatives – Now, the organization must articulate clearly what are the specific initiatives or activities that must be done across the business and operating model elements to drive the aspirations.

g.   Implementation Plan – It is important to outline the strategic initiatives identified over a time period. Also, it is imperative to note the key owners of each initiatives for accountability purposes.

As a Corporate Strategy Team (CST), this is the first set of work that must be done within your organization and it could be done internally with the CST driving the process or in conjunction with a consultant. Overall, ownership of this Strategy Plan will remain with the CST.

2.    Strategy Implementation, Monitoring & Reporting: Having defined your organization’s strategy, the next important step is implementation. Strategy is useless if it cannot be implemented. Over the years, its been proven that 90% of the reasons why strategy fail is poor implementation/execution. The role of the CST is extremely critical in ensuring that the identified initiatives are well implemented and issues that may arise during implementation are quickly resolved. In my experience as a Corporate Strategist, I have realized that strategic initiatives are not as easy to implement as defined on paper so this is where ingenuity and analytics play a big role and as the CST, you must lead this process. I am fortunate to have the Analytics team seat within Strategy so it is easy to do consistent market scan, comparator analysis, internal diagnostics and develop the necessary tactical plans to navigate potential issues that pose a threat to the implementation of the Strategic Initiatives. So, it is important for the CST to constantly review the macros, market and industry landscape as well as conduct comparator and internal diagnostics to continue to steer the organization in the defined strategic direction. Another important part of this process is reporting. Progress on strategic initiatives must be reported to the management team frequently. A good reporting timeframe to management is monthly or quarterly depending on the dynamics within the institutions. I also recommend that it is pertinent that progress is reported at Board Level and possible Strategic Partners level to ensure overall corporate strategy visibility. Board and Partner level reporting also sends the right signals to management on the importance of driving the corporate strategy. It is important to note that the KPIs defined for each of the strategic initiatives are also measured in line with performance on the strategic initiatives.

3.    Value Realization Measurement (VRM): This is one of the most important activity in the entire Strategic process. Value realization speaks to the value derived from the implementation of the strategic initiatives. As an organization you would want to understand what outcome a strategic initiative brings. These outcomes must be defined at the point of articulating the strategic initiatives. Let’s take an example. A strategic initiative could be “Develop Sector Specific Products”. A valid KPIs associated with this initiative could be “Number of sector specific products developed”. At reporting, it is not just enough to say that the product development team has developed ‘X’ number of sector specific products. The CST must now conduct value realization on this completed initiative i.e. Ascertain the uptake of the product and the revenues derived from the product. Possibly the contribution of the revenues from this product vis-à-vis other products. This is how you demonstrate that a completed initiative has indeed brought the desired value. Methods of VRM include conducting surveys, quantitative performance data, analytic reports etc.

In a nutshell, this is broadly the role of Corporate Strategy within any organization and the responsibilities of CST therein. Do you agree? Or do you have any thought around this, please share and happy to engage.