“Changing strategy is not usually a task that managers face repeatedly. Once companies have found a strategy that works, they want to use it, not change it. Consequently, most management teams do not develop a competence in strategic thinking.”
Formulating a strategy is not an everyday activity for your business or unit, and some firms drive along for years with the same strategy and address that strategy only when there is a problem.
So if you are not highly practiced at formulating strategy–or you want to give a helping hand to someone on your team who is tackling strategy for the first time–here are steps to follow. They involve looking both outside and inside the organization, since the market to be served is outside the organization and the capabilities for making the strategy work are within it.
1. Identify External threats and opportunities
At the highest level, strategy is concerned with the external market and how the firm’s resources should be allocated to create an advantage
There are always threats: macroeconomic trends that may reduce your customers’ ability to pay, demographic changes, substitute products that could undermine your business, new entrants, and suppliers who might cut you off.
There are always opportunities: an un-served customer base, a new-to-the-world technology, a failing competitor and so forth.
Thus, the first job of strategists is to scan the outer environment for threats and opportunities. Form a team of executives, a department manager, and individuals with special insights.
A strategy must be able to cope with these threats as they will always remain. The team’s job is to identify the core threats and opportunities. Avoid having anyone on the team who appears complacent or wedded to the status quo.
Gather the views of customers, suppliers, and industry experts. These outside views can be powerful. It’s the team’s job to find anything that could threaten a firm’s current business or point toward new directions in the industry or market.
2. Identify internal capabilities, practices and resources
Resources and internal capabilities can constrain your choice of strategy.
These internal capabilities–especially the human ones–matter greatly and are too often overlooked by strategists. A strategy can succeed only if it has the backing of the right set of people and other resources; these must be properly aligned with the strategy.
3. Address threats and opportunities
Develop strategies that focus on each core threat and opportunity:
• Look for missing information;. Determine what data you need to better assess a particular strategy. Then get it.
• Check all facts, and question all assumptions.
• Create many alternatives. In some cases, two different strategies can be combined to make a stronger third strategy.
• Seek advice on the leading strategy choices among the wisest heads you know.
4. Build a good “fit”
Michael Porter, has stated that strategy is more than just a blueprint for winning customers; it is also about combining company activities into a chain whose links are mutually supporting and effective in locking out imitators.
Competitive advantage comes from the way an organization’s activities fit and reinforce one another.” Each activity should support the other activity, involving a whole system, not a collection of parts; targeted towards a higher goal.
5. Create alignment
Alignment is a condition in which every employee at every level understands the strategy, and understands her role in making the strategy work Once you’ve developed a satisfactory strategy, your job is only half done. Now you have to create alignment between the people and the activities of the organization and its strategy. As a manager, your role in creating alignment is twofold:
• Communicating. You must help people understand the strategy and how their jobs contribute to it. You want to create a situation in which even the lowest-ranking employees can articulate the goals of the organization and explain how what they do every day furthers them.
• Coordinating work processes. You must align people’s activities with the business’s strategic intentions.
Recognize the need for change
Strategy formulation, then, is an ongoing requirement of good management. It is, to quote Michael Porter, “a process of perceiving new positions that woo customers from established positions or draw new customers into the market.” This is a process you must permanently embed in your organization. Unfortunately, many management teams cannot recognize when their strategies have become obsolete.
How often does your company re-strategize? If it doesn’t, who would be the people to conduct this duty?