What is Business Strategy?

There are many different definitions of business strategy. Some are quite prescriptive, suggesting that a strategy will fall into a particular type. These include cost leadership, differentiation, innovation, market growth and more.

For us, a business strategy flows from the strategy creation process. It is based on the ambition and vision of the owner and senior management. Since every business is different and does not fit into a ‘box’, each has its own vision for the future, as well as its own strengths and challenges. Consequently, the strategy is unique to every business.

Our definition of a business strategy is as follows:

A business strategy is a long-term plan that defines the vision and strategic goals of the business. It also sets out the tactics the business will use to achieve its vision and goals. A well-crafted strategy is an essential part of a company’s success. As a result, it helps ensure that business resources and efforts are deployed to achieve its long term goals and vision. Moreover, it helps to improve decision-making in the business.

Put simply, it answers the question “where will we be in X years how will we get there and what might get in the way?”. The first part of this question sets the vision and strategic goals. The second part focuses on what tactics will be employed to attain the vision and goals. ‘X’ is the how far the business strategy looks into the future. This will normally be 4 or 5 years, although it will depend on the business and the market it operates in. A rule of thumb is the further it looks into the future, the more visionary the strategy will be.

Since strategy focuses on the future of the business, plans will be more fluid. Consequently, the strategy consists of fairly loosely defined tactics, rather than highly focused activities.

Who should develop the business strategy?

The senior management team should be heavily involved with developing the strategy for a business. In addition, where relevant, input should be sought from people with specialist knowledge or expertise.

A well-crafted business strategy will often include analyses of the company’s internal and external environment. This may mean bringing in other people from both inside and outside the business to work on specific elements of the strategy. These elements may, for example, include SWOT and PEST analysis. Ideally, these analyses are carried out once the overall vision for the future of the business has been agreed. This is means that each analysis is focused on helping the business realise its strategic goals and vision.

Giving people a voice in the strategy creation process has many benefits, including increased buy-in, greater motivation and commitment to the strategy.  These factors help to ensure that the strategy is implemented. For more information, read our article on who to involve in creating business strategy.

The importance of causal relationships

An effective business strategy consists of a combination of many inter-connected elements. This means there is a cause-effect relationship among them.

Causal relationships are, therefore, important in business strategy. They allow companies to identify the tactics that are most likely to help achieve the business vision and goals. Consequently, understanding the cause-effect relationships between strategic tactics and their outcomes helps people make informed decisions.

For example, a business strategy includes a decision to invest in marketing efforts. This investment will cause an increase in brand awareness, which in turn leads to an increase in sales.

This demonstrates a causal relationship between the decision to invest in marketing and an increase in sales. Marketing efforts are the cause and the increase in sales is the effect.

How to Create a Vision and Goals for your Business

Creating the Vision and Goals for your business effectively sets out what the future version of your organisation will look like.

When developing strategic  vision and goals people often make the mistake of focusing on where they are today and simply extrapolate that to the future.  This can be limiting and counter-productive. When envisioning the future for your organisation, your thinking should not be limited by your current situation.  We always encourage participants to ignore their preconceptions about what is possible and think about what they would like their organisation to look like in the future.

In addition, your goals and vision should be aligned with your organisation’s purpose and values.  If you don’t have a genuine purpose, supported by clear values then you should consider our Purpose Driven Organisation Programme.

Sometimes creating truly visionary goals is about not just thinking outside the box but thinking about a totally different box!  An example of this is SpaceX.  They created the goal/vision of having a reusable rocket that could be sent into space and returned to earth to be used again.  At the time this goal was set they understood that this would revolutionise the process delivering cargo (including humans) into space, dramatically reducing costs and making it more accessible to many more organisations.  Here, they are not thinking outside the box, they are creating an entirely new box.  In addition, they had no idea how they were going to achieve it but had enough faith in their vision that they put the right team together to create the technology that they needed to achieve it.

