Do you ever wonder why some companies are successful and perform better than others? Or why some are hard to beat and others are not? Well, if a company wants to stay competitive in the industry, it must create and execute a strategy that is good and sound.
For example, companies like Amazon have been successful for years because their strategy is tightly tied to their vision. Amazon is known as the most customer-centric company in the world. Its products and services provide a seamless experience, where people can come to a place, find, discover and buy online.
A strategy is a long-term plan that you create for your company to reach the desired, future state you envision. A strategy includes your company’s goals and objectives, the type of products/services that you plan to build, the customers who you want to sell to and the markets that you serve to make profits.
Textbooks sometimes define business strategy simply as a firm’s high-level plan for reaching specific business objectives. Strategic plans succeed when they lead to business growth, a strong competitive position, and strong financial performance. When the high-level strategy fails, however, the firm must either change its approach or prepare to go out of business.
We can summarize all this as:
Business strategy is the firm’s working plan for achieving its vision, prioritizing objectives, competing successfully, and optimizing financial performance with its business model.
A strategy is solid when all the assumptions you make at the time of its creation have been validated and tested for accuracy, and the decisions you’ve made can be presented with clear facts and evidence. It is important to ensure that your strategy aligns with your company’s objectives, the type of business that your organization does and is known to do and the environment in which you plan to thrive. For example, Google’s vision is to provide the best internet experience to users. It’s well-known to the public as Google Search. All the products and services that Google builds are aligned with its core objectives.
A good strategy will help you make good investment decisions, like how and where you would like to spend money. It also helps to provide guidance on project prioritization and other activities within your organization. Allocate and optimize resources, and make profits that generate above-average returns.
What To Consider When Developing Your Own Strategy
- Clear, long-term objectives: Prepare a strategic plan that is long-term and realistic. What type of products/services would you like to build? Who will be your customers? What markets would you like to serve, and what activities would you like to carry on to get to your desired future state?
- Opportunity: Carefully analyze what opportunity exists in the future and how it might evolve over time. Gather more data and facts associated with it before finalizing any decisions. Clearly diagnose the risks and challenges anticipated in pursuing this opportunity and come up with the mitigation plan to address them.
- Innovation: Ensure that the products/services you plan to build are unique, with clear differentiation – and that they are aligned with your business. Think back to when Apple launched the iPod, a truly innovative product. The company has since been well-known for its brand and quality. Along with its computers, people buy Apple’s other products too, like the iPhone, iPad, etc., even though they might be more expensive than the alternatives.
- Competition: Ensure that your strategy remains competitive. Choose a market that is either not served or underserved with little or no competition, and be the first one there. This way, you capture the market share, build your brand, and position your company well in that marketplace, making it harder for any new entrants.
- Economies of scale: Lower the cost of your goods/services while remaining innovative. Offer unique features and high-quality customer service. For example, Walmart always tries to sell its products at a much lower price, increasing its sales through a large customer base, and generating higher profits.
- Time to market: Carefully evaluate the options of “build versus buy” for the products/services that you plan to offer your customers. Sometimes, it might be cheaper to buy part of the products or solutions that are already available or outsource to a third-party vendor to save some cost of producing your goods/services and getting them out in the market.
- Tests: Periodically review and update your strategy to ensure that it’s valid at all times and meets your company’s objectives and market needs. Test it out in small phases. It’s better to fail fast when it is less expensive and recover from mistakes.
- Risks and failures: Factor risks into your plan and allow your organization to accept failures. Use unique insights gained from successes and failures to learn from your past experience and improve your future.
- Stakeholders: Once your plan is finalized, share it with employees in your organization to provide them with guidance and reasoning on the initiatives that will be carried out within the company. Explain how it relates to them and to the firm. Additionally, prepare a separate plan to share with your external stakeholders, like investors, partners, suppliers, industry analysts, and your customers. Let them know what you are doing, why you are doing it, and how it affects the company’s forecast in generating revenues and impacting shareholders’ value.
So – want your company to be successful and perform better than your competitors? Develop and execute a solid, competitive strategy to make profits that generate above-average returns.
Article originally featured in Forbes online