Strategy

by Doreen Yarnold

More than one strategy?

Should you have more than one strategy in operation? Definitely! There can (and should) be a number of strategies operating at any given time. The key is that they all need to align to the overall vision, to the higher level objectives and to each other. Imagine if the production strategy didn’t align with the marketing strategy; this could result in the business not producing the volume or type of products needed by the marketing department.

The pioneers of business strategy back in the 1970s identified three core strategy areas which sub-divide into other sub-strategies. These three core strategy headings are

  • Corporate strategy
  • Competitive strategy
  • Operational strategy.

The order in which these strategies are created is important. At the core is the vision, mission, values, purpose and high-level objectives; then from the high level analysis comes the corporate strategy, followed by the competitive strategy, and only then can the operational strategy be created, as what goes on operationally has to be driven by the information determined by the other two.

Many managers see any strategic activity as exclusively the remit of senior managers and directors and not something that they should be involved in. This is flawed thinking, as strategy (be it operational, competitive or corporate) reflects the overall higher goals and objectives of the business. It therefore follows that every decision and action taken further down the hierarchical chain should dovetail directly into these.

Corporate strategy

Corporate strategy operates at the most senior level of an organisation and is primarily the concern of senior management and specialists. It sits just below the overall vision, mission, values and purpose of the business and will be concerned with

  • The types of businesses we should be involved in
  • Business acquisition; expansion and growth; sale; withdrawal; markets; the overall scope and boundaries within which the business operates
  • The structure and infrastructure of the business.

Strategic corporate decisions can be characterised as follows.

  1. They set the medium-/long-term direction of the organisation; you will note that the short-term direction is not included in this sub-heading, because it is covered in operational strategy. However, as a pre-curser to that, please note that short-term strategy 100 per cent flows from the medium- and long-term direction. In other words, first comes the long-term direction, from which the medium-term directions and activities are established, and the short-terms directions and activities will, in turn, flow from these. So they are all intrinsically linked to the same corporate source.
  2. They are the means to achieving the organisation’s high-level objectives and goals
  3. They embrace the top-line scope of organisational activities
  4. They entail assessing the needs and activities of the organisation, together with the competencies and capabilities of its people
  5. They are concerned with developing competencies and capabilities that will allow the organisation to meet its corporate objectives and growth aspirations
  6. They give consideration to the resource implications for the organisation
  7. They will be sensitive to the cultural needs of the organisation
  8. Those who set the strategy must understand the likelihood that strategic decisions may involve major change and they must be prepared to lead change within the organisation as and when required
  9. They must manage uncertainty within the organisation, particularly during economic downturns, recession and inter-industry market slow-downs
  10. They must stay adaptable and prepared to adopt an integrated approach to resolving strategic issues.

Competitive strategy

Competitive strategy is the domain of all business managers at all levels, not just senior managers and directors. Not all managers are directly responsible for it, but when the internal marketing and communication machine is working, all managers should be expected to buy into and drive the concept of needing to be better than the competition. At its core is the question: ‘How can we gain and sustain competitive advantage in order to achieve long term success?’

Developing competitive strategy requires understanding on many levels: the industry itself; the current competitive environment; the various markets within which it operates; the segmentation of those markets; competitors’ strategic capabilities, strengths and weaknesses, and the business’s own resources, competencies and capabilities (these are covered in further detail in operational strategy below), together with the future growth aspirations of the business.

The level and depth of understanding required should not be underestimated, as it is immense. However, a business cannot hope to create a sustainable competitive advantage without it. If a business is to position itself as a leader in its market(s), it has to be able to deliver greater value and/or perceived value to its customers than its competitors. The key focus here lies in building, reinforcing and supporting the difference in everything it does, both internally and externally, and thereby driving the sustainable competitive advantage it aspires to.

Operational strategy

Operational strategy is the domain of all business and functional managers and should directly be concerned with how each of the different business functions supports the others’ strategies to deliver the vision and overall high-level business objectives. Also, it is the initiatives and decisions taken and results achieved at operational level that influence the success or failure of these high-level business objectives and, of course, ultimately it’s vision.

So operational strategy is predominantly the domain of resources that have to be managed within a business. What do we mean by resources? Well, let’s have a look:

  • Our people (including competencies and capabilities)
  • Facilities
  • Systems
  • Money (cash flow, funding lines and so on)
  • Intellectual property (database, patents and so on)
  • Products
  • Customers, suppliers, distributors.

These are the resources that exist in most businesses and it would be folly to suppose that all of these resources could exist to create the success aspired to without a formal structure for doing so.

Operational strategy is the platform that provides the structure that considers each of the above and how they ‘fit’ the overall high-level business objectives. If the resources in a business are not aligned to these objectives then it is unlikely the objectives will or could be achieved.

In very large organisations, sub-strategies exist for each of the above resources. For example, you can imagine that an organisation that employs thousands of people, would absolutely need a people strategy. This might include the following at its core:

  • Recruitment and selection
  • Staffing levels
  • Reward and recognition
  • Pay and retention, salary bandings
  • Performance management
  • Succession planning
  • Exit processes.

And within each of these categories there would be policies, rules, procedures and so on that set out the rules of engagement for managing within the framework.

So the people strategy, as a sub-strategy of operational strategy, is likely to have very clearly-defined methods and mechanisms for managing each of the above areas. It may not necessarily be called a ‘people strategy’; it might just be a set of organisational policies and procedures that fall within the remit of the human resource department, but it’s a ‘rose by any other name’ and does the same job.

It is possible to be busy – very busy – without being very effective.

Stephen R Covey

For the purposes of clarity, everything that happens on a day-to-day, week-to-week, month-to-month and quarter-to-quarter basis should happen within an operational strategic framework. In other words, it should have been thought about, considered, discussed and decided upon. Every initiative, decision and activity forms part of that framework.

This doesn’t mean that flexibility, adaptability and new initiatives can’t happen; in fact, the opposite should be the case. The framework should allow for this, as long as all these things align with the overall vision and business objectives.