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Strategy

What is Strategy

The market is rapidly changing, and the introduction of new techniques and technologies is making everything advanced and fast-paced, among all of that, managers are looking for ways to make their products and services more distinct and unique so that they become profitable. In order to succeed they need to improve efficiency and be ahead of the competition, but the problem lies when the managers fail to understand the difference between operational effectiveness and strategy (Porter 3). In the race to do better than the competition, they improve efficiencies by manufacturing more goods, outsourcing to meets orders but in all of that, they fail to apply a strategy that will give them sustainability in profitability.

Operational effectiveness is when companies perform similar activities better than their competition, meaning how efficiently systems work and products are produced whereas strategy means that companies perform similar activities differently or different activities than its competition, just by looking at these statements it can be seen that developing strategy is more important as it is more sustainable, and it would keep companies ahead of its competition (Porter 4). Operational effectiveness can be imitated, and competition can match your technology and management style and work similar to you to reach your profitability level, that is the reason why operational effectiveness alone is not enough, companies need a strategy to have a competitive advantage in the market and be ahead of all. The strategy simply means doing things differently to provide the customer base with unique values that are hard to find elsewhere in the market. There are various strategic positionings that companies employ to gain that advantage, one of them is the variety-based positioning, that is when the choice of products and services is multiple (Porter 6). Another strategic positioning is need-based positioning; that is when a specific customer base is targeted based on their needs. No matter what type of strategic positioning is chosen, it should be made a part of organization planning. It is very important for companies to have a strategic position, but they are not sustainable without tradeoffs. Trade off means choosing one aspect over the other, more of one aspect and less of the other. For instance, an airline can choose to offer meals or offer low prices, it cannot go do both without being inefficient, so for the airline, there is a tradeoff between the meal and low price.

In today’s competitive environment, operational efficiency alone will not help companies achieve their profitability, they need a strategy, positioning and have to be aware of the tradeoffs they need to make in order to survive (Porter 20). Technological advancements have made imitation and copying the competition a very easy task, in order to remain above the competition and to acquire that competitive advantage, companies do need to invest heavily in solid strategy.

Building Your Company’s Vision

There are multiple companies that have been successful and keep climbing the ladder of success. Johnson & Johnson, 3M, Sony, Motorola and the likes of these have been consumers favorite for a while now (Collins and Porras 78). It is not by chance that these companies have done so well over the years, there is no magic formula, but a very strategically thought out plan. These companies know the importance of value and have carefully designed core values for their companies which they stick to. In that constantly changing world, where technology is progressing, and the world has become a global village, these companies stay true to their values and do not change it. Of course, their strategies change, their operational style and practices change, but their values remain the same. It is that dedication to their values that have led them to success. The ability to have unchanged values and a dynamic work ethic comes from developing a vision for the company. It is the vision of the company that highlights what remain constant and what changes. There are two parts to developing a company’s vision, core ideology and envisioned future.

Core ideology basically is what the company stands for, and the reason for existence whereas envisioned future is what the company hopes to become and what steps it can do to be there. Core ideology is stagnant, constant whereas envisioned future is ever changing. Core ideology is what gives a company its character, strength and allows it to grow and prosper, for good company vision, it is important to have a solid core ideology; core ideology is divided into two parts further: core values & core purpose (Collins and Porras 81). Core values are basically the principles that guide companies whereas the core purpose is the basic reason why companies exist. Core values come from within the company; there is no external stakeholder involved in that. Companies usually have about two to four core values defined; that is because they want to clear, concise and avoid confusion. While drafting core values companies should keep in mind that they are fixed so the values must be timeless and should be relevant through all times. Core purpose which is the other part of core ideology is basically a guiding star for the company; it is a constant reminder of why the company exists. In developing core purpose for the company, it is important to ask a lot of whys to reach to the bottom.

The second part of the company’s vision is envisioned future; that is certain goals that the company sets for itself for the future (Collins and Porras 84). For instance, a goal for a company can be to become a billion-dollar company or to become the number one player in their industry in the next five years. These are all part of envisioned future.

