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8 Steps to Strategy Development – Part One

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So you need a strategy.

Maybe you’re boot-strapping a start-up or have an established base and are ready for exponential growth in your company. Maybe you’re part of a large, multi-national conglomerate looking for cost savings or new markets to enter.

Whatever stage you’re at, a solid strategy will help you address your company’s challenges and advance your goals. But how do you go about developing a strong, coherent strategy?

In this two-part series, I’ll go over the strategic development process and the eight steps I use to develop an effective strategy.

What is business strategy development?

Strategy development is the process business leaders use to determine how they’re going to allocate company resources to address their most pressing challenges and contribute to achieving their vision.

It’s comprised of a number of steps and tools that enable leaders to determine the current state, diagnose present issues, consider the desired future state and develop a pathway to successfully create value for you and your customers. Let’s take a look at the first part of the process in more detail.

(Author’s note: there are variations on the process below hinging on consideration for your starting point, company structure, and staff engagement. Talk to your strategist, facilitator or leadership team and adjust as needed.)

What’s the process to build a strategy?

Step 1 – Figure out where you are now

Deep insight into the current state of your business is the critical first step to building effective strategy. Take a real assessment of things like your assets, resource position, core competencies, customer satisfaction, market players, technologies and internal processes to diagnose exactly where and why your company creates or destroys value.

This is a SWOT analysis framework. It has four quadrants, labelled "what are your strengths", "what are your weaknesses", what are your opportunities", and "what are your threats".

Strategists will use a #SWOT Analysis to define company strengths, weaknesses, opportunities and threats. What do staff have to say about it? What are customers saying? What’s happening in the marketplace? Beware your assumptions here and only add information once you can confirm it.

I also repurpose the 5 C’s Marketing model in Step 1 as it reveals a more complete picture about your business landscape. This tool gets you to think about your Company, Collaborators, Customers, Competitors, and Climate.
A graphic showing each of the 5 C's of Marketing: Company, Collaborators, Customers, Competitors, and Climate.
Using #designthinking for your customers’ journeys will help you and your team understand what’s important – and not important – to them.

Step 2 – Understand what your business challenges are

The tools in Step 1 can indicate your company’s main challenge but it’s also important to dive into your processes and activities further. Strategists will likely employ Porter’s Value-Chain Analysis here to understand how each internal activity adds or subtracts value from your final product. It’ll reveal which activities are most essential, most valuable and where your competitive advantage (or disadvantage!) is.
Porter's value chain model that illustrates a company's main activities, broken down into inbound logistics, operations, outbound logistics, marketing and sales, and service. Underneath those five categories, it has a further four "support activities" of a company: firm infrastructure, procurement, human resource management, and techonlogy.

A value chain consists of the stages of your product’s lifecycle – including R&D, logistics, operations, sales, and everything else. The concept was developed Michael Porter in his book, The Competitive Advantage: Creating and Sustaining Superior Performance.

Understanding the activities that go into your company’s output and how they relate to your competitive advantage (whether that’s cost or differentiation) will reveal important information about how you create or destroy value.

Step 3 – What future(s) do you need to plan for?

Using the info gathered in the first two steps, you and your team can debate what the future(s) could look like, both internally to the company and externally in the marketplace. Strategists will use a #PESTLE diagram here to holistically map out emerging trends.
Next, you can use this information to develop or refine your vision and mission statements. What would a perfect world look like? What is your company’s value-add and who is your main client? What are your organization’s main objectives and long-term goals?

Clarity on your company’s purpose and mission, distilled down to a few key points that can easily be communicated and understood by anyone, is critical to tuning out the cacophony of options, goals, strategies and plans.

Step 4 – What are the different pathways to success?

Having completed a robust analysis of the organization, the external market, and future trends, you and your team can develop the potential pathways that will enable your company to:
  1. Use your identified strengths to capitalize on opportunities and eliminate threats
  2. Convert your weaknesses into strengths and avoid threats becoming realities

Various strategic pathways will become apparent and executives can grapple with the best one to choose; whether it be leaner operations, supply chain improvements, or something else. You may discuss either concentrating or diversifying your product line, entering international markets, entering into joint ventures, liquidating or retrenching (shore up) your resources, or taking another path.

Beware the common pitfalls at this stage! Good strategists will help you watch for and challenge things like groupthink, over-reliance on “this is how we’ve always done it”, and unnecessary complexity. There are good strategies and bad strategies – make sure you know the difference.

Conclusion

These first four steps can be a lot or a little work depending on your existing data. Perhaps you already have evidence of what customers and staff are saying, like your product is highly-regarded but your warehouses processes are overly-complicated and slowing things down. Or perhaps you only have outdated information and want to do a deep dive to better inform your strategy. Your company’s unique situation will inform the depth and breadth of work in this area.

Coming up in Part Two, we’ll go over the remaining steps – evaluating and choosing an effective strategy then implementing it and reviewing its outcomes. If you use other tools, models or steps not included above, let me know about them in the comments.

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