Is Business Strategy Important?

We hear the word strategy on a regular basis.  But is business strategy important?

Lets dive deeper ... Does your business have a strategy?  Do you know what your businesses strategy is?  And does your business regularly follow and monitor it?  Your answer is probably no -- in fact, according to Harvard Business Review, 85% of business leaders spend less than one hour a month on strategy, and 50% spend no time at all.  Even worse, 95% of employees don't understand their business' strategy.  The article goes on to say how 90% of businesses fail to achieve their strategic targets.  This would be expected given the above challenging metrics.

This lack of a clear, measurable strategy is aligned with my experience where only one business I have worked for (out of seven businesses) both created a clear measurable strategy, managed to it, and ensured the team members were clear on the path.  I more details around strategy development in the article, 5 Steps to a Killer Business Strategy.  

Is Business Strategy Important?

To understand if business strategy is important, we first have to understand what we'll get out of a strategy. 

Lets start with the strategic planning process.  I've found that many times going through the process of building out a plan us just as valuable as getting to the final version.  The process itself drives introspection, learning, and helps with analysis.  It forces you to look at things different ways.  The process of getting there can be equal or even better than the end-result.

For the strategic planning process, the development and final outcome of the strategy helps ensure you not only have a clear vision but also helps align your company on the path forward.  The vision is the measurable place where your business will be in 1, 3, 5 years out.   It helps set priorities, and helps deprioritize other things that may not be as important.  It helps align teams, leaders, and all company employees.

The process also helps force you to justify your rationale for one direction versus another direction.  This is good.  Helping ensure you are heading in the better direction.

Why is Business Strategy Often Forgotten?

Many leaders may have an idea where they want to be -- what "success" over a few years looks like.  But fail to follow up on that idea (so it just remains an idea).    Is business strategy important?  Leaders believe it would be helpful, but maybe not the highest priority.  The time needed for more tactical initiatives tends to overrule the importance of a business strategy.  And not realizing how important this is.

As an example, I was working in one business.  The CEO was very sharp, insightful, and strategic.  The CEO though was highly focused on the  daily, weekly, monthly numbers -- but not trends, growth, or how we hope to look in 4 months, 8 months, 12 months.  I'd hear, look how we did today or last week.  Then a few days later the numbers would be off ... they'd go up and down.  No desire to look further down the road.  You can imagine the direction of this business unfortunately.

Importance of a Business Strategy Planning Process

The process of strategy planning should consider the following areas, but not all inclusive (there are full books written on business strategy, so this is a high-level view).  This will help you further understand: is business strategy important:

1. Your competitors:  who are they.  What is their value proposition.  How are they attracting and retaining customers.  What allows them to stand out from the crowd.  And what are you currently doing to stand out from the crowd?
2. Your Target Market:  Who is your key customer, their demographics.  What makes them want to buy versus not.  What are they trying to solve?  Their expectations and needs.
3. Business ecosystem:  where is the ecosystem going.  Will there be political influences -- for example, a migration to more green energy, or in healthcare a single payor system. 
4. Economic influences:  Will inflation (or lack of) make things better or worse.  Employment?  
5. Country ecosystem:  Do you expect the demographics of your customers to remain the same or change over time.

Then as you better understand inputs ...the environment, your customer, and your competitors.  What things can you do to enhance your product, market share, create more value for your customers.  Things we've looked at include:  enhancing products vertically, horizontally, or continued organic or inorganic growth, go-to-market process, value proposition, etc.  Or a combination of some or all of these -- but its not an all-in but a plan.  Certain things would happen at certain times / milestones.

For example, the strategy to get to X increase in market share begins with enhanced value proposition and go-to-market plan for the first 6 months to enhance penetration by 20%, then begin to build out a horizontal product line to drive further penetration and stickiness over the coming 12 months, followed by some inorganic acquisitions beginning at the 18 month point to grow both customers and incremental product enhancements.   Is business strategy important?  

Along each milestone you have certain measurements to ensure you're heading in the right direction -- AND you are measuring progress weekly.  So you can both break down barriers, solve for tactical problems, and pivot if needed or new information is acquired that may demand relooking at the strategy.

With this you're building business strategy into the operating function of the business.

So, Is Business Strategy Important?

Despite the concerns about time, or needs for a tactical focus, every business needs to have a strategy -- again, this is the path for how you align teams, how you will grow your business.  Its the combination of each of the critical ingredients that build the full recipe.  The strategy prevents misalignment amongst teams.  And helps ensure across the business everyone knows what success looks like.  

Is business strategy important?  Absolutely yes.  

How does your business create, communicate, and monitor their strategy?