Strategic management


Strategy - what is it and why we do it?

Most organisations have vision and/or mission statements that go some way towards describing why the organisation exists, its purpose and the "value" it seeks to add. Organisational strategy is the first step in turning that high-level aim into things that people can actually focus some attention on doing. Strategy provides an answer to why we carry out functions, tasks, roles and projects as part of our work.

Any organisation needs two things - a purpose that everyone in the organisation owns and an agreed strategy that everyone shares and understands. If you know broadly what you are trying to achieve (vision/purpose) and have agreed how you will achieve it (strategy) you are well on the way to delivering whatever counts as success. Before the operational and detailed tactical planning can be completed and implemented, strategies need to be evaluated and the right one selected.

What specifically does strategy do, and why is it necessary?

It makes sure that all efforts of the organisation are focused towards achieving the goal, and serves as a measure for the level to which individuals contribute.
It helps to identify gaps, in terms of things to do, people to do it and improvements that need making
Strategy helps to make sure your organisation is focused on what your customer wants

Strategic management process

As Richard Koch says in The Financial Times Guide to Strategy), the most valuable use of strategy is for managers who are running clearly defined businesses. If you are one of these, startegy can:

  • help you define the differents parts of your business, where you need to do different things to be successful
  • show in detail where you make the most profits and cash, and why
  • understand the customers' perspective and why they buy from you or from competitors
  • indicate where you should concentrate most effort and cash
  • scope the extent of likely profit improvement opportunities, from changing product/customer mix, changing prices and/or cutting prices
  • help you to understand why you have been successful ou unsuccesful in particular areas and initiatives
  • show up any missing skills
  • identify businesses or product lines which should be discontinued or sold
  • show which of their customers should be cultivated most and how to build their loyalty
  • identify whether it is appropriate to make acquisitions and, if so, of what kind
  • indicate the importance and most appropriate way of expanding internationally
  • develop a firm's culture and competencies so that it can be more successful than competitors at meeting the needs of its customers
  • improve the performance of its business units by close financial control based on a consistent methodology applied throughout the firm

Developing strategic objectives

The balanced scorecard developed by Kaplan and Norton provides a very powerful framework for developing strategic objectives. The four interrelated perspectives of the balanced scorecard:

  • Financial
  • Customer internal
  • Business process
  • Learning and growth

Kaplan and Norton concentrate on synergy. Synergy is the art of getting more from less (the 2 + 2 = 5 syndrome). In business, synergy delivers added value, but this is only possible if functions and resources work together.

Different planning approaches

Not all organisations adopt the same approach to their planning. You may already be familiar with the three approaches to planning below:

  • Planned

A pro-active approach based on forecasting environmental change and building strategy to respond to it. The key here is how effective your forecasting is.

  • Reactive

A more wait-and-see approach, where the organisation responds by changing its strategy after change has happened. Success with this approach depends on the flexibility and speed with which the business can respond to change. It is therefore more appopriate for small or medium-sized enterprises (SMEs), which can make and implement decisions quickly.

  • Incremental

Strategies and change are applied a little at a time - small rather than radical steps. It is an approach often favoured by more risk-averse organisations.

ACTION

Discuss the links between corporate strategy and HR management across your business life-cycle with one of HR experts.