Thoughts on business strategies?
Every now and then I stop and think on how I perceive the concept of strategy in the business environment and how it relates to other terms such as: strategic plans, tactics, objectives, mission, vision and policies. I welcome any kind of feedback and within time I will update this post to accommodate new thinking as well as users’ feedback.
Businesses are measured or compared on certain qualitative and quantitative aspects such as: level of profitability, share of a specific market, number of employees, no. of incoming service calls, employee churn, pipeline of prospects, web site ranking on Google, market value of shares, domain knowledge, and many others. These attributes change within time based on what the business does and on what happens around it.
Business objectives represent an ambition to change business reality into a desirable one, where certain aspects of the business will meet certain criteria. For example, an objective to reach a 30% market share in a target market within 5 years can be measured as the percentage of customers out of the total addressable market.
To change the complex business reality for a business and achieve objectives, the business has to execute a set of actions and to follow different guidelines during a specific time frame. The complexity of business reality is driven by different forces such as regulation, available talent, available capital, customers spending level, available innovation, politics and others. Setting and achieving business objectives bring into the equation of complexity an additional unique set of conflicting forces, and that is competition. Competition is when other businesses share similar objectives to yours and everyone can not have it in the same time. An objective that no other business tries to accomplish except for your business, within time becomes more of a personal ambition and less of a business objective.
The “virtual” group of all actions a business is intending to take in a predefined time frame comprises the pile of corporate plans. In reality there isn’t a one plan for a business that includes a recipe on what to do and usually it takes the form of several inter-dependent plans. In the complex and unpredictable reality planners consider known facts and also make predictions for different scenarios and how it can affect attaining the business objectives in a low risk fashion. Every action a business decides to take has a specific goal to be achieved; the process of breaking down the main objectives into the set of intermediary goals and setting the dependency among them represents the core of planning.
A strategic plan contains, except for the description of goals and resources, a continuous and coherent line of thought that answers the questions of what is the current state? What concrete goals can be achieved in high probability with available resources and finally how these goals will contribute to the accomplishment of the desired objectives. This underlying stream of thoughts can viewed as one aspect of business strategy and that is why a strategic plan is called a strategic plan.
The strategic plan takes into account the most important objectives for the business and dictates what to do with the most important resources available on a specific timeframe. A strategic plan is the root of any other plan in the organization. A business mission represents the path set in a strategic plan for reaching the objectives. The vision is a wider set of longer term objectives; and every strategic plan in its time has to be aligned with the general direction set by the vision’s objectives.
A strategic plan is made of explicit actions and their target goals (Or goals that will be achieved based on dependent lower-level plans) as well policies. Policies can be viewed as a set of rules that dictate the boundaries of actions laid in a plan. A rule unlike an explicit action is triggered upon certain predefined events and when it is triggered it activates other predefined actions for returning the business back to its chartered course. It is mainly a tool for accommodating the unpredictable nature of reality where a plan is executed. Achieving one objective can affect the success ratio of achieving a different parallel objective and policies serve as a synchronization mechanism for orchestrating a successful execution.
In a short example of a business that develops and sells software for banks the top management assumes that an excellence positioning on customer service would be the right strategy for achieving their strategic objectives. Customer service excellence means maintaining a constant high level of service that is satisfactory in relation to their expectations and to what competitors offer. Business policies serve here as a watchdog for assuring the excellence level and when things don’t go as planned different correctional courses of action are triggered.
Of course it is not an automatic mechanism, but still it is a way for a business to react better to unexpected scenarios. It somehow reduces rethinking on core strategies when events occur and leaves more space for thinking on correction. Strategic policies can be viewed also as the corporate values that are wished to be maintained on a certain level for keeping the general direction of the company on its mission.
A strategy is eventually translated into groups of standalone concrete steps – tactical steps, where every group of logically-bound steps share a visible and attainable goals that can be achieved only by successful and ordered execution. Tactics represent the implementation aspect of the strategic line of thought, where concrete actions take place with real consequences.