When I think about business strategy, I’m reminded of an old saying: “If you don’t know where you are going, then any path will get you there.”
Interestingly, rapidly growing businesses often reach a point where the destination becomes less clear or the path to success becomes less certain. Some companies have grown so quickly that they haven’t felt the need to pause and reflect on where to go next. Others have done so well that they now face a multitude of opportunities and potential paths to pursue.
As businesses grow, so does the need to make important strategic choices and to effectively communicate the company’s direction across the organization. This is critical to effective resource allocation and alignment of organizational action. Without clarity around their business strategy, organizations may drift, mis-apply resources and lose momentum in the marketplace.
Formalizing a winning business strategy doesn’t have to be a monumental and lengthy exercise. I recommend focusing on a few key matters that will help define where and how your company will win and prosper in chosen markets. With this in mind, I outlined four suggestions that will help you clarify and formalize a winning strategy for your business.
#1: Build Your Business Strategy on “Purpose”
A successful strategy needs to be anchored by a company’s core purpose. Purpose defines why a company exists and establishes key boundaries for execution. Going beyond the traditional notion of a mission, a well-defined purpose not only specifies what a company does but why they do it. This helps to align and inspire an organization, and it serves as a filter for strategic choices. For example, one healthcare services business I have worked with articulates its core purpose as follows:
“Our fundamental purpose is to advocate for healthcare providers and patients to maximize reimbursement while reducing cost.”
Defining or clarifying your core purpose requires focused discussion among key leaders and stakeholders within (and sometimes outside of) your organization. Conversations should focus on “what we’re all about as a company and why we exist” to reach a conclusion that will be meaningful and inspirational to all.
#2: Articulate a Few Compelling Aspirations
Aspirations state the goals that a winning strategy should achieve. They clearly articulate what success will look like in the current year as well as in the future (typically three to five years out). Some examples include:
- “Double our revenue and customer base by 2021”
- “Achieve 25%+ YOY growth in ARR”
- “Grow our international business by 50% over the next two years”
Additionally, companies with well-defined strategies often paint a picture of what they will look like in the future, using descriptive terms or analogs that convey meaning (e.g., “To be the ACME of the SMB market”).
A company that doesn’t make strategic choices ends up doing a bit of everything—but nothing well enough to continuously win in competitive markets.
Similar to defining your purpose, identifying aspirations requires concentrated dialogue among leaders and stakeholders about the future of the business and the level of ambition among the team. It can also be aided by talking through a few key metrics in “FROM” (current state) and “TO” (future state) terms.
#3: Make Clear Choices
The toughest—and most crucial—part of developing a strategy isn’t coming up with big ideas. It’s making choices—which markets to penetrate, customers to serve, solutions to offer and more. Many companies avoid making difficult choices, and as a result, they end up chasing too many opportunities or misallocating resources. A company that doesn’t make strategic choices ends up doing a bit of everything—but nothing well enough to continuously win in competitive markets.
To avoid this condition, focus your thinking and decision making on a few important questions that ultimately define your strategy including:
1: Where Should We Play?
- What markets and segments of customers (e.g. enterprise vs. SMB, originators vs. custodians, etc.) should we focus on? Why?
- What areas of need are most attractive to participate in (e.g., compliance, administrative efficiency, etc.)?
- What markets and segments of customers should we avoid?
2: How Will We Win?
- What is our compelling proposition and our points of differentiation?
- What products, services or solutions do we need to deliver?
- What is our advantage over competitors and how will it be solidified?
3: What Must We Do?
- What are the top three to five priorities we’ll focus on?
- What key initiatives or actions must we execute successfully?
- What resources will be needed and how will they be allocated?
- How will we align and motivate the organization to deliver?
4: Will It Pay?
- What results (e.g., quantified revenue growth, margin improvement, etc.) will the strategy deliver and will they meet our aspirations?
- What capital/investment will be needed to successfully execute the strategy?
A key thing to remember is that strategy should be viewed as something the entire organization must own and deliver on, and not something that only senior management cares about.
#4: Make Choices Clear – Communicate, Communicate and Communicate Again
Some of the greatest value that comes from formalizing a strategy is the opportunity to focus and align the organization. This can be done by engaging various stakeholders in providing input or reaction to your emerging strategy. It requires time and attention from senior management, but the payoff will be notable. Interactive work sessions, town-hall discussions and other forums can also be used to discuss or communicate the choices being made. A key thing to remember is that strategy should be viewed as something the entire organization must own and deliver on, and not something that only senior management cares about.
Here’s the bottom line.
As companies grow, so does the need for clarity on business direction and strategy. To accomplish this, companies should formalize and communicate their strategy across the organization, creating opportunities for employees to understand and commit to the path forward. This will ensure greater focus and alignment, improved execution and better results.