The Making of a Business Strategy

Published on 10th September 2019

We must first agree on the difference between three concepts and processes, namely Vision, Strategy and Business Plan. They have different goals and each of them is defined in time but are very often seen and felt to be similar and overlap on each other in people’s mind.

A vision is long term thinking, and its purpose is to forecast, or at least to dream of where the owners of a business want to see it in a certain number of years in size, performance and presence on its market. As Stephen Covey says: “Begin with the end in mind”. If you have this final goal in mind, you already have a vision. The final goal can today seem impossible to achieve, because you do not, right now, have the means to materialize it but it will stretch you to achieve something higher and work towards it. If in the end you fall short of your vision because of circumstances beyond your control, you will nevertheless have achieved an intermediate stage, still laudable, which you would probably not have achieved if the vision was not there.

A strategy has a shorter time frame, usually three years, and it outlines the measures that must be taken in that lapse of time, for the company to progress towards its declared vision. It is a cog, defined in time, which will consolidate, modify or completely change the way in which the business was going, very often dictated by changes in its business environment or new constraints and opportunities.

It is a big name, but is just a series of measures destined to improve the business, production wise, marketing and selling wise, so that the strategy, created by thinking, planning and daring is put in action. It may mean a new way of producing, presenting, selling, giving visibility to the product(s), and communicating with the target market. It often calls for the aligning of additional financial and human resources to execute this plan, often during a 12-month period.

A fallacy called collective strategy meetings

It has become common practice nowadays for companies who have financial means to assemble their senior staff and managers in a secluded place like a holiday resort for one or two days to brainstorm about and intellectually generate a strategy. In my mind, this leads to no concrete results as it is difficult for 20 or more persons to voice their thoughts and to come to a consensus. There is no such thing as collective business acumen. It is a business virtue of the highest level, exclusive to individuals and which cannot be acquired collectively or even transmitted.

Some minds are moved by concepts, some by processes and others by operations and logistics. They have, each of them, their own focus and priorities pertaining to their individual jobs, and their minds often operate at different levels. Among these 20 persons, a majority will probably not talk, for fear of being ridiculous or for being incapable of having a holistic view of the business to venture a comment, and the rhetoric will be left to the initiative of three or four trend setters. Then, how do you reach a consensus where most participants are silent? If I wanted to be nice, I would say that silence is consent, but the people called in this meeting are supposed primarily to talk and the virtue of silence does not help.

 What is the right course of action?

The most effective way to come to a strategy is to start by consultative meetings driven or chaired by the CEO, with business unit and line managers either on a one to one basis or by small groups of not more than three to four persons where interaction is easy. Everybody has the chance to voice his feelings without being overawed by the size of the audience, and interaction is easier. One subject is discussed at a time to obtain maximum focus and avoid diversion.

Once these consultative meetings have been held, the formulation of the strategy is the affair of the CEO, and only the CEO in his best judgement because he is the only one who will have to face the Board in case of failure. He will not be bailed out by any of his managers claiming that the strategy was the fruit of collective thinking. The CEO can choose to be helped in this final exercise by a restricted group of senior officials, close to him, who have experience, judgement and the ability to think global and outside the box. There is more likelihood of obtaining a consensus.

An enlarged meeting grouping all the executives can then be held to be apprised of the chosen strategy. Executives will be invited to give their views thereon to challenge it and refine it. It is in the interest of the CEO to make sure that the whole team adheres to the final strategy. None of these 20 persons can claim to have been left out of the thinking process, because they would have had the opportunity of voicing their feelings and their objections at the preliminary brainstorming and at the enlarged meeting.

Ongoing strategy

In a more practical sense, strategy is felt and lived every day in business life. The things which happen every day like modifications in the commercial environment, changes in demand, increase in price of raw materials, change in legislation, difficulty to sell, drop in sales, technological advance and changes in the behaviour of competitors amongst other things, keep modulating our way of doing business. They must be addressed there and then. Besides this, they keep us thinking ahead about improvements and refinements we should bring to our business to face change. In fact, if there is anything constant in life, it is change. If we are attentive to our business and to changes in our commercial environment, the end of year exercise in strategy making will require little brain storming and should evolve naturally as a response to these changes.

