Establishing a Winning Corporate Strategy
“Leadership and learning are indispensable to each other” – John F. Kennedy.
Walking into the office of most business executives, the keen observer may notice a trend: bookshelves filled with management guides, motivational marketing books and leadership manuals. There is a common ground among successful leaders: they are constantly learning. The business leader who truly wants to grow their business will most likely seek advice and help from those who have successfully navigated the road.
Most business development books agree: to remain competitive in the marketplace, a successful company must develop a corporate strategy. A recent online search for books about corporate strategy resulted in 36,598 titles available from an internet retailer. While it is always a good idea to brush up on leadership skills and ideas, it isn’t feasible to wade through thousands of books – at least not if one wants to remain in a leadership position. Want to develop a corporate strategy but don’t want the hassle of trying to find a book that will help?
In this article, we look at 1) defining corporate strategy, 2) why you need a corporate strategy, 3) components needed to develop a unique strategy, 4) the strategy framework – a look from all sides, and 5) famous strategy frameworks.
DEFINING CORPORATE STRATEGY
Many times, corporations develop what they call ‘Corporate Strategies”, but are disappointed with lackluster results and dismal returns. Before developing a corporate strategy, it is important to understand what a corporate strategy is, as well as what a corporate strategy isn’t.
Corporate strategy is often confused with other key elements of business planning. According to the dictionary, strategy is defined as the “careful plan or method for achieving a particular goal usually over a long period of time”. With that definition in mind, consider what a corporate strategy is not.
A corporate strategy is NOT a mission statement. The mission (or vision) of your company may guide the direction of your strategy, but simply composing a short paragraph about what the company intends to do will not propel your company to success.
A corporate strategy is NOT a business plan. Laying out a series of steps for financial success is important, but a corporate strategy entails more than financial guidelines. Well-developed corporate strategy will produce the framework for a business plan, but encompasses much more.
A corporate strategy is NOT a list of short term goals, although it may include elements of immediate action items. It is more than simply maintaining the current market trends, and involves careful consideration of the danger of mediocrity.
A winning corporate strategy is a set of key choices that can generate success. It is specific guidelines that a company can use to reach target customers, maintain an edge over competitors and increase their bottom line. Establishing a long term corporate strategy gives businesses more than a vision; it gives the tools to make the vision a reality. An effective corporate strategy is both static and fluid: the ultimate result is defined, but the path to get there may change as needed. Developing a winning corporate strategy takes collaboration, time and effort. If it were easy, though, everyone would do it. Lead, don’t follow – establish a corporate strategy and jump ahead of the competition.
WHY YOU NEED A CORPORATE STRATEGY
Understanding corporate strategy is important. Equally as important is the understanding of why you need one. Consider a business as a jigsaw puzzle. The mission – or vision – of the company is the picture on the box. The outside edge, with the straight sides, is the framework of the company. The middle of the puzzle is filled with the details: the daily operation of the business. A completed puzzle? Success; both intrinsic and extrinsic. Take away any of the puzzle parts and it doesn’t work. If the box is missing, it is hard to know how to fit the pieces together. Having a box but missing pieces creates gaps and lessens the end result. The middle of the puzzle with no outside edge can lead to a misshapen, poorly formed picture. You need all of the elements of the puzzle to successfully create a picture.
In the same way, you need all of the elements of a business: a business plan, a company vision, well-defined corporate structure, as well as a corporate strategy to keep it all together. A winning corporate strategy brings all of the elements of a business together, and gives them a purpose, similarly to the box that the puzzle comes in. By combining all the elements of a business within the framework of a corporate strategy, a company can maximize success.
Evaluating top companies across a variety of markets reveals that having a clear corporate strategy is often the difference between an average company and a winning company. The art of business is often referred to as a game. Winning coaches are typically questioned about the strategy they employed to win the game, and their plan is mimicked by others who want to capitalize on their success in hopes of realizing their own. For any company wishing to ‘win’ the business game, developing a successful corporate strategy requires several key elements.
COMPONENTS NEEDED TO DEVELOP A UNIQUE STRATEGY
Company Identity: How will you know if you win?
Before engaging in the game of business, a company must evaluate their own identity. While it may seem obvious, the first element in a winning corporate strategy is to determine what winning looks like. A careful self-evaluation of the company will develop answers to several key questions. The development or inclusion of a company mission statement or vision will be part of the company identity. Answering the question ‘What does our company want to do?’ helps to define the framework of a strategy. Concrete goals that can be measured are an important piece of knowing what winning looks like.
Market Placement: Where are you going to play?
