Strategy Development
Strategy Development, often called Strategic Planning, is the process of positioning the company to meet future stakeholder needs. In the private sector, the ultimate goal is to build strong businesses in attractive industries of the future.
The tangible output is a series of strategic initiatives and objectives that define the organisation’s path forward. An important but less tangible output is a heightened awareness within the leadership team of possible changes in the external environment, and potential actions required to deal with them.
Strategic planning must occur in the context of good information about the internal capabilities of the organisation, and the external environment. SWOT and Customer / Industry Analysis are valuable tools for providing this necessary insight.
John Browne, ex-CEO of BP, states:
“Strategy cannot be about gambling on one possible outcome five or ten years down the road. Strategy is about buying the right options that will give us a shot at competing in the future – that will give us the right to play if we decide we want to when the time comes.” (Ref 1)
Options Analysis and Scenario Planning are therefore important tools in Strategy Development.
Strategy development is an essential activity in all companies, and adds significant value to the business. According to research conducted by Lindgren and Bandhold (Ref 2), companies emphasising strategic planning are both better performers and have higher strategic flexibility than those that do not. Strategic flexibility (the combination of robustness and responsiveness) explains between 20 and 40 percent of the difference in financial performance between companies.
Despite its importance, strategy development is rarely done well. Many corporate strategic plans are little more than five-year resource budgets and market share projections. Strategy needs to respond to change and stretch the resources that yield competitive advantage. In profit-focussed organisations, strategy development should consider:
- How can the products and services gain and maintain a leadership position in the customer segments they target?
- How can the business becomes the best at what it does?
- Where can the business expand so that established strategic advantage can be used to stake out broader markets?
The Cascading Balanced Scorecard approach advocates that strategy should not just focus on the financial and customer aspects of performance, but should also aim to build capable internal business processes, and the organisational capability to learn and grow.
Unlike tactical planning, strategy development activities often do not fit neatly into the annual planning calendar. Strategy work should be scheduled on an as-needs basis.