What a strategy and business plan imply?

The Business plan that follows the choice of the strategy will determine what are the processes to be followed and the resources to be put in place to achieve the desired goal for these three years. These include land and buildings, production equipment, human resources and the means of obtaining finance for these plans to materialize. It also says whether the company will move forward by organic growth or acquisition of competitor business or the introduction of new lines of products. It may also state and call for objectives like a change of the target market or a departure from commodity business to brands or a change in the image of the company and its products from low to high or vice versa.

A strategy which states that the company will only progress by organic growth is hardly a strategy because this sort of philosophy does not call for fundamental changes in the structure of the company, its logistics, its productive equipment or its human resources for it to perform better. A strategy should be more aggressive with a view to progressing by leaps and bounds with more meaningful changes.

Strategies with no growth

Strategies which aim only at organic growth are those of very specialized companies like CocaCola whose coverage of the market has reached a saturation point. They will attract only catastrophe if their product changes in taste. Their success lies in the constancy of their products.

There is no such thing as collective business acumen

In such situations, the usual objective is to maintain market share and dominance and to prevent smaller competitors from making inroads in their market. Even then, there must be a strategy to achieve this objective and this course of action may focus on new presentation and packaging, better customer service and more efficient ways of production which take advantage of technological advances in productive equipment or information technology.

Strategies involving fundamental changes

Strategies which lead a company out of its comfort zone into a new activity carry several risks which must be considered. These can disrupt a whole business philosophy to which the work force was well accustomed. For example, the new orientation has no link with the traditional activity of a company to which the staff has  been tuned. If the new activity targets a market which is different from the usual and acquired market, this entails communicating with this new audience which has a different customer psychology, in a different language and style.

Big multinationals like Unilever, Procter & Gamble and Sony are multi-product companies often targeted at different markets, and they excel in this type of breadth seeking strategy. They are used to buying expertise and brain power to man any new activity which they take on board, and to monitor them. On the highly positive side, widening their activities and range of products give stability to multi-product companies.

Dynamic strategies

No strategy, even if it is formally laid down, is set in concrete. The top hierarchy should meet regularly to take stock of the evolution of the business in its environment to see whether the strategy needs to be modulated, or whether it has become un-adapted or ineffective and it should be simply scrapped. This boils down to saying that higher management should always breathe strategy because this will dictate their way of doing business as time goes by and will condition their ability to make of progress a continued objective, even in changing circumstances and markets.

Having a plan B to face meaningful and abrupt changes

Smart companies always have a plan B for likely, and often predictable and fundamental changes. This applies, for example, to the use of plastic bottles in the carbonated drink industry. In as much as the use of plastic bottles has become an integral part of this industry by being cost effective, these businesses should constantly bear in mind that legislation concerning protection of the environment can abruptly put an end to this practice, and they must, at short notice, be able to find alternative packaging at affordable cost in order not to modify their cost structure significantly. This can mean going back to glass bottles or recourse to new bio-degradable material. If this threat is always kept in mind, and the thought process of how to face it is ongoing, the shock will be dampened when this happens.

Everybody will now have understood the philosophy behind strategy making. It is not an entire management team sitting in a meeting room in a five-star hotel, or a hired and highly paid consultant having absolutely no feel for the market, the competition and the product who can formulate a strategy. It is the prerogative of a CEO, after he has taken advice from his team, because he will always be held personally accountable for any failure or shortcoming. He must never allow himself to he held to ransom by his managers and should always have the prerogative to overrule them.

By Mubarak Sooltangos (msooltangos@gmail.com)

He is the author of Business Inside Out (2018) and a lecturer on business topics.

Courtesy: Conjoncture.


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