Every entrepreneur regularly makes decisions of strategic importance. Such decisions can change your company permanently.There nevertheless remains a high risk of them simply being taken based on current circumstances. This is largely down to the fact that you are heavily preoccupied with your day-to-day business. Even if you have the key elements of your company’s strategic approach in mind, it is important to set out your corporate strategy in writing.
Why you require a strategy
Anyone who sets up or manages a company is pursuing an objective. To achieve this, it’s important to make decisions not based simply on the current situation, but to adhere to an overarching strategy. With our advice, you’ll successfully determine the most suitable strategy for your company.
What makes up a strategy
A strategy essentially entails establishing priorities with regard to markets, customers and resources. It therefore supports the management. A corporate strategy is usually drawn up and reviewed from the “top down”, so in other words comes from the management. However, if you decide to involve your employees in a targeted way as far as possible, you must ultimately support and implement your strategy to ensure it does not remain a paper tiger. The same applies to communication – you should explain the strategy and the measures derived from it to all of your stakeholders. Keeping it secret would be counterproductive.
The following elements are the cornerstones of your corporate strategy:
Vision and guiding principles
Your corporate vision sets out a challenging goal that should be achievable and the direction the journey should take.
Strategic success positions
Strategic success positions are requirements that must be met to ensure customers opt for your company. They are skills that help deliver your long-term success and through which you stand out from the competition. The quality depends on these criteria:
- Difficulty to imitate
- Significant customer benefits
- Major contribution to cash flow
Strategic business areas
At most small companies, the strategic business areas are identical to the main purpose of the company or the various fields of business. A consultant, for example, can provide advice, training and coaching on strategic business areas. Every strategic business area may require its own competitive strategy.
The strategic thrusts can be determined using a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities and threats. You have to compare your company’s strengths with its market opportunities and your strategic thrust is then derived from this. We will look at the SWOT analysis in greater detail later on.
Following these seven steps will enable you to set out your corporate strategy
Before focusing on the contents of your corporate strategy, you should address a few preliminary questions and points:
- Do you know the objective of your corporate strategy? What do you want to achieve with it?
- How are you going to draw up your strategy?
- Involve your employees. You could also consult customers, suppliers and even partner companies to obtain information from your main stakeholders.
- Also give some thought to the timeframe: you should set out objectives for the next three to five years and compile the information needed. A one-off weekend workshop is probably not going to be enough for this. You need to take the time to define the objectives and timeframe properly.
- Finally, you should reflect on whether you can manage this project yourself or whether it would be better to call on external support.
Once you have answered these questions, you can then define and implement your corporate strategy in the next stage. Here you can follow the seven steps set out below:
Analyse the trends in the environmental fields of the economy, technology, society and ecology from your company’s perspective. You should be able to determine future opportunities and threats from this. List the five key factors for each area that can be identified for the next three to five years. Evaluate these developments in terms of their significance to your company – positive or negative impact. Reflect on how your company should react to these trends. It might be a good idea to draw up these steps with your employees and other stakeholders.
The definition of stakeholders includes persons or groups who have expectations of your company or can exercise influence over it. They include employees, suppliers, customers, authorities and the media, amongst others. You should list all relevant stakeholders in order of importance and consider what the interests of each group are? How much power do they have and how much influence can they exert? Do they have a positive or negative attitude towards you? Then consider how you wish to structure the relationship with these stakeholders and list specific measures.
You are not usually the only player operating in your market. That’s why it’s important to be familiar with the competition – who are your competitors actually? Where do they excel and where do their weaknesses lie? You can derive key indicators for your own positioning from this analysis. Competitive intelligence provides an insight into your competitors and allows you to derive your own strengths from their weaknesses. Look for smart ways of cooperating with particularly strong or exciting competitors.
The analysis of strengths and weaknesses is the first step in providing a comprehensive analysis of your company. Determine what they are and involve various stakeholders in the analysis. In the case of the strengths and weaknesses analysis, this might be employees and customers, for example. Then work out which opportunities and risks exist for your company. Compare the opportunities with the strengths by asking the following question: “How can I optimally take advantage of the opportunities presented in view of the strengths of the company?” From this derive four to six strategic thrusts. Next, determine the weaknesses in relation to the risks and ask yourself: “What does our company need to do to manage the risks in light of our weaknesses?” Then define individual thrusts on this basis which should then be listed and prioritized at the end.
Where do you want your company to be in five to ten years from now? A strong vision shows the way forward and helps to convey a sense of purpose and strengthen identification with the company amongst employees. They should be clear and concise, inspiring, motivational and challenging. A good vision should be achievable over the long term. In contrast, the guiding principles are not just aimed at employees and management, but also at other stakeholders and give your company a face. They cover stakeholder relationships, financial goals, objectives concerning performance and social matters, such as management principles and staff support measures, etc.
Set out the vision and guiding principles using our checklist by writing concise sentences in response to every question.
Where do we want to be in five to ten years’ time?
- Which requirements do we aim to meet with our product or service?
- Which requirements in terms of quality, price and appearance and so on are we seeking to meet with our products and services?
- What market position do we wish to achieve?
- What are our objectives in terms of growth, independence, flexibility, ownership structure and financing?
- What values with regard to management and cooperation are important to us?
- What approach do we adopt towards stakeholders (answer individually for customers, employees, competitors, etc.)?
- What is our policy on social issues (environmental protection, development aid, etc.)?
You should derive measures from the objectives previously set out. Who is doing what, by when and with which resources? Create an Excel table and enter all tasks to be performed. Several interrelated measures can be combined as a project. The key thing is that each measure is assigned to somebody and responsibility has been established. Implementation determines the success of a strategy – this means you should also consider practical matters. How are the objectives to be incorporated into day-to-day working life? Get your employees on board. If objections and reservations are made, they need to be explored and the reasons examined. When the time comes to celebrate initial success during implementation, ensure you do so with everyone involved. This sends out the right message.
First of all, make sure your planning is realistic and then everything will be much easier. You should carry out reviews on an ongoing basis to make sure your measures and projects are being implemented as planned. Establish what the current situation is and compare it with the target situation mapped out. If there are deviations, what are the reasons for this? Take remedial action if a project is veering off track. On the other hand, you should celebrate and recognize project achievements, as implementation is demanding for those involved. Acknowledge their contribution.
Strategy development is expensive but essential
A clear corporate strategy will help your company to achieve the objectives set. With careful preparation, good planning and regular reviews, you will find and implement the most appropriate strategy for your company. One thing is clear: strategy development creates an additional workload for everyone involved in the project.Use simple and proven tools as far as possible and provide clear and transparent information about the process.When on the right track, everyone enjoys working actively and intuitively on securing the future of the company.If everyone is involved from the outset, they will implement the strategy with conviction.