Simply put, a company strategy is how you are going to reach your long-term goals from here. If I need to get to San Diego from El Paso in the next couple of months, my options are almost endless. If I wanted to, I could copy one of those Bike Across America guys and ride 20 miles every day until I got there. But if my goal is to get to San Diego tomorrow, then my strategy better include finding a flight or jumping into the car now for a 12-hour road trip.
At its most complicated, a company strategy is the unique formula for success that forms the foundation of a business plan and governs day-to-day operations. This strategy is not a business definition and summary of pertinent markets; it is an account of the one or two key factors that distinguish the firm from its competition and are most expected to contribute to the firm’s long-term success.
To be effective, a company’s strategy should be no longer than one page. For many businesses a single sentence is ideal. The strategy should be easily and frequently communicated to employees so that a cohesive business focus is always maintained.
Why develop a strategy? Your strategy helps you understand and properly communicate to your investors, employees, and your customers who you are, what you do, and why you are the best. It helps you understand who your best target audience is and discover the best way to reach them.
By serving as a jumping-off point for annual business planning, your strategy will become the nucleus around which an annual business plan is developed. It will also form a framework for considering mid-term deviations from the plan. It will help set a consistent direction for key functional areas.
A good strategy should endure year after year and tie one year’s business plan to the next. This enables the company to easily build upon the accomplishments of the previous year. This does not mean it doesn’t change or that once done, it should be stuffed in drawer to be forgotten. It should be considered a “living” document that changes as your business grows and new opportunities present themselves.
Without a clearly defined strategy, companies of all sizes tend to lose direction when they run into temporary difficulties, or when management gets bored operating “the same old business.”
It is amazing to see so many very small businesses, after having had a few moderately successful years, start adding completely unrelated product lines or services that only muddy their identities. This tactic signals to customers that management has no clue as to what the nature of the business really is.
If I haven’t sold you on the importance of a strategic plan, consider this: 79 percent of the largest, most successful companies said that strategic planning was their most important and favorite growth tool. One quick way to success is to see what the best of the best do and copy them.
Can you quickly state your company’s strategy? If not, now is the time to start creating one. I would recommend buying two books: The Plan-As-You Go Business Plan by Tim Berryand Strategic Planning Kit for Dummies by Erica Olsen.