Reinventing Your Business Model

The business model is the foundation on which companies are built. The weak business model will lead to a weak company, a well thought out business model will make a great company hence it is something that should not be taken lightly by the companies. The business model has four components; the first one is customer value proposition, any company that successfully identifies a customer problem and provides a solution to it, is creating value for the customer (Johnson, Christensen and Kagermann 105). The second component is the profit formula; that is a guideline of how the company provides value for itself while providing value for its customers. The third component of the business model is the key resource; that includes the people, technology, equipment, machinery needed to provide value to the customers. The last component of the business model is a key process which are the various operational, administrative and managerial processes that companies use to deliver value to its customers; these four components make up the business model which in turn defines the foundation and structure of a company. Successful business models are built by focusing on each individual component ((Johnson, Christensen and Kagermann 110). The most important aspect of customer value proposition is precision; companies need to be precise when delivering value to the customers, many times companies get busy in providing multiple values without putting their efforts into anyone, that is where they lose precision. It is also very crucial to carefully identify resources and processes in order to build a strong business models, many a times the success of lies in how resources and processes interact, companies need to find resources that compliments the processes and vice versa, in order to provide value to the customers the resources and processes have to work well together and have to integrate well.

The most important question, however, do companies need to update or change its business model, the answer is not always nut there are times when it becomes absolutely essential for instance when the company wants to include new customers to its base or when the company wants to experiment with new technology to work with, companies might need to rethink its business model when the competition is changing and bring new aspects into the market (Johnson, Christensen and Kagermann 113). All that should be only done when the company knows that the change is significant enough and that it will be beneficial and profitable for the company. The business model is a crucial element for any company be it small or large; it should be paid attention to and made with a lot of thought and foresightedness. The reinvention of the business model should only be done when the benefits exceed the cost, and it is a winning situation for the company otherwise it is simply a waste of time and resources.

The Secrets to Successful Strategy Execution

Companies can have amazing products / services, great strategies to implement and all the latest technologies but if they do not have a solid execution plan, nothing will work for them for long. Execution is when multiple decisions are made per day by the employees and decision makers for the interest of the company. A flawless execution takes place when employees know who has the decision right and when the flow of information to that person is constant and correct (Neilson, Martin and Powers 145). In small companies, decision rights are easily visible, and everyone knows what everyone else is up to, the problem occurs when the company grows and expand, the decision rights get blurry. Companies need to ensure a free flow of information among departments if the right decisions are expected to be made, information delay or hidden will result in poor decision making which will eventually hurt the execution. Management of companies need to realize the importance of decision making and need to equip their employees to be better at it (Neilson, Martin and Powers 148). The management to ensure that proper decisions are made and are streamlined needs to be careful of two things, the first being that the employees should have a clear idea of the decisions they are responsible for, secondly once the decision has been made the employees should not second guess it.

A proper execution strategy is important but is difficult to implement in companies because of various reasons. One of which is not always easy to maintain a free flow of information in the company, employees hinder the horizontal movement of the flow of information for some reason and it becomes difficult to execute plans properly (Neilson, Martin and Powers 151). Another reason for why it is difficult to implement an execution strategy is because at times important information does not reach the company from outside, information about the market or the competition does not reach the headquarters which delays the decision-making process.

The third reason for poor execution strategy is that employees are not aware of their responsibility as far as decision making is concerned, managers are unaware of their boundaries, employees are confused about what they are accountable for, that also stems for because of lack of proper information flow. Companies need to realize that and have to make sure that there is proper flow of information and no hindrance in the flow of information, one thing that they can do is that managers can become more accessible so that employees are encouraged to share information (Neilson, Martin and Powers 151). Another thing that managers can do is properly assign decisions to their subordinates so that everyone is on the same page when it comes to who is responsible for what. Managers should also involve more employees in the planning process so that they feel involved and also that enables the information to flow smoothly across the company. Execution is a tricky business, even for successful companies, managers should primarily focus on the free flow of information and decision making, and things will settle into place gradually.

Transforming Corner-Office Strategy into Frontline Action

For an effective running of a company, it is important the decision making is decentralized, what that does is make things happen quicker, employees are confident and willing to take risks, but it does have drawbacks, when so many people are into decision making, it can get a little chaotic and everyone can lose sight of the end goal. There are multiple companies that do that like General Motors, Southwest Airline, American Express (Gadiesh and Gilbert 193). All these companies employ a principle called strategic principle where they have a set of rules that embody company’s strategy into it, so by following that principle employee are not steering off the ultimate goals of the company; it allows employees to be flexible but not lose sight of what is important for the company. Many companies confuse strategic principle with the mission statement, both are similar to the point that both show the direction of the company, but mission statement is more about the culture of the company while the strategic principle is about the strategy (Gadiesh and Gilbert 195). The strategic principle also helps the company to understand how to utilize its scarce resources; it gauges the strategic balance of a particular plan, it also set perimeters for employees to be in but at the same time allows them to act freely while being in that perimeter.

