Have you ever worked for an organization and had no idea what its strategy was?
I was in this situation when I was working in the sales department of an international original equipment manufacturing company. I could see myself, other employees, and even managers becoming increasingly frustrated because the organization lacked a clear strategy. For example, our team worked for months on a project to attract a new customer, and then it was shut down. Why? Because it was conflicting with “the strategy”, and no one knew what exactly “the strategy” was.
What is a Strategy Statement?
Employees aren’t the only ones who don’t know the strategy; not even all executives can answer this simple question. And it’s no surprise that the firms for which those executives work are struggling in their industries.
Companies need a simple and clear statement of strategy that everyone can internalize and use as a guiding light for making difficult choices.
Here is an analogy that was presented in April 2008 by David J. Collis and Michael G. Rukstad Harvard Review titled, “Can You Say What Your Strategy Is?” :
Think of a major business as a mound of 10,000 iron filings, each one representing an employee. If you scoop up that many filings and drop them onto a piece of paper, they’ll be pointing in every direction. It will be a big mess: 10,000 smart people working hard and making what they think are the right decisions for the company – but with the net result of confusion.
If you pass a magnet over those filings, what happens?
They line up. Similarly, a well-understood statement of strategy aligns behavior within the business. It allows everyone in the organization to make individual choices that reinforce one another, rendering those 10,000 employees exponentially more effective.David J. Collis and Michael G. Rukstad
What makes a good strategy statement?
To develop a strategy statement, we need to know all the elements of the strategy statement.
Elements of a Strategy Statement
There are three critical components of a good strategy statement, and they are:
Objective, Scope, and Advantage.
People should be able to articulate the objective, scope, and advantage of their business in a simple statement.
Any strategy statement must begin with a definition of the ends that the strategy is designed to achieve.
“If you don’t know where you are going, any road will get you there” is the appropriate maxim here.Lewis Carroll
Defining the Objective
The definition of the objective should include both an endpoint and a time frame for reaching it. The strategic objective should be specific, measurable, and time-bound.
A mission statement or a statement of values is not the same as a strategic objective. Individual uniqueness and environmental sustainability are not strategic objectives. They control how employees should behave (“doing things right”); they do not guide what the company should do (“the right thing to do”). Check out “A Hierarchy of Company Statements.“
Defining the Scope
It is critical to identify the scope of the business, or domain: the area of the landscape in which the organization will operate. Also, the scope of the business should state where it will not go.
Clearly defined boundaries in those areas should make it clear to managers which activities to focus on and, more importantly, which to avoid.
Defining the Advantage
The advantage is the most important part of a strategy statement. It shows what your company will do differently or better than competitors. An advantage is a value proposition that outlines why the targeted market should choose your product over all others.
Clarity regarding what differentiates the company is what most helps employees understand how they may contribute and have the most effective performance.
With a clear definition of a strategy statement:
Formulation becomes easier because executives know what they are trying to create.
Implementation becomes simpler because the strategy’s essence can be readily communicated and digested by everyone in the organization.
Employees from all parts of the company and at all levels of the hierarchy should be involved in the process of formulating the strategy and then drafting the statement that captures its core in an easily communicated manner.
Spending the effort to produce the few words that genuinely describe your strategy will energize and empower your team. It will eventually improve your organization’s long-term financial success.
What’s your experience? Share your thoughts in the comments below!