Planning to Execution – Corporate Strategy 101
Some companies become great success stories while others flounder. When it comes to statistics, 65% of companies set agreed upon strategies to achieve their goals, while less than 10% of organizations successfully execute their strategies. Market forces and competition conspire to divert companies from reaching their goals, and a powerful strategy is a so-called weapon to counterattack such diversion. Sadly, strategies may be easy to formulate, but very difficult to execute.
Setting a good strategy is a key factor in achieving results, however, a good strategy is not enough. Organizations are required to translate their strategy into action and proper execution, and this is where budgeting lands in the equation. A budget is a detailed plan for executing not only long-term goals, but also sheds the light on day-to-day business operations.
Strategy and Strategic Planning
Before diving into the technical steps of strategy execution, let us first anticipate the business terms of strategy.
Strategy is a broad term; it sets forward the overall direction an organization plans to follow to achieve its goals. Strategy reflects the collective soul of an organization, and is developed by evaluating the use of core competencies to address threats and seize opportunities. At a corporate level, strategy considers the big picture, it determines the appropriate mix of businesses and identifies the competitive direction for the company.
Strategic planning is more focused, it is a zoomed-in component of strategy. Strategic planning is long range planning, and reflects a comprehensive view of the organization in relation to the industry, competitors, and external environment.
In a nutshell, strategy formulation develops a new strategy for the company, and strategic planning addresses the implementation of the strategy. The formulation and implementation should always cooperate in relation to the mission, vision, goals, and objectives of a company.
External Factors Affecting Strategy
It is vital to assess and analyze the external business environment prior to formulating strategies and setting execution plans.
Industries differ from one another in terms of external factors and broader environment; however, some external factors are mostly common between all industries:
1. Legal and Regulatory Factors: Rules of conduct set by legal entities and related agencies to govern behavior within a certain industry.
2. Market Forces and Industry Trends: Industrial analysis is a key part of strategic planning. Companies need to conduct a comprehensive assessment on their competitors and the structural boundaries of the industry.
3. Technological Changes: With the current exponential acceleration in technological advancements, companies within any industry are required to accommodate their plans into new technologies and digital transformation.
4. Stakeholder Groups: Stakeholders include all bodies who have an investment or interest in the success of the company. During strategic planning, companies need to identify their stakeholders to translate their expectations and needs into the overall company strategy.
5. Globalization: Companies need to evaluate their ability to migrate their operations internationally if they are planning to do so in the long range.
Internal Factors Affecting Strategy
Post analyzing external factors affecting corporate strategy, companies need to complement the assessment by conducting internal capability analysis. External and internal assessments compile together to bridge the gap between organizational current capabilities and those needed to succeed in the industry.
The assessment aids the company to evaluate if it has the required resources, skills, and processes to reach its strategic and tactical goals.
SWOT Analysis
SWOT analysis is one of the most common strategic tools to assess the current state of an organization. SWOT is the acronym for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis comes third in the sequence of steps after analyzing external and internal factors. Such analysis provides the basis to organize and analyze the data gathered in internal and external analysis. Data for strengths and weaknesses is gathered in internal analysis, and data for opportunities and threats is gathered in external analysis.
· Strengths: Skills, capabilities, and core competencies within an organization that gives them the ability to achieve its goals and objectives, and sustain its competitive advantage.
· Weaknesses: Skills, capabilities, and core competencies that the organization lacks and prevents it from achieving its goals and objectives, and could lead to losing competitive advantage.
· Opportunities: External events and trends that an organization can seize to meet goals and reach new growth levels.
· Threats: External barriers that stop the organization from growing.
The role of SWOT analysis in strategic planning is to build on strengths, eliminate and mitigate weaknesses, exploit opportunities, and minimize threats.
Master Strategies
Organizational goals and strategies must be explicitly stated and clearly communicated to the bodies responsible for their implementation. Therefore, an essential part of strategic planning is to develop vision and mission statements, goals, and objectives.
· Vision: Vision statement is a guiding image of future success and achievement articulated in terms of the organization’s contribution to society.
· Mission: Mission statement provides the guiding compass for an organization. Such statement provides the basis of why the company is operating and what they are trying to achieve. A mission statement must be accurate, simple, motivating, and transferable into action. It shows the path how the organization will work towards its vision and accomplishments towards its customers and stakeholders.
· Goals: Targets that an organization looks to achieve in order to fulfill its mission and reach its vision.
· Objectives: Details and actions required to support the goals.
Alignment and Communication
The road from formulating a strategy to executing it is very complex, and is not rooted solely on the mentioned above. The ultimate goal of planning and executing is to reach new annual growth levels and economic profit. Despite the nexus nature of strategy execution, there are two key factors that facilitate the process when implemented properly:
· Alignment: During strategy creation, companies must not leave meeting customer expectations to intuition and luck. Even if strategic planning involved a thorough assessment of internal capabilities and external events, if the customer is left outside the equation, then the company will face many unfavorable variances in terms of growth and revenue generation. Therefore, the company must ensure that the outcome of their strategic direction and daily operations is aligned with what the customer is looking for.
· Communication: There is a misconception that strategy formulation and planning only includes top management and key people in the organization. The vast majority of people responsible for execution are south the organization hierarchy. Ensuring efficient communication is very critical as information might mutate and lose coherence as it is transferred from top to the bottom of the organization chart. Therefore, strategy must be well communicated to lower-level employees and subordinates and companies must ensure that subordinates comprehend and believe in their vision, mission, goals, and objectives.