Previously strategic principle was not a necessity, companies who absolutely required it implemented in, but in today's world, businesses face situations which make it a necessity to have a strategic principle, situations like decentralization, technological changes, rapid growth and institutional turmoil (Gadiesh and Gilbert 197). The strategic principle is important for decentralization as it allows employees to make decisions by being within the boundaries.

The strategic principle is a must have during the times a company is going through growth, that is because during these times a lot of inexperienced managers have to make decisions. Therefore, it is helpful for them to have a principle to follow. During times of technological changes, companies also require strategic principle; that is because managers can experience rapid changes that hard to follow and have to make decisions amidst all of that. Strategic principle is helpful when the company is going through a turmoil, for instance, CEO resigns, and a new one is hired, the new CEO will have a set of principles ready for him, if the company has strategic principles jotted down, the new CEO does not have to bring in new strategies with him (Gadiesh and Gilbert 198). Making a strategic principle can sometimes be a tricky part for managers, they need to think about the elements they require to be present in the principles, managers need to keep in mind that these principles are meant not for a year or two but a substantial amount of time, so it needs to have elements that are not time bound.

Turning Great Strategy into Great Performance

Many companies are great at developing strategies; managers spend a considerable amount of time coming up with strategies that would work in the best interest of the company yet when it comes to measuring the performance, they fall short. Strategies are made in every company, but companies are not able to identify the goals they have to achieve in order to execute the implementation of their strategy. Very few companies track their financial results with the performance forecast they set in their strategic plan, that can explain why so many strategies fail at companies because there is no track of the actual versus planned performance. There are a number of reasons why there is a strategy performance gap in many companies like poor planning, resources not being used properly, resources not being used properly and little or no accountability (Mankins and Steele 211). Because of the processes that are used by the companies to track performances, it becomes difficult to understand what really the reason for the strategy performance gap is.

Strategy performance gap is found in a number of companies, many of which try to close the gap by applying few rules to their planning and execution, these rules help them to see any issues and prevent the gap from existing. Rule number one is to keep the strategy simple yet concrete, many times when the strategy is being defined it is vague and blurry (Mankins and Steele 214). For seamless planning and execution, it is important that the strategy defined should not be vague. The second rule is to plan the resource deployment early on. Forecast and planning become much clear when the resources are deployed early on. The third rule is to have defined priorities, to have a flawless strategy it is necessary for managers to know what the priorities are. They end goal has to be kept in mind, and ways to achieve it should be planned by prioritizing each step along the way. Lastly, it is crucial to monitor the performance in real time continuously and not just do it at the end of each year, in that way there is a margin to make things work instead of waiting for year-end to measure performance and then taking steps to counter the mistakes.

Closing the strategy performance gap is tiresome but once achieved it really boost the confidence of the managers and employees in their capabilities as a team and serve as a motivating factor. Employees start reaping the benefit of their efforts in the face of bigger paychecks, investors become confident in the company and investment flows hence closing the gap of strategy performance has multiple benefits not just for the company but for all stakeholders.

Works Cited

Collins, James C., and Jerry I. Porras. "Building your company's vision." HBR’s 10 Must Reads,

2011, pp. 77-103.

Gadiesh, Orit, and James L. Gilbert. "Transforming corner-office strategy into frontline

action." HBR’s 10 Must Reads, 2011, pp. 191-209.

Johnson, Mark W., Clayton M. Christensen, and Henning Kagermann. “Reinventing your

business model.” HBR’s 10 Must Reads, 2011, pp. 103-123.

Mankins, Michael C., and Richard Steele. “Turning great strategy into great performance.”

HBR’s 10 Must Reads, 2011, pp. 209-229.

Neilson, Gary L., Karla L. Martin, and Elizabeth Powers. "The secrets to successful strategy

execution." HBR’s 10 Must Reads, 2011, pp. 143-167.

Porter, Michael E. “What is strategy?” HBR’s 10 Must Reads, 2011, pp. 1-39.