History shows many more examples of how this visionary thinking has changed the world.  You don’t have to change the world but you can change they way that your work and you can create a market that does not currently exist.  We take it for granted today but when Amazon first introduced an on-line store it was revolutionary and effectively created a new market.

Our process has been designed to encourage people to contribute their ideas about what the organisation may look like in the future.  We do this by creating an environment where people feel safe and where they feel that their ideas and observations have value. Ultimately our aim is to build consensus about the future of the organisation. This is a critical element of creating and successfully implementing a robust strategic plan.

What is the Difference Between Mission, Vision, Purpose & Values?

Your mission, vision, purpose and values play an extremely important role in strategy development and in shaping the culture of your organisation.

There is, however, often confusion about what these terms mean because they are often used in different contexts. This means that they can take on different meanings and even the same meaning in some cases.

The confusion about the meaning of business terms such as vision, mission, purpose and values occurs because they are often used in different contexts. As a result they take on different meanings and even the same meaning in some cases.

Much of this confusion can be avoided if these terms are clearly defined and agreed within the organisation.

This short article summarises the meanings of each of these terms to ensure that everyone is on the ‘same page’ as the organisation moves forward.

Mission

A Mission statement describes what an organisation does and for whom in an inspirational way. It should be based on the organisation’s strategy, setting out its aims, philosophy and values . The mission should describe what business the organisation is in (and what it isn’t) both now and in the future. It basically answers the question “what do we do?”

Read more about Company Mission…

Vision

The vision statement describes the organisations desired future state. It is what the organisations executives envision the future of the organisation to be at some pre-defined point in the future.  For example, where will the organisation be in five years and beyond. It should serve as a guiding beacon that describes what the organisation aspires to be. It answers the question “Where do we want to go?”

Read more about Company Vision…

Purpose

Purpose should answer the question “why do we do what we do?” or “why do we exist?”.  The answer to this question should go beyond profit margins and internal benefits. It looks towards the long-term effect the organisation wants to have on its people,  customers,  markets,  stakeholders,  community and the environment.  In other words, it should explain how people will benefit from the organisations existence.

Read more about Business Purpose…

Values

Business values are the guiding principles that an organisation uses to govern its actions and decisions. They are important because they  shape the culture and atmosphere of the organisation. Company values can also serve as a guide for people to make decisions that are in line with the organisation’s goals and ideals. Business values can be related to a wide range of topics, including ethics, customer service, quality, innovation, and social responsibility. They answer the question “What do we stand for?”

Read more about Business Values…

Summary

What is a Vision Statement?

A vision statement describes what you envision the future of your organisation to be.

A strategic vision is the aspirations that the owners / senior decision makers have for their organisation.  As such, it paints a picture of the future which should be communicates to all stakeholders in an inspirational manner.

Since the strategic vision is outside the normal planning window, there is no need to have a clear understanding of how to achieve it. Rather, it should serve as a destination that ensures the organisation is always heading in the correct direction.

A carefully crafted vision statement will communicate your aspirations for the organisation to people in a clear and memorable way, giving them a sense of clear direction and focus.  It should inspire your people to think beyond their day-to-day activities and to understand how they can help the organisation to move from where it is to where you want it to be.  This will help to motivate them to concentrate their efforts on activities that will help the organisation attain its vision.  It will also serve as a filter for making important decisions, ensuring that everyone is pulling in the same direction.

The strategic vision should remain consistent through the entire organisation.  This means that while different parts of an organisation may have their own goals, they should all be linked to and focused on achieving the overarching vision of the organisation as whole.

An inspiring vision statement should have thee key characteristics:

1)  It needs to state where the company wants to be in the distant future,

2) It must be aligned with the organisation’s purpose, and

3)  It must inspire excitement and motivation within the organisation

Finally, a vision statement should be reviewed on a regular basis (usually annually) in order to ensure it is still relevant in terms of the organisation’s purpose as well as the internal and external environment and with the way you envision the future of the organisation.