What is strategy and why is it important in business?
Updated 11 August 2023
Strategy is an all-encompassing term that covers a range of business tasks, but it can be one of the most important tools in a professional's arsenal. As markets become more competitive, having the edge becomes less about talent and more about the methods used to implement that talent productively. This is strategy and is at the core of a successful business. In this article, we explain what strategy is and how businesses can use strategy to improve their operations.
What is strategy?
Although strategy is a highly studied and recorded concept, there is rarely a comprehensive answer to the question "What is strategy?". This is because different people think about strategy in a range of different ways. One of the most commonly accepted definitions is that strategy is a method of long-term planning and directing operations to achieve an end goal. In business, these goals are primarily driven by growth and based on building revenues.
Strategy vs. tactics
When people think about strategy, they often associate it with tactics. After all, the two are concepts built around planning actions to manufacture the most desirable outcome possible for the business. There are several fundamental differences between the two concepts. The most significant of these differences are below:
The most significant difference between strategy and tactics is the scales of action. Tactics are relatively small. For example, a purchasing manager or a sales assistant may use sales tactics to attempt to influence a customer to buy a product. The salesperson may use tactics on a single-interaction basis, which may include such methods as giving out referral codes to drive leads and sales.
Strategy occurs on a much grander scale than tactics. A strategy is the driving factor within an organisation or personal career over a long period, spanning months or even years. A core strategy is an overall direction that a company is working towards, and the tactics used are all in service of the grander strategy.
Another fundamental difference between strategy and tactics is the surrounding timeframe. You could use a tactic within a relatively short space of time, and the time it takes to implement could only be a matter of moments, minutes or hours throughout a single business interaction. Tactics help achieve small-scale goals and thus require a relatively small time investment.
Implementing a strategy takes far more time to successfully do. This is due to the nature of strategy, which is reliant on large-scale responses to drive a company to achieve large, long-term goals. For example, a business may implement a strategy to achieve a certain level of profit by the end of the next financial year, or put a hiring strategy in place to adjust the skill set within the organisation. In both of these cases, the strategy is about long-term adjustment rather than short-term shifts.
Why is strategy important?
Although you may not believe it to be the case, strategy is one of the most important things for functional growth and development. An efficient strategy can offer great opportunities, whereas failing to implement a strategy can lead to underlying issues. Below are some of the key reasons that companies implement strategies, and why they are key to long-term planning and execution:
Firstly, strategy offers a greater sense of direction. This means that there are clear goals to be striving towards, and staff know there are clear consequences for failing to achieve these goals, where there may be rewards for success. The alternative to having this drive and particular direction is an unfocused business and employees that are uncertain of their goals and motivations. Implementing clear strategies with achievable but still ambitious goals means that members of staff know their responsibilities, and can always be at their best.
Implementing a strategy means that every single member of staff works towards the same goals and points their efforts in the same direction. This means that management staff have a clear roadmap of operations, providing a framework to apply resources in the right direction. As there are minimal clashes between managers and the way they implement their resources, implementing a clear strategy allows everyone to work in harmony, enabling the business to become more efficient. In addition to accomplishing strategic goals, there are clear benefits to financial and productive efficiency.
One of the most dangerous things a business can do is fall behind the curve. When this happens, it has to react to events, and if those reactions are wrong, then the results could be detrimental to the intended outcomes. By putting a strategy in place, a business moves to a far more proactive stance, which means that it can engage with problems on the front foot and keep up with ever-changing market trends. Proactivity puts a business ahead of the competition and is an essential trait for effective companies aiming to make their mark.
Business can be a competitive and challenging world, varying from day to day with industry trends and markets shifting constantly. Changes in customer demand, supply chains and internally staffing may leave unprepared companies in a vulnerable position. By getting a cohesive strategy in place for the long-term development of the business, companies are in the best possible position to withstand tougher times, as there is a clear plan in place for the progression of the business.
How to develop a strategy
If you are looking for a role in management and leadership, or wish to take on more strategic responsibilities in your current position, then being able to put together a strategy is key. Strategic development can take time and requires a thorough level of understanding of not only the business but the wider market you work within. Below are some of the integral steps to take when developing a strategy:
1. Understand the goals
The key to a functional strategy is a strong understanding of the goals that you are looking to achieve. After all, there's no point in laying out a roadmap if you don't know where the roadmap is going to lead. Understanding your goals, both short-term and long-term, means that you can prepare a strategy that sets you on a specific course to achieve your needs.
2. Understand the industry
In addition to properly understanding your situation, you need to ensure that you have an understanding of the environment in which you work. Very few organisations or individuals can shape the business ecosystem, and instead, need to shape their actions around trends in the industry they work in. Understanding your industry means that you have a much better idea of your limits and won't find yourself striving for unachievable goals.
3. Rationally plan steps
Once you know where you're going and understand the constraints you're working within, you can look to plan the steps you need to take. It is of paramount importance that you do this in a rational manner. By planning rationally, you can set out achievable steps and landmarks on your business journey, rather than setting ambitions too high and overworking yourself, potentially delaying important plans and responsibilities. Planning sensible steps leaves you with an achievable strategy that still pushes you in a progressive direction.
4. Discuss the strategy
Once you have a fully written strategy document, it may need to go through a series of revisions. As the author of this strategy, you may be less likely to see the flaws in it than your colleagues would be due to internal biases. By discussing your strategy openly with members of your team, you open the strategy up to constructive criticism, which can further tailor the strategy to your benefit. Although nobody wants their ideas to go through the process of critique, it is an integral part of building a strategy.
Finally, you need to implement the business strategy. Once you have an idea of the steps that need to be completed in a specific timeframe, you can start to get your team working on the practical implementation of the strategy. Be prepared to adjust your strategy as you go, as you may find yourself struggling to progress as initially anticipated, or the market may shift. A firm strategy is a good step towards your goals, but leaving space for durability is key to long-term success.
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