After determining what winning looks like for your particular company, you must evaluate, ‘Where is the best place to play?’ Understanding your goal (what winning looks like) will help determine where to best meet that goal. If your goal is to be the leading provider of running shoes for women, the market for your product will be vastly different from a company who markets luxury accessories. While the customers may be all women, the market is not the same. Establishing the specific areas where you can excel (as well as knowing where you won’t) is important in a corporate strategy.
Company Capabilities: How are you going to win?
Identifying the strengths of the company, as well as the plan for company growth must be clearly defined. A company that has a top-notch distribution system will outplay a company that struggles with production and delivery if they capitalize on their abilities. Companies that want to lead the technology market should have a strong research and development department to stay ahead of the competition. Evaluate the company for the areas that it excels in. Does it support the goals and placement of the company? Maximizing the capabilities of the company will help ensure success, and will shed light on the areas that need improving or outsourcing.
Management Issues: What will it take to win?
Once a goal has been established, evaluate the company to determine if it has the necessary structure and management to reach it. What does the company need to reach the market its chosen and what does it need to stay there? If the goal is global, does the company have an established distribution channel? Is there a workable solution for ordering and shipping? Can the company support multiple warehouses? Consider the equipment needed to play and evaluate if the company has what it needs.
Evaluating the components of a corporate strategy cannot be done as a checklist effectively. Working through the components will require re-evaluation, altering, re-considering and ultimately moving from one component to another until they all fit together correctly. The goal may be to be a global leader, but the company may not be operating in the global marketplace. Similarly, the distribution channels may be excellent but a lack of management may render it ineffective. Aligning the components until a clear corporate strategy emerges will require some time and effort.
THE STRATEGY FRAMEWORK – A LOOK FROM ALL SIDES
A winning corporate strategy has the potential to thrust a company to the forefront of its market. By utilizing both long and short term objectives, a corporate strategy can remain true to the ultimate goal (winning) but can change in the market (where to play) and process (how to win). Once a strategy has been developed, there are four essential steps to putting it to work.
Using the strategy to establish a position in the market will increase a company’s chance at success. It takes into account the end goal, as well as the current state of the company. By clearly defining the process needed to win, a company has an accurate picture of where they are in the market.
A corporate strategy is a waste of time, effort and money if it isn’t put to use. Executing the strategy in an efficient and timely manner will not only help the company succeed, but will help to determine the validity of the plan. Execution of a corporate strategy requires buy-in by management and staff. This process can be difficult if the corporate strategy has changed, or if the means to the goal is changing, but is essential for the success of the company. Often, company officials choose to maintain the status quo in an effort to avoid stress, but this method will only hinder the company’s success.
A corporate strategy must be fluid. While the overall goal should not change, the means to reach that goal will change as technology advances, the market changes or other factors that will improve or alter the process. Being flexible with the ‘how to win’ portion of the strategy is important.
The overall success of a corporate strategy can be seen in more than a financial spreadsheet. A company that truly has maximized a corporate strategy has clear, concentrated goals. The road to those goals is clear and the company is constantly updating and improving their place in the market, while remaining true to the strategy framework.
FAMOUS STRATEGY FRAMEWORKS
Understanding a few of the common frameworks will help establish a winning corporate strategy for your business.
A quick analysis of a company environment, SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Based on a general evaluation of both internal and external company operations, the SWOT framework is a very brief look at a company. Internally, the company evaluates both strengths and weaknesses. Externally, it considers the opportunities it has in the market as well as the threat of competitors. This method is useful when trying to find ways to make the two viewpoints work together.
A series of processes from development to service, the value chain tracks a company’s ability to generate a profit. By adding value efficiently, a company can increase profit. The value chain moves from inbound logistics (acquiring raw materials), through operations, into outbound logistics (moving products to market), out to marketing and sales and finally to service. Often considered a supply and demand scale, the value chain gives companies a look at their processes versus profits.
Generic Competitive Advantages
The framework for generic competitive advantages can be applied by almost any company, in any market. There are three basic strategies that a company can use to be successful, according to this framework. By establishing an advantage in cost leadership, differentiation and focus, a company can pull ahead of the competition. Cost leadership maximizes on offering the lowest price in the marketplace. This requires careful attention to market prices and processes. Differentiation positions a company to highlight the unique characteristics that the market wants. Focus tailors the company to a specific, often narrow, field within the marketplace.
The mathematically-based Portfolio Theory gives companies a formula for evaluating, managing and minimizing risk. By looking at asset allocations, a company can evaluate the potential for risk against the possible reward.
Porter’s Five Forces
Based on the five forces that work against a company, Michael Porter’s Five Forces gives companies a closer look at the opposition. The five forces include: rivalry, supplier power, threat of substitutes, threat of new entrants and buyer power. Understanding the potential behind each force will help companies position themselves for success, as well as give an edge over the competition. Finding the appropriate strategy to leverage a company’s strengths can change based on the current force at play.